<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SEAGATE TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3573 94-2612933
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
</TABLE>
920 DISC DRIVE
SCOTTS VALLEY, CA 95066
(408) 438-6550
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------
ALAN F. SHUGART
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
SEAGATE TECHNOLOGY, INC.
920 DISC DRIVE
SCOTTS VALLEY, CA 95066
(408) 438-6550
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
LARRY W. SONSINI, ESQ. ANDREW R. BROWNSTEIN, ESQ.
JOHN V. ROOS, ESQ. DAVID M. SILK, ESQ.
PAGE MAILLIARD, ESQ. WACHTELL, LIPTON, ROSEN & KATZ
WILSON, SONSINI, GOODRICH & 51 WEST 52ND STREET
ROSATI NEW YORK, NY 10019
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As promptly
as practicable after this Registration Statement becomes effective and the
effective time of the proposed merger of a wholly-owned subsidiary of Registrant
with and into Conner Peripherals, Inc., as described in the Agreement and Plan
of Reorganization dated as of October 3, 1995 attached as Appendix A to the
Joint Proxy Statement/Prospectus forming a part of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
REGISTERED BE REGISTERED (1) PER SHARE (2) PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share....... 27,051,558 shares $20.44 $1,250,981,553 $431,373(2)
</TABLE>
(1) This Registration Statement relates to securities of the Registrant issuable
to holders of Common Stock of Conner Peripherals, Inc., a Delaware
corporation, in the proposed merger of Conner Peripherals, Inc. with a
wholly-owned subsidiary of the Registrant. Based on 61,202,620 shares of
Conner Peripherals, Inc. Common Stock.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended, on
the basis of the market value of Conner Peripherals, Inc. Common Stock to be
received by the Registrant in the proposed merger, calculated in accordance
with Rule 457(f) on the basis of the average of the high and low sales
prices reported for such securities by the New York Stock Exchange on
December 29, 1995. $199,495 was paid under Section 14(g) of the Securities
Exchange Act of 1934, as amended, in connection with the filing of
preliminary joint proxy materials on November 13, 1995.
------------------------
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>
SEAGATE TECHNOLOGY, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
ITEM
NO. FORM S-4 CAPTION PROSPECTUS CAPTION
- --------- ---------------------------------------------------------------- ------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1 Forepart of Registration Statement and Outside Front Cover Page
of Prospectus.................................................. Outside Front Cover Page of
Prospectus
Item 2 Insider Front and Outside Back Cover Pages of Prospectus........ Available Information; Incorporation
of Certain Documents by Reference;
Table of Contents
Item 3 Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information.................................................... Summary; Risk Factors; The Merger
and Related Transactions; Unaudited
Pro Forma Combined Condensed
Financial Statements
Item 4 Terms of the Transaction........................................ Summary; The Merger and Related
Transactions; Comparison of Rights
of Stockholders of Seagate and
Conner
Item 5 Pro Forma Financial Information................................. Summary; Unaudited Pro Forma
Combined Condensed Financial
Statements
Item 6 Material Contacts with the Company Being Acquired............... Summary; The Merger and Related
Transactions
Item 7 Additional; Information Required for Refereeing by Persons and
Parties Deemed to be Underwriters.............................. Not Applicable
Item 8 Interests of Named Experts and Counsel.......................... Not Applicable
Item 9 Disclosure of Commission Position on Indemnification for
Securities Acts Liabilities.................................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
Item 10 Information with Respect to S-3 Registrants..................... Available Information; Incorporation
of Certain Documents by Reference;
Summary; Unaudited Pro Forma
Combined Condensed Financial
Statements
Item 11 Incorporation of Certain Information by Reference............... Incorporation of Certain Documents
by Reference
Item 12 Information with Respect to S-2 or S-3 Registrants.............. Not Applicable
Item 13 Incorporation of Certain Information by Reference............... Not Applicable
Item 14 Information with Respect to Registrants Other than S-3 or S-2
Registrants.................................................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM
NO. FORM S-4 CAPTION PROSPECTUS CAPTION
- --------- ---------------------------------------------------------------- ------------------------------------
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
<S> <C> <C>
Item 15 Information with Respect to S-3 Companies....................... Available Information; Incorporation
of Certain Documents by Reference
Item 16 Information with Respect to S-2 or S-3 Companies................ Not Applicable
Item 17 Information with Respect to Companies Other than S-3 or S-2
Companies...................................................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
Item 18 Information if Proxies, Consents or Authorizations are to be
Solicited...................................................... Incorporation of Certain Documents
by Reference; Summary; The Seagate
Meeting; The Conner Meeting; The
Merger and Related Transactions;
Stockholder Proposals
Item 19 Information if Proxies, Consents or Authorizations are not to be
Solicited or in an Exchange Offer.............................. Not Applicable
</TABLE>
<PAGE>
SEAGATE TECHNOLOGY, INC.
920 DISC DRIVE
SCOTTS VALLEY, CA 95066
January 3, 1996
Dear Stockholder:
A Special Meeting of Stockholders (the "Special Meeting") of Seagate
Technology, Inc., a Delaware corporation ("Seagate"), will be held on Friday,
February 2, 1996, at 10:00 a.m., local time, at Seagate's corporate headquarters
at 920 Disc Drive, Scotts Valley, California 95066.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the issuance of shares of Seagate Common Stock pursuant to
the terms of the Agreement and Plan of Reorganization dated as of October 3,
1995, as amended by Amendment No. 1 thereto dated as of December 18, 1995, (the
"Reorganization Agreement"), entered into by and among Seagate, a newly-formed,
wholly-owned subsidiary of Seagate ("Sub") and Conner Peripherals, Inc., a
Delaware corporation ("Conner"), and a related Agreement of Merger (the "Merger
Agreement," and, collectively with the Reorganization Agreement, the "Merger
Agreements") which provide for Sub to be merged with and into Conner, with
Conner being the surviving corporation and becoming a wholly-owned subsidiary of
Seagate (the "Merger"). At the effective time of the Merger, each outstanding
share of Conner Common Stock (other than treasury shares and shares owned by
Seagate or its subsidiaries) and the accompanying preferred share purchase right
issued pursuant to the terms of the Preferred Shares Rights Agreement dated as
of November 29, 1994, between Conner and The First National Bank of Boston as
Rights Agent (the "Conner Rights") will be converted into the right to receive
0.442 (the "Exchange Ratio") of a share of Seagate Common Stock. Based upon the
number of shares of Seagate Common Stock and Conner Common Stock outstanding at
December 15, 1995, an aggregate of approximately 24,202,875 shares of Seagate
Common Stock would be issued in connection with the Merger, representing
approximately 24.9% of the total number of shares of Seagate Common Stock
outstanding, after giving effect to such issuance. In addition, as a result of
the Merger, each outstanding option to purchase Conner Common Stock will be
assumed by Seagate and converted into an option to acquire such number of shares
of Seagate Common Stock as the holder would have been entitled to receive had
such holder exercised such option in full immediately prior to the effective
time of the Merger. Based upon the number of options to purchase Conner Common
Stock outstanding at December 15, 1995, approximately 2,848,683 additional
shares of Seagate Common Stock would be reserved for issuance to option holders
of Conner in connection with Seagate's assumption of such options. The rules of
the New York Stock Exchange require that the issuance of Seagate Common Stock
pursuant to the Merger Agreements be approved by a majority of the votes cast at
the Special Meeting, provided that the total votes cast on the proposal
represents over 50% of the outstanding shares of Seagate Common Stock.
Consummation of the proposed Merger is conditioned upon, among other things, the
receipt of all required stockholder and certain regulatory approvals.
SEAGATE'S BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND HAS DETERMINED THAT THE MERGER AGREEMENTS ARE FAIR TO, AND THAT THE
MERGER IS IN THE BEST INTERESTS OF, SEAGATE AND ITS STOCKHOLDERS. THE BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENTS AND THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS OF SEAGATE APPROVE THE ISSUANCE OF SHARES OF
SEAGATE COMMON STOCK PURSUANT TO THE MERGER AGREEMENTS.
Seagate's Board of Directors has received an opinion of Morgan Stanley & Co.
Incorporated, Seagate's financial advisor, that, as of the date of the Merger
Agreements, the Exchange Ratio is fair, from a financial point of view, to
Seagate.
In addition, you will be asked to consider and vote upon a proposal to
ratify and approve amendments to Seagate's Executive Stock Plan.
In the material accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Joint Proxy Statement/Prospectus relating to the
actions to be taken by Seagate stockholders at the Special Meeting (as well as
the actions to be taken by the Conner stockholders at their special meeting) and
a Proxy Card. The Joint Proxy Statement/Prospectus more fully describes the
proposed Merger and includes information about Seagate and Conner.
All stockholders are cordially invited to attend the Special Meeting in
person. However, whether or not you plan to attend the Special Meeting, PLEASE
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. If you
attend the Special Meeting, you may vote in person if you wish, even though you
have previously returned your proxy. It is important that your shares be
represented and voted at the Special Meeting.
Sincerely,
/s/ Alan F. Shugart
ALAN F. SHUGART
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE>
SEAGATE TECHNOLOGY, INC.
920 DISC DRIVE
SCOTTS VALLEY, CALIFORNIA 95066
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 2, 1996
TO THE STOCKHOLDERS OF SEAGATE TECHNOLOGY, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Seagate
Technology, Inc., a Delaware corporation ("Seagate"), will be held on Friday,
February 2, 1996, at 10:00 a.m., local time, at Seagate's corporate headquarters
at 920 Disc Drive, Scotts Valley, California 95066 (the "Special Meeting"), for
the following purposes:
1. To consider and vote upon a proposal to approve the issuance of shares
of Seagate Common Stock pursuant to the terms of the Agreement and Plan of
Reorganization dated as of October 3, 1995, as amended by Amendment No. 1
thereto dated as of December 18, 1995 (the "Reorganization Agreement"), entered
into by and among Seagate, a newly-formed, wholly-owned subsidiary of Seagate
("Sub") and Conner Peripherals, Inc., a Delaware corporation ("Conner"), and a
related Agreement of Merger between Sub and Conner (the "Merger Agreement," and,
collectively with the Reorganization Agreement, the "Merger Agreements") which
provide for Sub to be merged with and into Conner, with Conner being the
surviving corporation and becoming a wholly-owned subsidiary of Seagate (the
"Merger"). Pursuant to the Merger, each outstanding share of Conner Common Stock
(other than treasury shares and shares owned by Seagate or its subsidiaries) and
the accompanying preferred share purchase right issued pursuant to the terms of
the Preferred Shares Rights Agreement dated as of November 29, 1994, between
Conner and The First National Bank of Boston as Rights Agent (the "Conner
Rights") will be converted into the right to receive 0.442 (the "Exchange
Ratio") of a share of Seagate Common Stock. In addition, as a result of the
Merger, each outstanding option to purchase Conner Common Stock will be assumed
by Seagate and converted into an option to acquire such number of shares of
Seagate Common Stock as the holder would have been entitled to receive had such
holder exercised such option in full immediately prior to the effective time of
the Merger, at an exercise price per share equal to the exercise price per share
of Conner Common Stock under such option immediately prior to the effective time
of the Merger divided by the Exchange Ratio.
2. To consider and vote upon a proposal to ratify and approve amendments to
Seagate's Executive Stock Plan.
3. To transact such other business as may properly come before the Special
Meeting, including any motion to adjourn to a later date to permit further
solicitation of proxies if necessary, or before any adjournments thereof.
The Merger and related transactions are more fully described in the Joint
Proxy Statement/Prospectus and the appendices thereto, including the Merger
Agreements, accompanying this Notice. Any action may be taken on any of the
foregoing proposals at the Special Meeting on the date specified above or on any
date to which the Special Meeting may properly be adjourned. Only stockholders
of record of Seagate Common Stock at the close of business on December 15, 1995
are entitled to notice of, and will be entitled to vote at, the Special Meeting
or any
adjournments thereof. Approval of the issuance of shares of Seagate Common Stock
pursuant to the Merger Agreements requires the affirmative vote of the holders
of a majority of the votes cast at the Special Meeting, provided that the total
votes cast on the proposal represents over 50% of the outstanding shares of
Seagate Common Stock.
You are requested to complete and sign the accompanying proxy, which is
solicited by Seagate's Board of Directors, and mail it promptly in the enclosed
envelope. If the accompanying proxy is properly executed and returned to Seagate
in time to be voted at the Special Meeting and not revoked, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF THE
ISSUANCE OF SEAGATE COMMON STOCK PURSUANT TO THE MERGER AGREEMENTS. The presence
of a stockholder at the Special Meeting will not automatically revoke such
stockholder's proxy. A stockholder may, however, revoke a proxy at any time
prior to its exercise by filing a written notice of revocation with, or
delivering a duly executed proxy bearing a later date to, Mr. Donald L. Waite,
Secretary, Seagate Technology, Inc., 920 Disc Drive, Scotts Valley, California
95066, or by attending the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Donald L. Waite
DONALD L. WAITE
SECRETARY
Scotts Valley, California
January 3, 1996
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE POSTAGE PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY TIME
BEFORE IT IS VOTED.
<PAGE>
CONNER PERIPHERALS, INC.
3081 ZANKER ROAD
SAN JOSE, CALIFORNIA 95134
January 3, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Conner Peripherals, Inc., a Delaware corporation
("Conner"), which will be held on Friday, February 2, 1996, at 9:00 a.m., local
time, at The Inn at Spanish Bay, 2700 17 Mile Drive, Pebble Beach, California
93953.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Reorganization dated as
of October 3, 1995, as amended by Amendment No. 1 thereto dated as of December
18, 1995 (the "Reorganization Agreement"), entered into by and among Conner,
Seagate Technology, Inc., a Delaware corporation ("Seagate"), and a
newly-formed, wholly-owned subsidiary of Seagate ("Sub"), and a related
Agreement of Merger (the "Merger Agreement," and, collectively with the
Reorganization Agreement, the "Merger Agreements") which provide for Sub to be
merged with and into Conner, with Conner being the surviving corporation and
becoming a wholly-owned subsidiary of Seagate (the "Merger"). At the effective
time of the Merger, each outstanding share of Conner Common Stock (other than
treasury shares and shares owned by Seagate or its subsidiaries) and the
accompanying preferred share purchase right issued pursuant to the terms of the
Preferred Shares Rights Agreement dated as of November 29, 1994, between Conner
and The First National Bank of Boston as Rights Agent (the "Conner Rights") will
be converted into the right to receive 0.442 (the "Exchange Ratio") of a share
of Seagate Common Stock. In addition, as a result of the Merger, each
outstanding option to purchase Conner Common Stock will be assumed by Seagate
and converted into an option to acquire such number of shares of Seagate Common
Stock as the holder would have been entitled to receive had such holder
exercised such option in full immediately prior to the effective time of the
Merger, at an exercise price per share equal to the exercise price per share of
Conner Common Stock under such option immediately prior to the effective time of
the Merger, divided by the Exchange Ratio. Based on the last reported sale price
of Seagate Common Stock on the New York Stock Exchange on December 29, 1995, the
Exchange Ratio would result in a per share purchase price for Conner Common
Stock of $21.00. If the Merger is completed, Conner stockholders would no longer
hold any interest in Conner following the Merger other than through their
interest in shares of Seagate Common Stock. Consummation of the proposed Merger
is conditioned upon, among other things, approval by holders of a majority of
the outstanding shares of Conner Common Stock.
CONNER'S BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND HAS DETERMINED THAT THE MERGER AGREEMENTS ARE FAIR TO, AND THAT THE
MERGER IS IN THE BEST INTERESTS OF, CONNER AND ITS STOCKHOLDERS. THE BOARD HAS
APPROVED THE MERGER AGREEMENTS AND THE MERGER AND RECOMMENDS THAT THE
STOCKHOLDERS OF CONNER VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENTS.
Conner's Board of Directors has received an opinion of Goldman, Sachs & Co.,
Conner's financial advisor, that, as of the date of the Merger Agreements, the
Exchange Ratio pursuant to the Reorganization Agreement is fair to the holders
of shares of Conner Common Stock. A copy of this opinion is included as Appendix
E to the enclosed Joint Proxy Statement/Prospectus.
In the material accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Joint Proxy Statement/Prospectus relating to the
actions to be taken by Conner stockholders at the Special Meeting (as well as
the actions to be taken by the Seagate stockholders at their special meeting)
and a Proxy Card. The Joint Proxy Statement/Prospectus more fully describes the
proposed Merger and includes information about Conner and Seagate.
All stockholders are cordially invited to attend the Special Meeting in
person. However, whether or not you plan to attend the Special Meeting, PLEASE
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. If you
attend the Special Meeting, you may vote in person if you wish, even though you
have previously returned your proxy. It is important that your shares be
represented and voted at the Special Meeting.
Sincerely,
/s/ Finis F. Conner
FINIS F. CONNER
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
<PAGE>
CONNER PERIPHERALS, INC.
3081 ZANKER ROAD
SAN JOSE, CALIFORNIA 95134
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 2, 1996
TO THE STOCKHOLDERS OF CONNER PERIPHERALS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Conner
Peripherals, Inc., a Delaware corporation ("Conner"), will be held on Friday,
February 2, 1996, at 9:00 a.m., local time, at The Inn at Spanish Bay, 2700 17
Mile Drive, Pebble Beach, California 93953 (the "Special Meeting"), for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Reorganization dated as of October 3, 1995, as amended by Amendment
No. 1 thereto dated as of December 18, 1995 (the "Reorganization Agreement"),
entered into by and among Conner, Seagate Technology, Inc., a Delaware
corporation ("Seagate"), and a newly-formed, wholly-owned subsidiary of Seagate
("Sub"), and a related Agreement of Merger between Sub and Conner (the "Merger
Agreement," and, collectively with the Reorganization Agreement, the "Merger
Agreements") which provide for Sub to be merged with and into Conner, with
Conner being the surviving corporation and becoming a wholly-owned subsidiary of
Seagate (the "Merger"). Pursuant to the Merger, each outstanding share of Conner
Common Stock (other than treasury shares and shares owned by Seagate or its
subsidiaries) and the accompanying preferred share purchase right issued
pursuant to the terms of the Preferred Shares Rights Agreement dated as of
November 29, 1994, between Conner and The First National Bank of Boston as
Rights Agent (the "Conner Rights") will be converted into the right to receive
0.442 (the "Exchange Ratio") of a share of Seagate Common Stock. In addition, as
a result of the Merger, each outstanding option to purchase Conner Common Stock
will be assumed by Seagate and converted into an option to acquire such number
of shares of Seagate Common Stock as the holder would have been entitled to
receive had such holder exercised such option in full immediately prior to the
effective time of the Merger, at an exercise price per share equal to the
exercise price per share of Conner Common Stock under such option immediately
prior to the effective time of the Merger, divided by the Exchange Ratio.
2. To transact such other business as may properly come before the Special
Meeting, including any motion to adjourn to a later date to permit further
solicitation of proxies if necessary, or before any adjournments thereof.
The Merger and related transactions are more fully described in the Joint
Proxy Statement/Prospectus and the appendices thereto, including the Merger
Agreements, accompanying this Notice. Any action may be taken on any of the
foregoing proposals at the Special Meeting on the date specified above or any
date to which the Special Meeting may properly be adjourned. Only stockholders
of record of Conner Common Stock at the close of business on December 15, 1995
are entitled to notice of, and will be entitled to vote at, the Special Meeting
or any adjournment thereof. Approval and adoption of the Merger Agreements will
require the affirmative vote of the holders of a majority of the outstanding
shares of Conner Common Stock entitled to vote thereon.
You are requested to complete and sign the accompanying proxy, which is
solicited by Conner's Board of Directors, and mail it promptly in the enclosed
envelope. If the accompanying proxy is properly executed and returned to Conner
in time to be voted at the Special Meeting and not revoked, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENTS. The presence of a stockholder at the Special Meeting
will not automatically revoke such stockholder's proxy. A stockholder may,
however, revoke a proxy at any time prior to its exercise by filing a written
notice of revocation with, or by delivering a duly executed proxy bearing a
later date to, Thomas F. Mulvaney, Esq. Vice President, General Counsel and
Secretary, Conner Peripherals, Inc., 3081 Zanker Road, San Jose, California,
95134, or by attending the Special Meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas F. Mulvaney
THOMAS F. MULVANEY
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
San Jose, California
January 3, 1996
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE POSTAGE PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY TIME
BEFORE IT IS VOTED.
<PAGE>
SEAGATE TECHNOLOGY, INC.
AND
CONNER PERIPHERALS, INC.
JOINT PROXY STATEMENT
--------------------------
PROSPECTUS OF SEAGATE TECHNOLOGY, INC.
--------------------------
This Joint Proxy Statement/Prospectus is being furnished to the stockholders
of Seagate Technology, Inc., a Delaware corporation ("Seagate"), in connection
with the solicitation of proxies by the Seagate Board of Directors for use at
the Special Meeting of Seagate stockholders (the "Seagate Meeting") to be held
at 10:00 a.m. , local time, on Friday, February 2, 1996, at Seagate's corporate
headquarters at 920 Disc Drive, Scotts Valley, California 95066, and at any
adjournments or postponements of the Seagate Meeting. At the Seagate Meeting,
holders of Seagate Common Stock (as defined below) will be asked to consider and
vote upon (i) a proposal to approve the issuance of shares of Seagate Common
Stock pursuant to the terms of the Agreement and Plan of Reorganization dated as
of October 3, 1995, as amended by Amendment No. 1 thereto dated as of December
18, 1995 (the "Reorganization Agreement"), entered into by and between Seagate,
a newly-formed, wholly-owned subsidiary of Seagate ("Sub") and Conner
Peripherals, Inc., a Delaware Corporation ("Conner"), and a related Agreement of
Merger between Sub and Conner (the "Merger Agreement," and, collectively with
the Reorganization Agreement, the "Merger Agreements") and (ii) a proposal to
ratify and approve amendments to Seagate's Executive Stock Plan.
This Joint Proxy Statement/Prospectus is also being furnished to the
stockholders of Conner, in connection with the solicitation of proxies by the
Conner Board of Directors for use at the Special Meeting of Conner stockholders
(the "Conner Meeting") to be held at 9:00 a.m., local time, on Friday, February
2, 1996, at The Inn at Spanish Bay, 2700 17 Mile Drive, Pebble Beach, California
93953, and at any adjournments or postponements of the Conner Meeting. At the
Conner Meeting, holders of shares of Common Stock of Conner, par value $.001 per
share ("Conner Common Stock"), will be asked to consider and vote upon a
proposal to approve and adopt the Merger Agreements, pursuant to which, among
other things, Conner would be acquired by Seagate by means of the merger of Sub
with and into Conner, with Conner being the surviving corporation and becoming a
wholly-owned subsidiary of Seagate (the "Merger").
This Joint Proxy Statement/Prospectus constitutes the prospectus of Seagate
for use in connection with the offer and issuance of shares of Common Stock of
Seagate, $.01 par value per share ("Seagate Common Stock"), pursuant to the
Merger. Upon the effectiveness of the Merger, each outstanding share of Conner
Common Stock (other than treasury shares and shares owned by Seagate or its
subsidiaries) and the accompanying preferred share purchase right issued
pursuant to the terms of the Preferred Share Purchase Rights Agreement dated as
of November 29, 1994, between Conner and The First National Bank of Boston will
be converted into the right to receive 0.442 (the "Exchange Ratio") of a share
of Seagate Common Stock. In addition, as a result of the Merger, each
outstanding option to purchase Conner Common Stock (a "Conner Option") will be
assumed by Seagate and converted into an option to acquire such number of shares
of Seagate Common Stock as the holder would have been entitled to receive had
such holder exercised such Conner Option in full immediately prior to the
effective time of the Merger, at an exercise price per share equal to the
exercise price per share of Conner Common Stock under such Conner Option
immediately prior to the effective time of the Merger divided by the Exchange
Ratio. Based upon the number of shares of Seagate Common Stock and Conner Common
Stock outstanding at December 15, 1995, an aggregate of approximately 24,202,875
shares of Seagate Common Stock would be issued in connection with the Merger,
representing approximately 24.9% of the total number of shares of Seagate Common
Stock outstanding after giving effect to such issuance. Based upon the number of
Conner Options outstanding at December 15, 1995, approximately 2,848,683
additional shares of Seagate Common Stock would be reserved for issuance to
holders of Conner Options in connection with Seagate's assumption of such Conner
Options.
In addition, upon consummation of the Merger, Conner, and, if required,
Seagate, will enter into supplemental indentures with the trustees under the
indentures governing Conner's outstanding 6 3/4% Convertible Subordinated
Debentures due 2001 and Conner's outstanding 6 1/2% Convertible Subordinated
Debentures due 2002, respectively (the "Conner Debentures") providing that each
holder of a Conner Debenture shall be entitled to convert such Conner Debenture
into the kind and amount of Seagate Common Stock which such holder would have
been entitled to receive had such Conner Debenture been converted into Conner
Common Stock immediately prior to consummation of the Merger.
The outstanding shares of Seagate Common Stock are listed on the New York
Stock Exchange (the "NYSE") under the symbol "SEG," and it is a condition to the
obligations of Seagate and Conner to consummate the Merger that the shares of
Seagate Common Stock to be issued in the Merger be approved for listing on the
NYSE, upon official notice of issuance. The last reported sale price of Seagate
Common Stock on the NYSE composite tape on December 29, 1995 was $47.50 per
share. Based on such last reported sale price, the Exchange Ratio would result
in a per share purchase price for the Conner Common Stock of $21.00. Because the
Exchange Ratio is fixed, a change in the market price of Seagate Common Stock
before the Merger will affect the dollar market value of the Seagate Common
Stock to be received by the stockholders of Conner in the Merger.
This Joint Proxy Statement/Prospectus does not cover resales of Seagate
Common Stock received by stockholders of Conner in the Merger, and no person is
authorized to make use of this Joint Proxy Statement/Prospectus in connection
with any such resale.
This Joint Proxy Statement/Prospectus and the accompanying Proxy Cards are
first being mailed to stockholders of Seagate and Conner on or about January 3,
1996.
THE SHARES OF SEAGATE COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION.
STOCKHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS JOINT
PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY, PARTICULARLY THE
MATTERS REFERRED TO ON PAGE 26 UNDER "RISK FACTORS."
The date of this Joint Proxy Statement/Prospectus is January 3, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION...................................................................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 5
SUMMARY.................................................................................................... 6
The Companies.......................................................................................... 6
The Proposed Merger.................................................................................... 7
Special Meetings of Stockholders....................................................................... 8
Recommendations of the Boards of Directors............................................................. 9
Opinions of Financial Advisors......................................................................... 10
The Merger and Related Transactions.................................................................... 10
Markets and Price Data................................................................................. 17
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA........................................................... 19
COMPARATIVE PER SHARE DATA................................................................................. 23
RISK FACTORS............................................................................................... 26
Risks Related to the Merger............................................................................ 26
Risks Related to the Business and Operations of Seagate and Conner..................................... 27
THE SEAGATE MEETING........................................................................................ 35
General................................................................................................ 35
Record Date and Outstanding Shares..................................................................... 35
Voting of Proxies...................................................................................... 35
Vote Required.......................................................................................... 36
Abstentions; Broker Non-Votes.......................................................................... 36
Solicitation of Proxies and Expenses................................................................... 37
THE CONNER MEETING......................................................................................... 37
General................................................................................................ 37
Record Date and Outstanding Shares..................................................................... 37
Voting of Proxies...................................................................................... 37
Vote Required.......................................................................................... 38
Abstentions; Broker Non-Votes.......................................................................... 38
Solicitation of Proxies and Expenses................................................................... 38
THE MERGER AND RELATED TRANSACTIONS........................................................................ 39
General................................................................................................ 39
Background of the Merger............................................................................... 41
Reasons for the Merger................................................................................. 45
Board Recommendations.................................................................................. 50
Certain Information Concerning Seagate................................................................. 50
Certain Information Concerning the Merger.............................................................. 51
Opinions of Financial Advisors......................................................................... 52
Interests of Certain Persons in the Merger............................................................. 59
Representations and Covenants.......................................................................... 62
Conditions to Consummation of the Merger............................................................... 63
Regulatory Approvals Required.......................................................................... 64
Limitation on Negotiations............................................................................. 65
Waiver and Amendment................................................................................... 65
Termination; Breakup Fees; Seagate Option to Purchase Conner Common Stock.............................. 65
Seagate Acquisition of the Minority Interests in Arcada Holdings, Inc.................................. 67
Certain Federal Income Tax Matters..................................................................... 68
Accounting Treatment................................................................................... 69
Restrictions on Resale of Seagate Common Stock......................................................... 69
No Dissenters' Rights.................................................................................. 70
</TABLE>
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Stock Exchange Listing of Seagate Common Stock......................................................... 70
Expenses............................................................................................... 70
Surrender of Conner Common Stock Certificates.......................................................... 70
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................................................ 72
DISCUSSION AND ANALYSIS OF PRO FORMA INFORMATION........................................................... 80
COMPARISON OF RIGHTS OF STOCKHOLDERS OF SEAGATE AND CONNER................................................. 81
Stockholder Meetings................................................................................... 81
Stockholder Action by Written Consent.................................................................. 81
Director Nominations................................................................................... 81
Stockholder Proposals.................................................................................. 82
Indemnification........................................................................................ 82
Election of Directors.................................................................................. 82
Preferred Shares Rights Agreement...................................................................... 82
DESCRIPTION OF SEAGATE CAPITAL STOCK....................................................................... 83
Common Stock........................................................................................... 83
Preferred Stock........................................................................................ 83
Delaware General Corporation Law Section 203........................................................... 83
PROPOSED RATIFICATION AND APPROVAL OF AMENDMENT TO THE EXECUTIVE STOCK PLAN................................ 84
STOCKHOLDER PROPOSALS...................................................................................... 88
ADJOURNMENT OF SPECIAL MEETINGS............................................................................ 88
Adjournment of Seagate Meeting......................................................................... 88
Adjournment of Conner Meeting.......................................................................... 88
EXPERTS.................................................................................................... 88
LEGAL MATTERS.............................................................................................. 88
Appendix A -- Agreement and Plan of Reorganization and Amendment No. 1 thereto
Appendix B -- Agreement of Merger
Appendix C -- Seagate Option
Appendix D -- Opinion of Morgan Stanley & Co. Incorporated
Appendix E -- Opinion of Goldman, Sachs & Co.
</TABLE>
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NO PERSON HAS BEEN AUTHORIZED BY SEAGATE OR CONNER TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SEAGATE OR
CONNER. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY THIS JOINT
PROXY STATEMENT/PROSPECTUS OR A SOLICITATION OF A PROXY IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS
RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
Seagate and Conner are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). These materials can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of these materials can also be obtained
from the Commission at prescribed rates by writing to the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Such
reports, proxy or information statements and other information concerning
Seagate and Conner can also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
Under the rules and regulations of the Commission, the solicitation of
proxies from stockholders of Conner to approve and adopt the Merger Agreements
constitutes an offering of the Seagate Common Stock to be issued in connection
with the Merger. Accordingly, Seagate has filed with the Commission a
Registration Statement on Form S-4 under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to such offering (the "Registration
Statement"). This Joint Proxy Statement/Prospectus constitutes the prospectus of
Seagate that is filed as part of the Registration Statement. Other parts of the
Registration Statement are omitted from this Joint Proxy Statement/ Prospectus
in accordance with the rules and regulations of the Commission. Copies of the
Registration Statement, including the exhibits to the Registration Statement and
other material that is not included herein, may be inspected, without charge, at
the offices of the Commission referred to above, or obtained at prescribed rates
from the Public Reference Section of the Commission at the address set forth
above.
Statements made in this Joint Proxy Statement/Prospectus concerning the
contents of any contract or other documents are not necessarily complete. With
respect to each contract or other document filed as an exhibit to the
Registration Statement, reference is hereby made to that exhibit for a more
complete description of the matter involved, and each such statement is hereby
qualified in its entirety by such reference.
ALL INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS RELATING
TO SEAGATE AND ITS AFFILIATES HAS BEEN SUPPLIED BY SEAGATE, AND ALL INFORMATION
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS RELATING TO CONNER AND ITS
AFFILIATES HAS BEEN SUPPLIED BY CONNER, EXCEPT FOR THE INFORMATION SET FORTH
UNDER "THE MERGER AND RELATED TRANSACTIONS -- INTERESTS OF CERTAIN PERSONS IN
THE MERGER -- EMPLOYMENT,
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CONSULTING AND NONCOMPETITION AGREEMENT WITH FINIS F. CONNER." "-- EMPLOYMENT
AGREEMENT WITH P. JACKSON BELL" AND "THE MERGER AND RELATED TRANSACTIONS --
SEAGATE ACQUISITION OF THE MINORITY INTERESTS IN ARCADA HOLDINGS, INC.," WHICH
HAS BEEN SUPPLIED BY SEAGATE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THERE WILL BE PROVIDED
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A JOINT
PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST OF ANY
SUCH PERSON, A COPY OF ALL DOCUMENTS INCORPORATED BY REFERENCE HEREIN (EXCLUDING
EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
HEREIN). WITH RESPECT TO SEAGATE'S DOCUMENTS, REQUESTS SHOULD BE DIRECTED TO
SEAGATE TECHNOLOGY, INC., INVESTOR RELATIONS, 920 DISC DRIVE, SCOTTS VALLEY, CA
95066 (TELEPHONE (408) 439-2371). WITH RESPECT TO CONNER'S DOCUMENTS, REQUESTS
SHOULD BE DIRECTED TO CONNER PERIPHERALS, INC., INVESTOR RELATIONS DEPARTMENT,
3081 ZANKER ROAD, SAN JOSE, CALIFORNIA 95134 (TELEPHONE (408) 456-4500). IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE SPECIAL
MEETINGS TO WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS RELATES, ANY SUCH
REQUEST SHOULD BE MADE BY JANUARY 15, 1996.
Seagate incorporates herein by reference Seagate's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, Seagate's Quarterly Report on Form
10-Q for the quarter ended September 29, 1995 and the description of Seagate's
Common Stock set forth in Seagate's Registration Statement on Form 8-A/A dated
December 2, 1994. Seagate's Commission file number is 0-10630.
Conner incorporates herein by reference Conner's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, as amended by the Form 10-K/A filed
on November 15, 1995, Conner's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, Conner's
Report on Form 8-K dated October 3, 1995, the description of the Conner Common
Stock set forth in Conner's Registration Statement on Form 8-B filed with the
Commission on September 9, 1992 and the description of Conner's preferred share
purchase rights issued pursuant to the Preferred Share Rights Agreement between
Conner and The First National Bank of Boston, as rights agent, dated as of
November 29, 1994 set forth in Conner's Registration Statement on Form 8-A dated
November 30, 1994. Conner's Commission file number is 1-10639.
All reports and definitive proxy or information statements filed by Seagate
and Conner pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Joint Proxy Statement/Prospectus and prior to the
date of their respective special meetings of stockholders shall be deemed to be
incorporated by reference into this Joint Proxy Statement/Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated herein shall be deemed to be modified
or superseded for purposes of this Joint Proxy Statement/Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Joint Proxy Statement/Prospectus.
5
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SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THE SUMMARY DOES NOT CONTAIN A
COMPLETE DESCRIPTION OF THE AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF
OCTOBER 3, 1995, AS AMENDED BY AMENDMENT NO. 1 THERETO DATED AS OF DECEMBER 18,
1995, ENTERED INTO BY AND AMONG SEAGATE TECHNOLOGY, INC., A DELAWARE CORPORATION
("SEAGATE"), ATHENA ACQUISITION CORPORATION, A NEWLY-FORMED, WHOLLY-OWNED
SUBSIDIARY OF SEAGATE ("SUB"), AND CONNER PERIPHERALS, INC., A DELAWARE
CORPORATION ("CONNER"), A COPY OF WHICH IS ATTACHED HERETO AS APPENDIX A (THE
"REORGANIZATION AGREEMENT"), THE RELATED AGREEMENT OF MERGER BETWEEN SUB AND
CONNER, A COPY OF WHICH IS ATTACHED HERETO AS APPENDIX B (THE "MERGER
AGREEMENT," AND, COLLECTIVELY WITH THE REORGANIZATION AGREEMENT, THE "MERGER
AGREEMENTS"), THE MERGER OF SUB WITH AND INTO CONNER (THE "MERGER"), OR THE
OPTION OF SEAGATE (THE "SEAGATE OPTION") TO ACQUIRE UP TO 15% OF THE OUTSTANDING
CONNER COMMON STOCK (AS DEFINED BELOW), UNDER THE TERMS AND CONDITIONS SET FORTH
THEREIN, A COPY OF WHICH IS ATTACHED HERETO AS APPENDIX C. THE SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THIS JOINT PROXY
STATEMENT/PROSPECTUS, THE ATTACHED APPENDICES AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN. THE SEAGATE STOCKHOLDERS AND THE CONNER STOCKHOLDERS ARE URGED
TO READ CAREFULLY THIS JOINT PROXY STATEMENT/PROSPECTUS AND THE ATTACHED
APPENDICES IN THEIR ENTIRETY.
THE COMPANIES
SEAGATE. Seagate designs, manufactures and markets a broad line of rigid
magnetic disc drives for use in computer systems ranging from notebook computers
and desktop personal computers to workstations and supercomputers as well as in
multimedia applications such as digital video and video-on-demand. Seagate's
products include approximately 100 rigid disc drive models with form factors
from 2.5 to 5.25 inches and capacities from 300 megabytes to 9 gigabytes.
Seagate sells its products to original equipment manufacturers ("OEMs") for
inclusion in their computer systems or subsystems, and to distributors,
resellers and dealers. Seagate has pursued a strategy of vertical integration
and accordingly designs and manufactures rigid disc drive components including
recording heads, discs, substrates and motors. Seagate also assembles certain of
the key subassemblies for use in its products including printed circuit board
and head stack assemblies. Seagate's products are currently manufactured
primarily in the Far East with limited production in the United States.
In addition to pursuing its core rigid disc drive business, Seagate has
broadened its business strategy as a data technology company to more fully
address the markets for storage, retrieval and management of data. In this
regard, Seagate has invested in, and continues to investigate opportunities to
invest in software activities. Seagate anticipates that users of computer
systems will increasingly rely upon client/server network computing environments
and believes that as this reliance increases, users will demand software that
more efficiently and securely manages and provides access to data across
computer networked environments. As a result, Seagate is broadening its core
competencies to include software products to meet these requirements. In
addition, Seagate has implemented a strategy to establish itself as a leading
supplier of selected magnetic recording components, including thin-film heads,
to other manufacturers. Finally, Seagate's broadened strategy includes expanding
its traditional rigid disc drive business to include other forms of data storage
and retrieval, such as flash memory, where Seagate has made a significant
investment in SanDisk Corporation (formerly SunDisk Corporation), a flash memory
company.
Seagate's predecessor was incorporated in California in 1978. In February
1987, Seagate was reincorporated under the laws of Delaware. Unless otherwise
indicated, "Seagate" refers to Seagate and its wholly-owned subsidiaries.
Seagate's principal executive offices are located at 920 Disc Drive, Scotts
Valley, California 95066, and its telephone number at that location is (408)
438-6550.
CONNER. Conner designs, builds and sells information storage solutions
products, including a large selection of hard disc drives, tape drives, storage
management software and integrated storage systems for a wide range of computer
applications. Conner's hard disc drive products include 2.5 inch and 3.5 inch
disc drives which offer storage capacities ranging from 210 megabytes to over 4
gigabytes
6
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of formatted capacity. Conner also designs and sells tape drive products which
are peripheral hardware devices that store or protect large volumes of data
through the use of tape stored on small cartridges used singly or, in the case
of Digital Audio Tape, in multiple autoloader applications. Through its
majority-owned Arcada Holdings, Inc. ("Arcada") subsidiary, Conner offers data
protection and storage management software and develops data protection and
storage management software products that operate across multiple desktop and
client-server environments, including those of International Business Machines
Corporation, Microsoft, Inc. and Novell, Inc. Conner storage systems integrate
hardware and software solutions to allow consumers to meet the demanding
requirements of the current mixed network environments. Conner sells its hard
disc drive, tape drive, software and storage systems products principally to
OEMs through a direct sales force and to non-OEM purchasers such as
distributors.
Conner's predecessor was incorporated in California in June 1985. In
September 1992, Conner was reincorporated under the laws of Delaware. Conner's
principal executive offices are located at 3081 Zanker Road, San Jose,
California 95134, and its telephone number at that location is (408) 456-4500.
SUB. Sub, a Delaware corporation, is a newly-formed, wholly-owned
subsidiary of Seagate formed solely for the purposes of the Merger. Other than
in connection with the proposed Merger, Sub has no material assets or
liabilities and has not engaged in any activities. Sub's principal executive
offices are located at 920 Disc Drive, Scotts Valley, California 95066, and its
telephone number at that location is (408) 438-6550.
THE PROPOSED MERGER
The Merger Agreements provide for the merger of Sub with and into Conner,
with Conner being the surviving corporation and becoming a wholly-owned
subsidiary of Seagate. The Merger will become effective upon the filing of the
properly executed Merger Agreement with the Secretary of State of the State of
Delaware (the "Effective Time"). Upon consummation of the Merger, each then
outstanding share of Common Stock of Conner, par value $.001 per share (the
"Conner Common Stock") and the accompanying preferred share purchase right
issued pursuant to the terms of the Preferred Shares Rights Agreement dated as
of November 29, 1994, between Conner and The First National Bank of Boston as
Rights Agent (the "Conner Rights") will automatically be converted into 0.442
(the "Exchange Ratio") of a share of Common Stock of Seagate, $.01 par value per
share ("Seagate Common Stock"). Cash will be paid in lieu of fractional shares.
If the Merger is consummated, Conner stockholders will no longer hold any
interest in Conner other than through their interest in shares of Seagate Common
Stock. In addition, each outstanding option to purchase Conner Common Stock (a
"Conner Option") will be assumed by Seagate and converted into an option to
acquire such number of shares of Seagate Common Stock as the holder would have
been entitled to receive had such holder exercised such Conner Option in full
immediately prior to the Effective Time, at an exercise price per share equal to
the exercise price per share of Conner Common Stock under such Conner Option
immediately prior to the Effective Time divided by the Exchange Ratio. Seagate
will file a registration statement on Form S-8 with the Commission with respect
to the shares of Seagate Common Stock subject to the assumed Conner Options. See
"The Merger and Related Transactions -- General -- Assumption of Options."
Each outstanding share of Seagate Common Stock will remain outstanding and
unchanged following the Merger. Based upon the number of shares of Seagate
Common Stock and Conner Common Stock outstanding at December 15, 1995, an
aggregate of approximately 24,202,875 shares of Seagate Common Stock would be
issued in connection with the Merger, representing approximately 24.9% of the
total number of shares of Seagate Common Stock outstanding after giving effect
to such issuance. Based upon the number of Conner Options outstanding at
December 15, 1995, approximately 2,848,683 additional shares of Seagate Common
Stock would be reserved for issuance to holders of Conner Options in connection
with Seagate's assumption of such Conner Options.
7
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The outstanding shares of Seagate Common Stock are listed on the New York
Stock Exchange (the "NYSE") under the symbol "SEG," and it is a condition to the
obligations of Seagate and Conner to consummate the Merger that the shares of
Seagate Common Stock to be issued in the Merger be approved for listing on the
NYSE, upon official notice of issuance.
SPECIAL MEETINGS OF STOCKHOLDERS
DATE, TIME AND PLACE
SEAGATE. The Special Meeting of Seagate's stockholders (the "Seagate
Meeting") will be held on Friday, February 2, 1996 at 10:00 a.m., local time, at
Seagate's corporate headquarters at 920 Disc Drive, Scotts Valley, California
95066.
CONNER. The Special Meeting of Conner's stockholders (the "Conner Meeting")
will be held on Friday, February 2, 1996 at 9:00 a.m., local time, at The Inn at
Spanish Bay, 2700 17 Mile Drive, Pebble Beach, California 93953.
PURPOSES OF THE SPECIAL MEETINGS
SEAGATE MEETING. At the Seagate Meeting, stockholders of record of Seagate
as of the close of business on the Seagate Record Date (as defined below) will
be asked to consider and vote upon (i) a proposal to approve the issuance of
shares of Seagate Common Stock pursuant to the Merger Agreements and (ii) a
proposal to ratify and approve amendments to Seagate's Executive Stock Plan.
CONNER MEETING. At the Conner Meeting, stockholders of record of Conner as
of the close of business on the Conner Record Date (as defined below) will be
asked to consider and vote upon a proposal to approve and adopt the Merger
Agreements.
RECORD DATES AND OUTSTANDING SHARES
SEAGATE. Holders of record of Seagate Common Stock at the close of business
on December 15, 1995 (the "Seagate Record Date") are entitled to notice of and
to vote at the Seagate Meeting. At the close of business on the Seagate Record
Date, there were 73,101,968 shares of Seagate Common Stock outstanding, each of
which will be entitled to one vote on each matter to be acted upon.
CONNER. Holders of record of Conner Common Stock at the close of business
on December 15, 1995 (the "Conner Record Date") are entitled to notice of and to
vote at the Conner Meeting. At the close of business on the Conner Record Date,
there were a total of 54,757,637 shares of Conner Common Stock outstanding, each
of which will be entitled to one vote on each matter to be acted upon.
QUORUM
The required quorum for the transaction of business at both the Seagate
Meeting and the Conner Meeting is a majority of the shares of Seagate Common
Stock or Conner Common Stock, as the case may be, issued and outstanding on the
applicable record date. Abstentions and broker non-votes each will be included
in determining the number of shares present for purposes of determining the
presence of a quorum.
VOTES REQUIRED
SEAGATE VOTE REQUIRED. Because the number of shares of Seagate Common Stock
to be issued or reserved for issuance in connection with the Merger will exceed
20% of the number of shares of Seagate Common Stock outstanding prior to the
Merger, approval by holders of Seagate Common Stock of the issuance of Seagate
Common Stock pursuant to the Merger Agreements is required under the rules of
the NYSE. Under NYSE rules, the proposal to issue Seagate Common Stock pursuant
to the Merger Agreements must be approved by a majority of the votes cast at the
Seagate Meeting, provided that the total votes cast on the proposal represents
over 50% of the outstanding shares of Seagate Common Stock. If holders of
Seagate Common Stock do not vote to approve such issuance, the Merger will not
be consummated. Seagate is not a constituent corporation to the Merger and,
therefore, specific approval of the Merger Agreements by Seagate's stockholders
is not required under the Delaware General Corporation Law (the "DGCL"), the
Restated Certificate of Incorporation of Seagate (the "Seagate Certificate of
Incorporation") or the Bylaws, as amended, of Seagate (the
8
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"Seagate Bylaws"). The ratification and approval of amendments to Seagate's
Executive Stock Plan will require the affirmative vote of not less than a
majority of the Seagate Common Stock represented and voting either in person or
by proxy at the Seagate Meeting.
It is expected that all of the 434,301 shares of Seagate Common Stock (which
excludes shares subject to stock options) beneficially owned by directors and
executive officers of Seagate and their affiliates at the Seagate Record Date
(representing less than 1% of the total number of shares of Seagate Common Stock
outstanding at such date) will be voted for approval of the issuance of Seagate
Common Stock pursuant to the Merger Agreements. As of the Seagate Record Date,
Conner owned none, and its directors and executive officers and their affiliates
beneficially owned less than 1% in the aggregate, of the outstanding shares of
Seagate Common Stock. It is expected that any shares of Seagate Common Stock
beneficially owned by Conner's directors and executive officers will be voted
for approval and adoption of the issuance of shares of Seagate Common Stock
pursuant to the Merger Agreements. See "The Seagate Meeting -- Vote Required."
CONNER VOTE REQUIRED. Pursuant to the DGCL and the Restated Certificate of
Incorporation of Conner, as amended (the "Conner Certificate of Incorporation"),
and the Bylaws of Conner, as amended (the "Conner Bylaws"), approval of the
Merger Agreements requires the affirmative vote of at least a majority of the
outstanding shares of Conner Common Stock entitled to vote at the Conner
Meeting.
It is expected that all of the 1,456,783 shares of Conner Common Stock
(which excludes shares subject to Conner Options) beneficially owned by
directors and executive officers of Conner and their affiliates at the Conner
Record Date (representing approximately 2.7% of the total number of shares of
Conner Common Stock outstanding at such date) will be voted for approval and
adoption of the Merger Agreements. As of the Conner Record Date, Seagate and its
directors and executive officers and their affiliates beneficially owned none of
the outstanding shares of Conner Common Stock. See "The Conner Meeting -- Vote
Required."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
SEAGATE BOARD OF DIRECTORS. The Board of Directors of Seagate (the "Seagate
Board") has unanimously approved the Merger Agreements and the Merger and
believes that the terms of the Merger Agreements are fair to, and that the
Merger is in the best interests of, Seagate and its stockholders and therefore
unanimously recommends that holders of Seagate Common Stock vote for the
approval of the issuance of Seagate Common Stock pursuant to the Merger
Agreements. Among the factors considered by the Seagate Board in reaching its
determination to approve the Merger Agreements were the opportunities afforded
by the Merger to enhance Seagate's research and development efforts, to
strengthen Seagate's component capabilities, to broaden Seagate's product line
in its core disc drive business, to obtain significant efficiencies and cost
savings, to expand Seagate's storage management software business and to expand
Seagate's tape drive product line. A fuller account of the primary factors
considered and relied upon by the Seagate Board in reaching its recommendation
are referred to in "The Merger and Related Transactions -- Reasons for the
Merger -- Reasons of Seagate for the Merger."
CONNER BOARD OF DIRECTORS. The Board of Directors of Conner (the "Conner
Board") has approved the Merger Agreements and the Merger and believes that the
terms of the Merger Agreements are fair to, and that the Merger is in the best
interests of, Conner and its stockholders and therefore recommends that holders
of Conner Common Stock vote for approval and adoption of the Merger Agreements.
The Conner directors who considered and voted upon the Merger Agreements and the
Merger were unanimous in their approval and recommendation. One director, Mark
Rossi, recused himself from discussions or votes by the Conner Board with
respect to a transaction with Seagate due to a possible conflict of interest
resulting from his position as a director of StorMedia Incorporated, which
supplies thin film discs to manufacturers of hard disc drives, including
Seagate. The Conner Board's decision to approve the Reorganization Agreement and
the Merger Agreement was based, in large part, on its assessment that Conner is
engaged in an extremely competitive business, with short
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product cycles that require a high level of execution for any business strategy
to succeed. The Conner Board recognized that Conner's ability to achieve its
business plan may depend upon future technological developments and access to
and availability of certain components, and that the combination with Seagate
could provide a more attractive solution to the challenge of obtaining such
technology than the alternatives for Conner as an independent company. The
Conner Board also examined other risks associated with the strategic
alternatives to the Merger, including the potential impact of certain recent
changes in the executive management and Conner's ability to consummate either
its existing business plan or such strategic alternatives. Against these
considerations the Conner Board weighed, among other things, the fact that the
Exchange Ratio offered a premium to Conner stockholders and, because the
consideration was stock in the ongoing enterprise combining Conner and Seagate,
that Conner's stockholders would have the opportunity to benefit from any
synergies to be achieved by such combination. For certain forward-looking
financial information regarding Seagate considered by the Conner Board and
Conner's financial advisor, see "The Merger and Related Transactions -- Certain
Information Concerning Seagate." A fuller account of the primary factors
considered and relied upon by the Conner Board in reaching its recommendation
are referred to in "The Merger and Related Transactions -- Reasons for the
Merger -- Reasons of Conner for the Merger."
OPINIONS OF FINANCIAL ADVISORS
SEAGATE. Morgan Stanley & Co. Incorporated ("Morgan Stanley") has delivered
its written opinion to the Seagate Board dated October 3, 1995 stating that, as
of such date, the Exchange Ratio of 0.442 of a share of Seagate Common Stock for
each outstanding share of Conner Common Stock is fair, from a financial point of
view, to Seagate. The full text of the opinion of Morgan Stanley, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken by Morgan Stanley, is attached as Appendix D to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. SEAGATE
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION IN ITS ENTIRETY. See
"The Merger and Related Transactions -- Opinions of Financial Advisors --
Opinion of Morgan Stanley & Co. Incorporated."
CONNER. Goldman, Sachs & Co. ("Goldman Sachs") has delivered its written
opinion to the Conner Board dated October 3, 1995 stating that, as of such date,
the Exchange Ratio pursuant to the Reorganization Agreement is fair to the
holders of shares of Conner Common Stock. The full text of the opinion of
Goldman Sachs, which sets forth the assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
as Appendix E to this Joint Proxy Statement/Prospectus and is incorporated
herein by reference. CONNER STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
OPINION IN ITS ENTIRETY. See "The Merger and Related Transactions -- Opinions of
Financial Advisors -- Opinion of Goldman, Sachs & Co."
THE MERGER AND RELATED TRANSACTIONS
CONDITIONS TO THE MERGER
In addition to the requirement that the Seagate stockholders approve the
issuance of Seagate Common Stock and that the Conner stockholders approve the
Merger Agreements, consummation of the Merger is subject to a number of other
conditions which, if not satisfied or waived, could cause the Merger not to be
consummated and the Reorganization Agreement to be terminated. Each party's
obligation to consummate the Merger is conditioned upon, among other things, the
accuracy of the other party's representations, each party's performance of its
obligations under the Reorganization Agreement, the receipt of letters dated as
of the effective date of the Merger from the independent auditors of both
Seagate and Conner regarding the appropriateness of pooling of interests
accounting for the Merger under Accounting Principles Board Opinion ("APB") No.
16, the receipt of written opinions from the legal counsel of both Seagate and
Conner to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), the absence of legal action preventing consummation of the Merger and
the authorization for listing on the NYSE, upon official notice of issuance, of
the shares of Seagate Common Stock to be issued in the Merger. See "The Merger
and Related Transactions -- Conditions to Consummation of the Merger."
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<PAGE>
REGULATORY MATTERS
Consummation of the Merger is subject to the expiration or termination of
any applicable waiting period (and any extension thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the merger control regulations of the European Economic Community (the
"EEC"). The applicable waiting period under the HSR Act expired on November 12,
1995 and on November 17, 1995, the Commission of the EEC issued a decision in
which it stated that it would not oppose the Merger. See "The Merger and Related
Transactions -- Regulatory Approvals Required."
REPRESENTATIONS AND WARRANTIES; COVENANTS
Under the Reorganization Agreement, Seagate and Conner made a number of
representations regarding their respective capital structures, operations,
financial condition and other matters. Each party agreed as to itself and its
subsidiaries that, until consummation of the Merger or the earlier termination
of the Reorganization Agreement, it will, among other things, maintain its
business, conduct its operations in the ordinary course, provide the other with
reasonable access to its financial, operating and other information, and use all
reasonable efforts to consummate the Merger. See "The Merger and Related
Transactions -- Representations and Covenants" and "The Merger and Related
Transactions -- Conditions to Consummation of the Merger."
LIMITATION ON NEGOTIATIONS
The Reorganization Agreement provides that Conner will not solicit or
encourage or take other action to facilitate any inquiries or the making of any
proposal regarding (i) any merger, consolidation, sale of substantial assets or
similar transaction involving Conner or any subsidiaries of Conner, (ii) the
sale of 20% or more of the outstanding capital stock of Conner, (iii) the
acquisition by any person, or group, of beneficial ownership of, or a right to
acquire beneficial ownership of, 20% or more of the outstanding capital stock of
Conner, or (iv) any public announcement of a proposal, plan, intention or
agreement to do any of the foregoing (an "Acquisition Proposal"), or engage in
any discussions or negotiations with any person with respect to any Acquisition
Proposal or accept any Acquisition Proposal. Notwithstanding the foregoing, the
Conner Board, in the exercise of and as required by its fiduciary duties as
determined after consultation with outside legal counsel, may engage in
discussions or negotiations with, and furnish information to, a third party who
makes a written, unsolicited Acquisition Proposal that is reasonably capable of
being consummated and is reasonably likely to be financially superior to the
Merger, as determined in each case in good faith by the Conner Board after
consultation with Conner's financial advisors (a "Superior Proposal"). See "The
Merger and Related Transactions -- Limitation on Negotiations."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
CHANGE OF CONTROL/SEVERANCE AGREEMENTS. In October 1994, Conner entered
into change of control/severance agreements with each of Finis F. Conner, its
Chairman and Chief Executive Officer, and P. Jackson Bell, its Executive Vice
President and Chief Financial Officer. The agreements provide for certain
benefit payments if the executive is employed as of the date of a change of
control (the Merger would be a change of control for purposes of such
agreements). In April 1995, Conner also entered into a change of
control/severance agreement with Kenneth F. Potashner, its Executive Vice
President and General Manager of Disc Drive Operations. The agreement provides
for certain benefit payments if Mr. Potashner is employed as of the date of a
change of control (the Merger would be a change of control for purposes of such
agreement) and his employment is terminated or constructively terminated within
the 24-month period following the date of change of control, other than for
cause. Pursuant to two separate letter agreements entered into at the request of
Seagate, and dated December 21, 1995, by and among Conner, Seagate and each of
Mr. Conner and Mr. Bell, Mr. Conner and Mr. Bell have agreed to accept from
Conner in 1995 the lump sum cash payments to which they are entitled under their
respective change of control/severance agreements. See "The Merger and Related
Transactions -- Interests of Certain Persons in the Merger -- Change of
Control/Severance Agreements."
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<PAGE>
EMPLOYMENT, CONSULTING AND NON-COMPETITION AGREEMENT WITH FINIS F.
CONNER. On October 3, 1995, after execution by the parties thereto of the
Reorganization Agreement, Seagate entered into an employment, consulting and
non-competition agreement (the "Conner Employment Agreement") with Mr. Conner to
be effective only upon consummation of the Merger. Pursuant to the Conner
Employment Agreement, Seagate has agreed to cause Conner, after the Merger, to
honor the terms of the change of control/severance agreement between Mr. Conner
and Conner described above. In addition, Mr. Conner will be engaged for a period
of 24 months beginning immediately upon the closing of the Merger to perform
such employment, advisory and consulting services as may be requested by
Seagate. The Conner Employment Agreement also contains non-competition terms
providing that beginning on the closing date of the Merger and continuing for
the ensuing 24 months, Mr. Conner will not, directly or indirectly, engage in
activities that are competitive with certain of the businesses of Seagate or
Conner. Mr. Conner has also agreed to use his best efforts to ensure that good
employee, customer and supplier relations are maintained at Conner during the
24-month term of the Conner Employment Agreement. See "The Merger and Related
Transactions -- Interests of Certain Persons in the Merger -- Employment,
Consulting and Non-Competition Agreement with Finis F. Conner."
EMPLOYMENT AGREEMENT WITH P. JACKSON BELL. Seagate entered into an
employment agreement dated December 7, 1995 (the "Bell Employment Agreement")
with Mr. Bell to be effective only upon consummation of the Merger. Pursuant to
the Bell Employment Agreement, Seagate has agreed to cause Conner, after the
Merger, to honor the terms of the change of control/severance agreement between
Mr. Bell and Conner described above. In addition, Mr. Bell will be engaged for a
period of up to six months beginning immediately upon the closing of the Merger
to perform such employment services as may be requested by Seagate. At the end
of Mr. Bell's employment period, Mr. Bell will receive a lump sum severance
payment. See "The Merger and Related Transactions -- Interests of Certain
Persons in the Merger -- Employment Agreement with P. Jackson Bell."
INDEMNIFICATION AND INSURANCE. The Reorganization Agreement provides that
Seagate will assume all of the obligations of Conner under Conner's existing
indemnification agreements with each of the directors and officers of Conner, as
such agreements relate to the indemnification of such persons for expenses and
liabilities arising from facts or events that occurred prior to the Effective
Time or relating to the transactions contemplated by the Merger Agreements. The
Reorganization Agreement also requires the surviving corporation in the Merger,
or Seagate, to maintain in effect for three years after the Effective Time,
directors' and officers' liability insurance for the benefit of the directors
and officers of Conner with respect to claims arising from facts or events which
occurred before the Effective Time. In addition, pursuant to the Reorganization
Agreement, Seagate has agreed that, subsequent to the Effective Time, it will
fund one counsel's representation of the officers and directors of Conner as
defendants in all stockholder litigation commenced prior to the Effective Time
concerning the performance of their duties under federal or state law (including
litigation under federal and state securities laws) and Seagate's proposal
respecting the Merger. See "The Merger and Related Transactions -- Interests of
Certain Persons in the Merger -- Indemnification and Insurance."
INTEREST IN CONNER COMMON STOCK AND OPTIONS. As of the Conner Record Date,
the executive officers and directors of Conner beneficially owned an aggregate
of 2,147,111 shares of Conner Common Stock (including 690,328 shares of Conner
Common Stock subject to Conner Options exercisable within 60 days of the Conner
Record Date). Based upon the closing sale price of the Seagate Common Stock on
the Conner Record Date of $46.75, and assuming the exercise of outstanding
Conner Options exercisable within 60 days of the Conner Record Date, the
aggregate dollar value of Seagate Common Stock to be received in the Merger by
the executive officers and directors of Conner is approximately $44,366,825.
Pursuant to certain plans, options or change of control/severance agreements of
Conner, all options and restricted stock awards held by members of the Conner
Board, Mr. Conner and Mr. Bell will become immediately exercisable at the time
of the Merger. The change of control/severance agreements between Conner and Mr.
Potashner provide for full and
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<PAGE>
immediate vesting of 50% of all options and restricted stock awards should he be
terminated, under certain circumstances, following the Merger. See "The Merger
and Related Transactions -- Interests of Certain Persons in the Merger --
Interests in Conner Common Stock and Options."
INTERESTS IN ARCADA HOLDINGS, INC. Certain executive officers of Conner
hold options to purchase shares of capital stock of Arcada. Seagate has agreed
to acquire, after consummation of the Merger, all of the outstanding shares of
Arcada capital stock held by the stockholders of Arcada other than Conner (the
"Arcada Minority Stockholders") and to assume and convert into options to
purchase Seagate Common Stock all options to purchase Arcada capital stock. See
"The Merger and Related Transactions -- Seagate Acquisition of the Minority
Interests in Arcada Holdings, Inc." Pursuant to Seagate's acquisition of the
minority interests in Arcada, the executive officers of Conner will receive
options to purchase an aggregate of 162,225 shares of Seagate Common Stock at an
exercise price of $9.7087 per share. See "The Merger and Related Transactions --
Interests of Certain Persons in the Merger -- Interests in Arcada Holdings,
Inc."
TERMINATION; BREAKUP FEES; SEAGATE OPTION TO PURCHASE CONNER COMMON STOCK
TERMINATION. The Merger Agreements may be terminated any time before the
Effective Time, before or after approval of the issuance of Seagate Common Stock
by the stockholders of Seagate and of the Merger Agreements by the stockholders
of Conner (i) by mutual written consent of Seagate and Conner; (ii) by Seagate
or Conner if the Merger has not become effective on or before April 3, 1996
(unless the Merger has not been consummated due to the waiting period (or any
extension thereof) under the HSR Act not having expired or been terminated, or
due to an action having been instituted by the Department of Justice or Federal
Trade Commission (the "FTC") challenging or seeking to enjoin the consummation
of the Merger, in which case such date shall be extended to June 3, 1996),
unless caused by the action or failure to act of the party seeking to terminate
the Merger Agreements in breach of such party's obligations thereunder; (iii) by
Seagate or Conner if any court or governmental entity of competent jurisdiction
shall (a) have taken any action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, which action is final and
nonappealable, or (b) seek to enjoin the Merger and the terminating party
reasonably believes that the time period required to resolve such governmental
action and the related uncertainty is reasonably likely to have a material
adverse effect on either Seagate or Conner; (iv) by Seagate or Conner if the
required approvals of the stockholders of Seagate or Conner are not obtained at
the Seagate Meeting or the Conner Meeting, respectively, or any adjournment
thereof, unless caused by the action or failure to act of the party seeking to
terminate the Merger Agreements in breach of such party's obligations
thereunder; (v) by Seagate or Conner, if Conner shall have accepted or
recommended to the stockholders of Conner a Superior Proposal and, in the case
of the termination of the Merger Agreements by Conner, Conner shall have paid to
Seagate the Breakup Fee (as defined below); (vi) by Seagate if the Conner Board
withdraws, modifies or refrains from making its recommendation for approval in
respect of the Merger or if a third party acquires beneficial ownership of, or
the right to acquire beneficial ownership of, at least 20% of Conner's
outstanding voting equity securities; (vii) by Seagate or Conner upon a breach
of any representation, warranty, covenant or agreement of the other party, or if
any representation or warranty of the other party shall have become untrue, in
either case such that the conditions to the consummation of the Merger would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided that if such inaccuracy in the
representations and warranties or breach is curable by the party through the
exercise of its reasonable efforts and for so long as such party continues to
exercise such reasonable efforts, the other party may not terminate the Merger
Agreements pursuant to this provision; or (viii) by Seagate, at any time if, as
a result of any structural damage to the main manufacturing building at the
Conner Penang facility, there is, or is reasonably expected to be, a cost to
Conner (after insurance) in excess of $20,000,000 or a substantial cessation of
operations at the Conner Penang facility for at least 15 work days. See "The
Merger and Related Transactions -- Termination; Breakup Fees; Seagate Option to
Purchase Conner Common Stock -- Termination."
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<PAGE>
BREAKUP FEES. Upon the occurrence of any of the following events, Conner
shall immediately make payment to Seagate of a breakup fee of $35,000,000 (the
"Breakup Fee"): (i) Conner shall have accepted a Superior Proposal; (ii) the
Conner Board shall have withdrawn, modified or refrained from making its
recommendation or approval in respect of the Merger, or shall have disclosed its
intention to change such recommendation; or (iii) a third party acquires
beneficial ownership of, or the right to acquire beneficial ownership of, at
least 20% of Conner's outstanding voting equity securities. Payment of the
Breakup Fee will be subject to offset as described below under "-- Seagate
Option to Purchase Conner Common Stock," and shall be reduced by any amount paid
by Conner pursuant to the agreement set forth in the following sentence. In
addition, Conner has agreed to immediately make a $15,000,000 payment to Seagate
in the event that the Merger Agreements have been submitted to a vote of the
Conner stockholders and such stockholders have failed for any reason (other than
as a result of Seagate's breach of the Merger Agreements) to approve the Merger
Agreements by the requisite vote, provided, however, that if the Breakup Fee has
been paid in full by Conner, then no amount shall be payable by Conner pursuant
to this provision. Seagate has agreed to immediately make a $15,000,000 payment
to Conner in the event that the issuance of Seagate Common Stock pursuant to the
Merger Agreements has been submitted to a vote of the Seagate stockholders and
such stockholders have failed for any reason (other than as a result of Conner's
breach of the Merger Agreements) to approve the issuance of Seagate Common Stock
by the requisite vote. See "The Merger and Related Transactions -- Termination;
Breakup Fees; Seagate Option to Purchase Conner Common Stock -- Breakup Fees."
SEAGATE OPTION TO PURCHASE CONNER COMMON STOCK. Upon the execution of the
Reorganization Agreement, Conner granted Seagate the Seagate Option to purchase
up to 8,015,420 shares of Conner Common Stock, at an exercise price of $17.90
per share, which amount equals 0.442 times the closing price per share of
Seagate Common Stock on the date of the Reorganization Agreement. The Seagate
Option includes customary antidilution provisions and upon any issuance of
shares of Conner Common Stock after September 2, 1995, the number of shares of
Conner Common Stock subject to the Seagate Option will be adjusted to equal at
least 15% of the number of shares of Conner Common Stock then outstanding (other
than shares of Conner Common Stock issued pursuant to the Seagate Option).
Subject to certain conditions, the rights granted to Seagate in the Seagate
Option become exercisable in the event a third party acquires or is granted any
option or right to acquire more than 20% of the outstanding Conner Common Stock,
or commences a tender offer or exchange offer (or enters into an agreement to
make such a tender offer or exchange offer) for at least 20% of the outstanding
Conner Common Stock, or Conner enters into a written definitive agreement or
written agreement in principle with a third party in connection with a
liquidation, dissolution, recapitalization, merger, consolidation or acquisition
or purchase of all or a material portion of the assets or the equity interest in
Conner. In the event that a third party acquires 50% or more of the outstanding
shares of Conner Common Stock, or makes a publicly disclosed proposal with
respect to a tender offer or exchange offer for 50% or more of the outstanding
shares of Conner Common Stock, a merger, consolidation or other business
combination or any acquisition of a material portion of the assets of Conner,
then Seagate, in lieu of exercising the Seagate Option, can request that Conner
pay to Seagate, in cancellation of the Seagate Option, a cancellation fee. The
cancellation fee will be equal to the excess over the exercise price of the
Seagate Option of the greater of (i) the last sale price of a share of Conner
Common Stock as reported on the NYSE on the last trading day prior to the date
that Seagate gives notice of its exercise of the Seagate Option or (ii) the
highest price per share of Conner Common Stock offered to be paid or paid
pursuant to such acquisition or proposal, multiplied by the number of shares
subject to the Seagate Option. Any Breakup Fee due and payable by Conner will be
offset by the amount received by Seagate upon exercise of the Seagate Option and
disposition of the underlying shares less the exercise price of the Seagate
Option or by any option cancellation fee paid to Seagate, and, if Conner has
already paid to Seagate the Breakup Fee, then Seagate will immediately remit to
Conner the amount of the offset. The Seagate Option is attached hereto as
Appendix C and
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incorporated herein by reference. See "The Merger and Related Transactions --
Termination; Breakup Fees; Seagate Option to Purchase Conner Common Stock --
Seagate Option to Purchase Conner Common Stock."
AMENDMENT
The Merger Agreements may be amended by Seagate and Conner at any time
before or after the approvals by the stockholders of Seagate and Conner, but
after any such stockholder approval, no amendment may be made which by law
requires the further approval of such stockholders without obtaining such
further approval. See "The Merger and Related Transactions -- Waiver and
Amendment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a tax-free reorganization for federal
income tax purposes, so that no gain or loss would generally be recognized by
the stockholders of Conner on the exchange of their shares of Conner Common
Stock for shares of Seagate Common Stock, except to the extent of cash received
in lieu of a fractional share of Seagate Common Stock. Conner stockholders are
urged to consult their own tax advisors as to the specific tax consequences of
the Merger. See "The Merger and Related Transactions -- Certain Federal Income
Tax Matters."
ACCOUNTING TREATMENT
The Merger is intended to be treated as a pooling of interests for
accounting purposes. The obligations of Seagate and Conner to consummate the
Merger are conditioned upon the receipt by Seagate and Conner from Ernst & Young
LLP and Price Waterhouse LLP, respectively, of letters dated as of the Effective
Date regarding the appropriateness of pooling of interests accounting for the
Merger under APB No. 16, if closed and consummated in accordance with the Merger
Agreements. See "The Merger and Related Transactions -- Accounting Treatment."
RESTRICTIONS ON RESALE OF SEAGATE COMMON STOCK
The shares of Seagate Common Stock issuable to stockholders of Conner upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely without restriction by those stockholders who are
not deemed to be "affiliates" of Conner or Seagate, as that term is defined in
the rules under the Securities Act. Shares of Seagate Common Stock received by
those stockholders of Conner who are deemed to be "affiliates" of Conner may be
resold without registration under the Securities Act only as permitted by Rule
145 under the Securities Act or as otherwise permitted under the Securities Act.
Conner has agreed to use all reasonable efforts to obtain, at least 30 days
prior to the Effective Time, agreements by each "affiliate" of Conner to the
effect that such persons will not offer to sell, transfer or otherwise dispose
of, or reduce such person's risk relative to, (i) any shares of Seagate Common
Stock distributed to them pursuant to the Merger, except in compliance with Rule
145 under the Securities Act, or in a transaction that is otherwise exempt from
the registration requirements of the Securities Act, or in an offering which is
registered under the Securities Act; and (ii) any shares of Conner Common Stock
or Seagate Common Stock held by them in the 30-day period immediately preceding
the Effective Time and, until Seagate has publicly released combined financial
results of Seagate and Conner for a period of at least 30 days of combined
operations, any shares of Seagate Common Stock distributed to them pursuant to
the Merger. In addition, Seagate has agreed to use all reasonable efforts to
obtain agreements by each "affiliate" of Seagate to the effect that such persons
will not offer to sell, transfer or otherwise dispose of, or reduce such
person's risk relative to any shares of Seagate Common Stock or Conner Common
Stock held by them during the period commencing 30 days immediately preceding
the Effective Time and continuing until Seagate has publicly released combined
financial results of Seagate and Conner for a period of at least 30 days of
combined operations. See "The Merger and Related Transactions -- Restrictions on
Resale of Seagate Common Stock."
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NO DISSENTERS RIGHTS
Both Seagate and Conner are incorporated in the State of Delaware, and,
accordingly, are governed by the provisions of the DGCL. Pursuant to Section
262(b) of the DGCL, the stockholders of Conner are not entitled to appraisal
rights in connection with the Merger because Conner Common Stock is quoted on
the NYSE and such stockholders will receive as consideration in the Merger only
shares of Seagate Common Stock, which shares will be listed on the NYSE upon the
closing of the Merger, and cash in lieu of fractional shares. In addition, the
Seagate stockholders are not entitled to appraisal rights under Section 262 of
the DGCL because even though approval of such stockholders is required for the
issuance of Seagate Common Stock in the Merger, the approval of the stockholders
of Seagate is not required for the Merger itself. See "The Merger and Related
Transactions -- No Dissenters' Rights."
MERGER EXPENSES AND FEES
The Reorganization Agreement provides that all costs and expenses incurred
in connection with such agreement and the transactions contemplated thereby will
be paid by the party incurring such costs and expenses, except for expenses
(other than attorney's fees) incurred in connection with printing the
Registration Statement and this Joint Proxy Statement/Prospectus, and the filing
fees with the Commission with respect to the Registration Statement and this
Joint Proxy Statement/ Prospectus, which will be shared equally by Conner and
Seagate. See "The Merger and Related Transactions -- Expenses."
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MARKETS AND PRICE DATA
SEAGATE. Seagate Common Stock has been traded on the NYSE under the symbol
"SEG" since December 12, 1994. Prior to that time, the Seagate Common Stock
traded on the Nasdaq National Market under the symbol "SGAT." The following
table sets forth the range of high and low sale prices reported on the NYSE
composite tape or the Nasdaq National Market, as applicable, for the Seagate
Common Stock for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED JULY 1, 1994
First Quarter........................................................ $ 21 $ 15 3/4
Second Quarter....................................................... 25 16 7/8
Third Quarter........................................................ 28 3/8 22
Fourth Quarter....................................................... 26 3/4 19
FISCAL YEAR ENDED JUNE 30, 1995
First Quarter........................................................ $ 27 $ 20 1/16
Second Quarter....................................................... 26 3/4 21 7/8
Third Quarter........................................................ 28 1/4 23 5/8
Fourth Quarter....................................................... 42 7/8 27
FISCAL YEAR ENDING JUNE 28, 1996
First Quarter........................................................ $ 49 3/8 $ 37 1/2
Second Quarter (through December 29, 1995)........................... 54 3/4 36 5/8
</TABLE>
CONNER. Conner Common Stock is traded on the NYSE under the symbol "CNR."
The following table sets forth the range of high and low sale prices reported on
the NYSE composite tape for the Conner Common Stock for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1993
First Quarter........................................................ $ 25 1/2 $ 13 1/4
Second Quarter....................................................... 14 9
Third Quarter........................................................ 13 9 1/4
Fourth Quarter....................................................... 14 3/4 9
FISCAL YEAR ENDED DECEMBER 31, 1994
First Quarter........................................................ $ 20 1/2 $ 14 1/4
Second Quarter....................................................... 16 1/4 11 3/4
Third Quarter........................................................ 13 3/4 10 1/4
Fourth Quarter....................................................... 13 1/4 9
FISCAL YEAR ENDING DECEMBER 31, 1995
First Quarter........................................................ $ 11 3/4 $ 9 1/4
Second Quarter....................................................... 14 1/4 9 3/8
Third Quarter........................................................ 19 1/4 12 1/4
Fourth Quarter (through December 29, 1995)........................... 24 15 1/8
</TABLE>
The following table sets forth the closing sale prices per share of Seagate
Common Stock and Conner Common Stock on the NYSE composite tape on September 19,
1995, the last trading day before the announcement of the proposed Merger, and
on December 29, 1995, the latest practicable trading day before the printing of
this Joint Proxy Statement/Prospectus for which information was obtainable, and
the equivalent per share price for Conner Common Stock. The "equivalent per
share
17
<PAGE>
price" for Conner Common Stock as of such dates equals the closing sale price
per share of Seagate Common Stock on such dates multiplied by the Exchange Ratio
of 0.442. See "The Merger and Related Transactions --General."
<TABLE>
<CAPTION>
SEAGATE CONNER EQUIVALENT
COMMON STOCK COMMON STOCK PER SHARE PRICE
--------------- --------------- ---------------
<S> <C> <C> <C>
September 19, 1995........................... $ 47 1/4 $ 16 7/8 $ 20.88
December 29, 1995............................ 47 1/2 21 21.00
</TABLE>
Seagate and Conner believe that Conner Common Stock presently trades on the
basis of the value of the Seagate Common Stock expected to be issued in exchange
for such Conner Common Stock in the Merger, discounted for the time value of
money and for the uncertainties associated with such a transaction. Apart from
the publicly disclosed information concerning Seagate which is included and
incorporated by reference in this Joint Proxy Statement/Prospectus, Seagate
cannot state with certainty what factors account for changes in the market price
of the Seagate Common Stock.
Conner stockholders are advised to obtain current market quotations for
Seagate Common Stock and Conner Common Stock. No assurance can be given as to
the market prices of Seagate Common Stock or Conner Common Stock at any time
before the Effective Time or as to the market price of Seagate Common Stock at
any time thereafter. Because the Exchange Ratio is fixed, the Exchange Ratio
will not be adjusted to compensate Conner stockholders for decreases in the
market price of Seagate Common Stock which could occur before the Merger becomes
effective. In the event the market price of Seagate Common Stock decreases or
increases prior to the Effective Time, the value at the Effective Time of the
Seagate Common Stock to be received in the Merger in exchange for Conner Common
Stock would correspondingly decrease or increase.
Following the Merger, all Conner Common Stock will be owned by Seagate and,
as a result, Conner Common Stock will no longer be listed on the NYSE.
Seagate and Conner have never paid cash dividends on their respective shares
of Common Stock. Pursuant to the Reorganization Agreement, each of Seagate and
Conner has agreed not to pay cash dividends pending the consummation of the
Merger, without the written consent of the other. Subject to completion of the
Merger, the Conner Board presently intends to continue a policy of retaining all
earnings to finance the expansion of its business. The Seagate Board currently
intends to retain all earnings for use in the business of the combined companies
and has no present intention to pay cash dividends.
18
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical financial information of Seagate and
Conner has been derived from their respective historical financial statements
and should be read in conjunction with such consolidated financial statements
and the notes thereto incorporated by reference herein. The Seagate historical
financial statement data as of and for the three months ended September 30, 1995
and 1994 has been prepared on the same basis as the historical information
derived from the audited financial statements and, in the opinion of management,
contain all adjustments, consisting only of normal recurring accruals, necessary
for the fair presentation of the results of operations for such periods. The
Conner historical financial statement data as of and for the nine months ended
September 30, 1995 and 1994 has been prepared on the same basis as the
historical information derived from the audited financial statements and, in the
opinion of management, contain all adjustments, consisting only of normal
recurring accruals, necessary for the fair presentation of the results of
operations for such periods. The unaudited selected pro forma combined condensed
financial data is derived from the unaudited pro forma combined condensed
financial statements, appearing elsewhere herein, which give effect to the
Merger as a pooling of interests, and should be read in conjunction with such
pro forma statements and the notes thereto. For the purpose of the pro forma
combined condensed statement of operations data, Seagate's financial data for
the three fiscal years ended June 30, 1995, 1994 and 1993, and for the three
months ended September 30, 1995 and 1994, have been combined with Conner's
financial data for the twelve months ended June 30, 1995, the fiscal years ended
December 31, 1994 and 1993, and the three months ended September 30, 1995 and
1994, respectively. No cash dividends have been declared or paid on Seagate
Common Stock or Conner Common Stock.
In addition, in connection with the Merger, Seagate is to acquire the
outstanding minority interest of Arcada Holdings, Inc., a majority-owned
subsidiary of Conner ("Arcada"), in a transaction to be accounted for as a
purchase. The minority interest in Arcada amounts to a 31.4% ownership interest
on a fully diluted basis. The pro forma combined condensed balance sheet
includes adjustments necessary to give effect to the acquisition of the minority
interest of Arcada assuming the transaction was consummated at September 30,
1995. The pro forma combined condensed income statements for the twelve months
ended June 30, 1995, and for the three months ended September 30, 1995 and 1994,
include adjustments which give effect to this transaction assuming the
acquisition of the Arcada minority interest was consummated at the beginning of
Seagate's fiscal 1995.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred had the Merger and the acquisition of the Arcada minority
interest been consummated in an earlier period, nor is it necessarily indicative
of future operating results or financial position.
19
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SEAGATE
HISTORICAL CONSOLIDATED STATEMENT OF INCOME DATA (1)(2):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
---------------------------------------------------------- ---------------------
1995 1994 1993 1992 1991 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales..................................... $4,539,570 $3,500,103 $3,043,604 $2,875,273 $2,676,980 $1,453,626 $ 933,146
Gross profit.................................. 931,909 704,282 672,928 487,637 484,491 291,651 198,145
Income from operations........................ 372,622 310,957 269,027 106,046 111,285 146,390 47,480
Income before extraordinary gain.............. 260,082 225,110 195,434 63,183 62,845 108,046 22,537
Extraordinary gain on retirement of debt...... -- -- -- -- 4,613 -- --
Net income.................................... 260,082 225,110 195,434 63,183 67,458 108,046 22,537
Income per share:
Primary:
Income before extraordinary gain.......... $ 3.52 $ 3.08 $ 2.80 $ 0.92 $ 0.95 $ 1.44 $ 0.30
Extraordinary gain on retirement of
debt..................................... -- -- -- -- 0.07 -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income................................ $ 3.52 $ 3.08 $ 2.80 $ 0.92 $ 1.02 $ 1.44 $ 0.30
---------- ---------- ---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------- ---------- ---------
Fully diluted:
Income before extraordinary gain.......... $ 3.06 $ 2.83 $ 2.71 $ 0.91 $ 0.94 $ 1.23 $ 0.30
Extraordinary gain on retirement of
debt..................................... -- -- -- -- 0.07 -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income................................ $ 3.06 $ 2.83 $ 2.71 $ 0.91 $ 1.01 $ 1.23 $ 0.30
---------- ---------- ---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------- ---------- ---------
Number of shares used in per share
computations:
Primary..................................... 73,839 73,064 69,821 68,860 66,140 75,088 74,904
Fully diluted............................... 91,474 85,012 76,265 69,805 66,584 91,681 91,501
</TABLE>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA (1):
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- SEPTEMBER 30,
1995
-------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets................................ $3,361,262 $2,877,530 $2,031,193 $1,816,604 $1,880,060 $3,622,555
Long-term debt, less current portion........ 539,874 549,492 281,276 320,528 393,425 539,804
Stockholders' equity........................ 1,541,768 1,328,399 1,045,241 862,068 766,340 1,671,605
</TABLE>
- ------------------------------
(1) Seagate's fiscal year ends on the Friday closest to June 30. For clarity of
presentation, annual and quarterly fiscal periods are reported as ending on
a calendar month end.
(2) The fiscal year 1995 results of operations include a $70,360 write-off of
in-process research and development incurred in connection with the
acquisition of software companies. The results of operations for the three
months ended September 30, 1994, include a $43,000 write-off of in-process
research and development in connection with the acquisition of a software
company.
20
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONNER
HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS DATA (1)(2):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1994 1993 1992 1991 1990 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................................... $2,365,152 $2,151,672 $2,238,423 $1,598,984 $1,337,593 $1,939,912 $1,773,541
Gross profit................................. 468,649 237,954 458,464 316,257 328,211 316,887 371,223
Income (loss) from operations................ 166,564 (446,430) 153,530 130,211 172,732 52,801 124,017
Income (loss) before extraordinary gain...... 109,687 (445,314) 121,072 92,492 130,052 30,227 65,504
Extraordinary gain on retirement of debt..... -- -- -- -- -- 6,171 --
Net income (loss)............................ 109,687 (445,314) 121,072 92,492 130,052 36,398 65,504
Income (loss) per share:
Primary:
Income (loss) before extraordinary
gain.................................... $ 2.10 $ (9.03) $ 2.19 $ 1.57 $ 2.51 $ 0.57 $ 1.26
Extraordinary gain on retirement of
debt.................................... -- -- -- -- -- 0.11 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........................ $ 2.10 $ (9.03) $ 2.19 $ 1.57 $ 2.51 $ 0.68 $ 1.26
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fully diluted:
Income (loss) before extraordinary
gain.................................... $ 1.77 $ (9.03) $ 1.89 $ 1.54 $ 2.41 $ 0.56 $ 1.10
Extraordinary gain on retirement of
debt.................................... -- -- -- -- -- 0.11 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........................ $ 1.77 $ (9.03) $ 1.89 $ 1.54 $ 2.41 $ 0.67 $ 1.10
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Number of shares used in per share
computations:
Primary.................................... 52,253 49,339 55,242 58,863 51,727 53,471 52,175
Fully diluted.............................. 74,558 49,339 74,723 65,252 54,527 54,365 74,489
</TABLE>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA (1):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- SEPTEMBER 30,
1995
-------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets................................ $1,461,429 $1,464,051 $1,904,707 $1,334,538 $ 880,468 $ 1,490,787
Long-term debt, less current portion........ 627,059 660,606 704,845 367,916 36,731 527,961
Stockholders' equity........................ 336,676 208,851 626,036 712,825 603,862 383,715
</TABLE>
- ------------------------------
(1) Conner's fiscal year ends on the Saturday closest to December 31. For
clarity of presentation, quarterly and annual fiscal periods are reported
as ending on a calendar month end.
(2) Income (loss) from operations for 1994 includes a credit of $38,019 for the
reduction of restructuring reserves established in 1993. This credit was
partially offset by a $5,000 charge to write off in-process research and
development in connection with the acquisition of a software company.
Income (loss) from operations for 1993 includes a charge of $40,300 to
reflect inventory write-offs resulting from the acceleration of the
end-of-life of certain disc drive products, $212,945 for the write-down of
goodwill and other intangibles, $106,457 for restructuring charges, and a
charge of $19,000 for certain contingencies. Income (loss) from operations
for 1992 includes a charge of $57,611 for the write-off of in-process
research and development in connection with the acquisition of Archive
Corporation. Income (loss) from operations for the nine months ended
September 30, 1995 includes a $2,817 write-off of in-process research and
development in connection with the acquisition of a software company.
21
<PAGE>
SEAGATE AND CONNER
UNAUDITED SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL DATA (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS DATA (2):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
JUNE 30, SEPTEMBER 30,
---------------------------------- -------------------------
1995 1994 1993 1995 1994
---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $6,943,418 $5,865,255 $5,195,276 $ 2,140,805 $1,492,650
Gross profit.................................... 1,341,779 1,172,931 910,882 397,275 299,326
Income (loss) from operations................... 457,550 477,521 (177,403) 168,173 67,141
Income (loss) before extraordinary gain......... 323,021 334,797 (249,880) 119,376 30,693
Income (loss) per share before extraordinary
gain:
Primary....................................... $ 3.25 $ 3.48 $ (2.80) $ 1.18 $ 0.31
Fully diluted................................. $ 2.88 $ 3.16 $ (2.80) $ 1.02 $ 0.30
Number of shares used in per share computations:
Primary....................................... 99,336 96,160 89,187 101,254 100,172
Fully diluted................................. 125,880 117,967 89,187 126,966 110,491
</TABLE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET DATA (2):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
-------------
<S> <C> <C> <C> <C> <C>
Working capital......................................................... $ 2,257,953
Total assets............................................................ 5,170,266
Long-term debt, less current portion.................................... 1,067,765
Stockholders' equity.................................................... 1,995,152
</TABLE>
- ------------------------
(1) See "Unaudited Pro Forma Combined Condensed Financial Statements" and the
notes thereto included elsewhere herein.
(2) Seagate expects to incur charges to operations currently estimated to range
from $140,000 to $180,000, in the quarter ending March 31, 1996, the quarter
in which the Merger is expected to be consummated. An estimated charge at
the midpoint of the above range of $121,000, net of estimated tax benefits
of $39,000, is reflected in the unaudited pro forma combined condensed
balance sheet. The charge, before estimated tax benefits, primarily relates
to costs associated with combining the operations of the two companies and
includes employee severance benefits of $87 million, closure of duplicate
and excess facilities of $53 million and fees of financial advisors,
attorneys and accountants of $20 million. This range is a preliminary
estimate only and is therefore subject to change.
In addition, in connection with the Merger, Seagate is to acquire the
outstanding minority interest of Arcada, a majority-owned subsidiary of
Conner, in a transaction to be recorded as a purchase. Based on preliminary
information, Seagate estimates that it will incur a charge to operations of
approximately $37,100 for the three months ending March 31, 1996 to write
off in-process research and development in connection with the acquisition
of this minority interest. The estimated range of the write-off is from
$35,000 to $40,000; however, the actual write-off is subject to change based
on completion of the final purchase price allocation.
22
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain historical per share data of Conner
and Seagate, and combined per share data on an unaudited pro forma basis after
giving effect to the Merger on a pooling of interests basis assuming the
issuance of 0.442 of a share of Seagate Common Stock in exchange for each share
of Conner Common Stock and the issuance of an option to purchase 0.442 of a
share of Seagate Common Stock for each outstanding Conner Option. In addition,
in connection with the Merger, Seagate is to acquire the outstanding minority
interest of Arcada, a majority-owned subsidiary of Conner, in a transaction to
be accounted for as a purchase. The combined pro forma data below for fiscal
1995 and as of and for the periods ended September 30, 1995 and 1994, give
effect to the acquisition of Arcada's minority interest assuming Seagate issues
shares of Seagate Common Stock and options to purchase Seagate Common Stock
totaling approximately 2,192,000 shares (equivalent to approximately $97.8
million based on a value of $44.625 per share of Seagate Common Stock) in
exchange for the minority interest. The data below should be read in conjunction
with the selected financial data, the unaudited pro forma combined condensed
financial statements included elsewhere in this Joint Proxy
Statement/Prospectus, and the separate historical financial statements of Conner
and Seagate incorporated by reference herein. The unaudited pro forma combined
financial data are not necessarily indicative of the operating results that
would have been achieved had the Merger and the acquisition of the Arcada
minority interest been consummated in an earlier period and should not be
construed as representative of future operations.
Seagate expects to incur charges to operations currently estimated to range
from $140 million to $180 million, in the quarter ending March 31, 1996, the
quarter in which the Merger is expected to be consummated. An estimated charge
at the midpoint of the above range of $121 million, net of estimated tax
benefits of $39 million, is reflected in the unaudited pro forma combined
condensed balance sheet. The future cash requirements related to this charge are
estimated to be in the range of $100 million to $120 million, of which
approximately $29 million relates to lease payments for duplicative facilities
which will be paid on a monthly basis over periods extending through 2018. The
charge, before estimated tax benefits, primarily relates to costs associated
with combining the operations of the two companies and includes employee
severance benefits of $87 million, closure of duplicate and excess facilities of
$53 million and fees of financial advisors, attorneys and accountants of $20
million. These ranges are preliminary estimates only and are therefore subject
to change.
In connection with the acquisition of the minority interest of Arcada,
Seagate estimates that it will incur a charge to operations of approximately $35
million to $40 million in the quarter ending March 31, 1996, in connection with
the write-off of in-process research and development. The write-off is an
estimate and is subject to change based on completion of the final purchase
price allocation.
23
<PAGE>
COMPARATIVE PER SHARE DATA (CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
ENDED
JUNE 30, SEPTEMBER 30,
------------------------------- --------------------
1995 1994 1993 1995 1994
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
HISTORICAL -- SEAGATE (1):
Net income:
Primary........................................................ $ 3.52 $ 3.08 $ 2.80 $ 1.44 $ 0.30
Fully diluted.................................................. $ 3.06 $ 2.83 $ 2.71 $ 1.23 $ 0.30
Book value....................................................... $ 21.42 $ 22.92
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1993 1992 1995 1994
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
HISTORICAL -- CONNER (2):
Primary:
Income (loss) before extraordinary gain........................ $ 2.10 $ (9.03) $ 2.19 $ 0.57 $ 1.26
Extraordinary gain on retirement of debt....................... -- -- -- 0.11 --
--------- --------- --------- --------- ---------
Net income (loss).............................................. $ 2.10 $ (9.03) $ 2.19 $ 0.68 $ 1.26
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Fully diluted:
Income (loss) before extraordinary gain........................ $ 1.77 $ (9.03) $ 1.89 $ 0.56 $ 1.10
Extraordinary gain on retirement of debt....................... -- -- -- 0.11 --
--------- --------- --------- --------- ---------
Net income (loss).............................................. $ 1.77 $ (9.03) $ 1.89 $ 0.67 $ 1.10
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Book value....................................................... $ 6.42 $ 7.17
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Seagate's fiscal year ends on the Friday closest to June 30, and includes 52
weeks for all annual periods presented and 13 weeks for both quarterly
periods presented. For clarity of presentation, quarterly and annual fiscal
periods are reported as ending on a calendar month end.
(2) Conner's fiscal year ends on the Saturday closest to December 31, and
includes 52 weeks in fiscal 1994 and 1993, 53 weeks in fiscal 1992, and 39
weeks in the nine month periods ended September 30, 1995 and 1994. For
clarity of presentation, quarterly and annual fiscal periods are reported as
ending on a calendar month end.
24
<PAGE>
COMPARATIVE PER SHARE DATA (CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
ENDED
JUNE 30, SEPTEMBER 30,
------------------------------- --------------------
1995 1994 1993 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED -- PER SEAGATE SHARE (1):
Income (loss) before extraordinary gain:
Primary....................................................... $ 3.25 $ 3.48 $ (2.80) $ 1.18 $ 0.31
Fully diluted................................................. $ 2.88 $ 3.16 $ (2.80) $ 1.02 $ 0.30
Book value...................................................... $ 19.36 $ 20.66
UNAUDITED PRO FORMA COMBINED -- PER CONNER SHARE (2):
Income (loss) before extraordinary gain:
Primary....................................................... $ 1.44 $ 1.54 $ (1.24) $ 0.52 $ 0.14
Fully diluted................................................. $ 1.27 $ 1.40 $ (1.24) $ 0.45 $ 0.13
Book value...................................................... $ 8.56 $ 9.13
</TABLE>
- ------------------------
(1) For purposes of pro forma combined data, Seagate's financial data for the
three fiscal years ended June 30, 1995, 1994, and 1993, and the three months
ended September 30, 1995 and 1994, have been combined with Conner's
financial data for the twelve months ended June 30, 1995, the fiscal years
ended December 31, 1994 and 1993, and the three months ended September 30,
1995 and 1994, respectively.
(2) The equivalent of Conner's pro forma per share amounts are calculated by
multiplying the pro forma combined per share amounts by the Exchange Ratio
of 0.442 of a share of Seagate Common Stock for each share of Conner Common
Stock.
25
<PAGE>
RISK FACTORS
THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY BY HOLDERS OF CONNER
COMMON STOCK IN EVALUATING WHETHER TO APPROVE AND ADOPT THE MERGER AGREEMENTS,
AND BY HOLDERS OF SEAGATE COMMON STOCK IN EVALUATING WHETHER TO APPROVE THE
ISSUANCE OF SEAGATE COMMON STOCK PURSUANT TO THE MERGER AGREEMENTS. THESE
FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION INCLUDED
OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
RISKS RELATED TO THE MERGER
DIFFICULTY OF INTEGRATING TWO COMPANIES. The successful combination of
companies in the high technology industry may be more difficult to accomplish
than in other industries. The anticipated benefits of the Merger will not be
achieved unless the operations of Conner are successfully combined with those of
Seagate in a timely manner. The transition to a combined company will require
substantial attention from management. The diversion of the attention of
management and any difficulties encountered in the transition process could have
an adverse impact on the revenues and operating results of the combined company.
The combination of the two companies will also require integration of the
companies' product offerings and the coordination of their research and
development and sales and marketing efforts. The difficulties of assimilation
may be increased by the necessity of coordinating geographically separated
organizations, integrating personnel with disparate business backgrounds and
combining two different corporate cultures. In addition, the process of
combining the two organizations could cause the interruption of, or a loss of
momentum in, the activities of either or both of the companies' businesses,
which could have an adverse effect on their combined operations. There can be no
assurance that either company will retain its key technical personnel, that the
engineering teams of Seagate and Conner will successfully cooperate and realize
any technological benefits or that Seagate will realize any of the other
anticipated benefits of the Merger. In addition, the announcement and
consummation of the Merger could cause customers and potential customers of
Seagate or Conner to delay or cancel orders for products as a result of customer
concerns and uncertainty over product evolution, integration and support of the
combined company's products. Such a delay or cancellation of orders could have a
material adverse effect on the business, results of operations and financial
condition of either or both of Seagate or Conner.
RISKS ASSOCIATED WITH RECENT CONNER MANAGEMENT TRANSITION. In May 1995,
Conner's President and Chief Operating Officer resigned, and subsequently
certain other members of Conner's management left Conner. Although Conner has
been engaged in a search process for a new President and Chief Operating Officer
and other members of management, certain positions, including that of the
President and Chief Operating Officer, have not been filled (other than on an
interim basis). The absence of such members of management could adversely affect
the integration of the operations of Conner and Seagate following the Merger. In
addition, in the event that the Merger is not consummated, the absence of such
members of management could adversely affect Conner's ability to achieve its
business plan. The pendency of the Merger could also adversely affect Conner's
ability to attract qualified managers to fill such positions. In addition,
certain key employees and members of Conner management have left Conner
subsequent to the announcement of the Merger.
RISKS ASSOCIATED WITH FIXED EXCHANGE RATIO. As a result of the Merger, each
outstanding share of Conner Common Stock will be converted into the right to
receive 0.442 of a share of Seagate Common Stock. The Merger Agreements do not
provide for adjustment of the Exchange Ratio based on fluctuations in the price
of Seagate Common Stock. Because the Exchange Ratio is fixed and will not
increase or decrease due to fluctuations in the market price of either Seagate
Common Stock or Conner Common Stock, Conner stockholders will not be compensated
for decreases in the market price of Seagate Common Stock which could occur
before the Effective Time. In the event that the market price of Seagate Common
Stock decreases or increases prior to the Effective Time, the market value at
the Effective Time of the Seagate Common Stock to be received by Conner
stockholders in the Merger would correspondingly decrease or increase. The
market prices of Seagate Common Stock and Conner Common Stock as of a recent
date are set forth herein under "Summary -- Markets and Price Data," and Conner
Stockholders are advised to obtain recent market quotations for Seagate Common
26
<PAGE>
Stock and Conner Common Stock. The Seagate Common Stock and the Conner Common
Stock historically have been subject to substantial price volatility. No
assurance can be given as to the market prices of Seagate Common Stock or Conner
Common Stock at any time before the Effective Time or as to the market price of
Seagate Common Stock at any time thereafter. See "Summary -- Markets and Price
Data" and "-- Substantial Price Volatility of the Seagate Common Stock and the
Conner Common Stock."
ACQUISITION OF THE MINORITY INTERESTS IN ARCADA HOLDINGS, INC. Seagate's
acquisition of the minority interests in Arcada is subject to the satisfaction
of a number of conditions, including, among others, the approval of the
transaction by the Arcada Minority Stockholders. If Seagate's acquisition of the
minority interests in Arcada were to not close, such minority interests would
remain outstanding and, although Seagate or its subsidiaries would own a
substantial majority of the outstanding capital stock of Arcada upon the
consummation of the Merger, Arcada would not become an indirect wholly-owned
subsidiary of Seagate. In addition, if such acquisition were to not close,
certain of the Arcada Minority Stockholders would have the contractual right,
pursuant to an existing stockholder agreement, to require Arcada to file a
registration statement under the Securities Act in order to register the shares
of capital stock of Arcada held by them or, in the alternative, the right, in
certain instances, to require Arcada to purchase all or a portion of the capital
stock of Arcada held by them. See "The Merger and Related Transactions --
Seagate Acquisition of the Minority Interests in Arcada Holdings, Inc."
SUBSTANTIAL EXPENSES RESULTING FROM THE MERGER. The negotiation and
implementation of the Merger will result in aggregate pre-tax expenses to
Seagate and Conner of approximately $140 million to $180 million. The
restructuring charge, before estimated tax benefits, primarily relates to costs
associated with combining the operations of the two companies and includes
employee severance benefits of $87 million, closure of duplicate and excess
facilities of $53 million and fees of financial advisors, attorneys and
accountants of $20 million. Although the companies do not believe that the costs
will exceed the aforementioned range, there can be no assurance that the
companies' estimate is correct or that unanticipated contingencies will not
occur that will substantially increase the costs of combining the operations of
the two companies. In any event, costs associated with the Merger will
negatively impact results of operations in the quarter ending March 31, 1996.
SUBSTANTIAL DILUTION OF OWNERSHIP INTEREST OF CURRENT SEAGATE
STOCKHOLDERS. Following the Merger, the current stockholders of Seagate will
own approximately 75.1% of the outstanding shares of Seagate Common Stock. This
represents substantial dilution of the ownership interest in Seagate by
Seagate's current stockholders.
SHARES ELIGIBLE FOR FUTURE SALE. If the Merger is consummated, Seagate will
issue to stockholders of Conner an aggregate of approximately 24,202,875 shares
of Seagate Common Stock based on the number of shares of Conner Common Stock
outstanding as of December 15, 1995. Immediately upon consummation of the
Merger, up to approximately 23,558,977 of such shares will be freely tradeable.
As a result, substantial sales of Seagate Common Stock could occur after the
Merger. Following publication of financial results covering 30 days of
post-Merger combined operations, an additional approximately 643,898 shares
issued in the Merger to persons who may be deemed affiliates of Conner could be
publicly sold pursuant to Rule 145 under the Securities Act, subject to the
volume and other limitations thereof. In addition, based on the number of Conner
Options outstanding on December 15, 1995, approximately 2,848,683 additional
shares of Seagate Common Stock will be reserved for issuance to holders of
Conner Options to be assumed by Seagate in the Merger. Future sales of a
substantial number of such shares of Seagate Common Stock could adversely affect
or cause substantial fluctuations in the market price of Seagate Common Stock.
RISKS RELATED TO THE BUSINESS AND OPERATIONS OF SEAGATE AND CONNER
SIGNIFICANT VARIABILITY OF DEMAND, SEVERE PRICE EROSION AND OTHER
CHARACTERISTICS OF THE RIGID DISC DRIVE INDUSTRY. The rigid disc drive industry
in which Seagate and Conner compete is subject to a number of risks. The demand
for rigid disc drive products depends principally on demand for computer systems
and storage upgrades to computer systems, which historically has been volatile.
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Changes in demand for computer systems often have an exaggerated effect on the
demand for rigid disc drive products in any given period, and unexpected
slowdowns in demand for computer systems generally cause sharp declines in
demand for rigid disc drive products. The industry has been characterized by
periodic situations in which the supply of rigid disc drives exceeds demand,
resulting in higher than anticipated inventory levels and strong price
competition. Even during periods of consistent demand, the industry is
characterized by intense competition and ongoing price erosion over the life of
a given rigid disc drive product. Each of Seagate and Conner expects that price
erosion in the rigid disc drive industry will continue for the foreseeable
future. In addition, the demand of rigid disc drive customers for new
generations of products has led to short product life cycles, which require that
industry participants constantly develop and introduce new rigid disc drive
products on a cost effective and timely basis. The manufacture of rigid disc
drive products is difficult and complex, and it is common in the industry for
companies to experience production difficulties, due to contamination related
issues, yield shortfalls and other difficulties, occasionally creating
short-term delivery delays and quality problems that generally subside within 90
days. Most rigid disc drive products, including those of Seagate and Conner, are
manufactured outside of North America and foreign manufacturing is subject to a
number of risks, including changes in government policies, transportation
delays, tariffs, fluctuations in foreign exchange rates, and export and tax
controls. Seagate's principal manufacturing facilities are located in Thailand,
Singapore, California, Minnesota, Malaysia and Oklahoma. Conner's principal
manufacturing facilities are located in Malaysia, Singapore, the People's
Republic of China, Italy and California. Each of Seagate and Conner continually
evaluates its component and manufacturing processes, as well as the desirability
of transferring volume production of disc drives and related components between
facilities or to new facilities. In this regard, Seagate is considering
expanding its manufacturing operations into other countries overseas, but to
date has made no definitive decision. Effective January 1, 1995, the European
Union ("EU") established a new General System of Preferences ("GSP"). Under this
revised code, certain products which had been exempt from customs duties under
previous GSP rules, including rigid disc drives imported into the EU from
Singapore, became subject to certain customs duties. In addition, during
calendar 1995 Singapore is progressively losing its status as a beneficiary
country under the GSP. As a result, rigid disc drives produced in Singapore and
imported into the EU will realize no reduction from full most favored nation
customs duties after December 31, 1995. The imposition of such customs duties
may increase costs and could adversely impact Seagate's and/or Conner's gross
margins depending upon the extent to which such duties are absorbed by Seagate
and/or Conner. In addition, future changes in tariff or duty structures in the
EU or elsewhere could affect production and increase costs in the manufacturing
operations in, with respect to Seagate, Ireland, China, Singapore and/or
Thailand, and, with respect to Conner, Singapore, Malaysia, the People's
Republic of China and/or the EU. For these reasons, as well as those discussed
in the following additional risk factors, an investment in the Seagate Common
Stock and/or the Conner Common Stock involves a high degree of risk.
RAPID TECHNOLOGICAL CHANGE AND REQUIREMENT OF ONGOING NEW PRODUCT
DEVELOPMENT. The rigid disc drive industry is characterized by rapidly changing
technology, short product life cycles and rapidly changing customer needs, each
of which require ongoing development and introduction of new products. Each of
Seagate and Conner believes that its future success will depend upon its ability
to develop, manufacture and market products which meet changing customer needs,
and which successfully anticipate or respond to changes in technology and
standards on a cost-effective and timely basis. No assurance can be given that
Seagate and/or Conner will be able to successfully design or introduce new
products in a timely manner, that Seagate and/or Conner will be able to
manufacture new products in volume with acceptable manufacturing yields and
gross margins or successfully market such products, or that such products will
perform to specifications on a long-term basis. In addition, during periods of
new product introduction, each company must manage its inventory carefully to
avoid inventory obsolescence. The failure of Seagate and/or Conner to achieve
any of these objectives could have a material adverse effect on Seagate's and/or
Conner's business, results of operations and financial condition.
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The demand of rigid disc drive customers for products with ever increasing
storage capacity and more advanced technology has resulted in increased
dependence by both Seagate and Conner on sales of high capacity disc drives. The
increased difficulty and complexity associated with production of higher
capacity disc drives increases the likelihood of reliability, quality or
operability problems that could result in reduced bookings, manufacturing rework
costs, delays in collecting accounts receivable, increased service and warranty
costs and a decline in Seagate's and/or Conner's competitive position. There can
be no assurance that, despite testing by Seagate and its customers and Conner
and its customers, quality problems will not be found in new products after
commencement of commercial shipments, resulting in loss or delay in market
acceptance and having a material adverse effect on Seagate's and/or Conner's
business, results of operations and financial condition.
Today, all Seagate drives use thin-film heads and all Conner drives use MiG
or thin-film heads, each of which are based on sophisticated technology that
permits a high density of storage on each disc. Seagate sources most of its
heads internally; Conner purchases its heads from a number of independent
suppliers. Each of Seagate and Conner believes that as requirements for even
greater storage densities increase, demand for a more advanced head technology
will grow. In anticipation of such growth, each of Seagate and Conner currently
has under development (in Seagate's case, internally; in Conner's case, with
certain suppliers) magneto-resistive ("MR") heads to be incorporated into future
products. MR heads have discrete read and write structures which take advantage
of special magnetic properties in certain metals to achieve significantly higher
storage capacities. There can be no assurance that Seagate's and/or Conner's MR
head development efforts will be successful and a failure of Seagate and/or
Conner to successfully manufacture and market products incorporating MR head
technology in a timely manner could have a material adverse effect on Seagate's
and/or Conner's business, results of operations and financial condition.
FLUCTUATION OF QUARTERLY RESULTS. The rigid disc drive industry in which
Seagate and Conner compete is characterized by variability of demand and
declining unit sales prices over the life of a product, and each of Seagate and
Conner anticipates that these characteristics will continue. Each of Seagate and
Conner expects that competitors will offer new and existing products at prices
necessary to gain or retain market share and customers. This competition and
continuing price erosion could adversely affect Seagate's and/or Conner's
results of operations in any given quarter and such adverse effect often cannot
be anticipated until late in any given quarter. In addition, Seagate's and/or
Conner's operating results may also be subject to significant quarterly
fluctuations as a result of a number of other factors, including the timing of
orders from and shipment of products to major customers, product mix, variations
in product costs and pricing, delays in product development, introduction and
production, increased competition and general economic and industry
fluctuations.
Seagate has invested in, and continues to investigate opportunities to
invest in, software and other complementary businesses. During fiscal 1995,
Seagate recognized aggregate charges of $70.4 million for write-offs of
in-process research and development in connection with acquisitions of software
companies. Seagate intends to continue its expansion into software and other
complementary businesses. As a result, Seagate expects that it will continue to
incur charges as it acquires businesses, including charges for the write-off of
in-process research and development. The timing of such write-offs has in the
past and may in the future lead to fluctuations in Seagate's operating results
on a quarterly and annual basis.
Conner also operates a software business through its Arcada subsidiary,
which accounted for approximately 1% of total revenues in the fiscal year ended
December 31, 1994. During fiscal year 1995, Conner has recognized a charge of
approximately $2.8 million for the write-off of in-process research and
development associated with an acquisition made in 1995 by Arcada. The software
business is subject to many uncertainties and Arcada from time to time may
consider other acquisitions that could lead to charges for write-offs of
in-process research and development, and consequent fluctuation in Conner's
operating results on a quarterly or annual basis.
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RISKS RELATED TO CONNER TAPE DRIVE BUSINESS. In addition to its rigid disc
drive business and software business, Conner operates a tape drive business
which accounted for approximately 15% of total revenue for the fiscal year ended
December 31, 1994. Like the disc drive business, the tape drive business in
which Conner competes is subject to a number of risks, including variability of
demand, price erosion, uncertainty related to the introduction of new
technology, component cost increases and currency fluctuation. In addition, the
tape drive business is subject to competitive pressures from optical disc
drives, floppy disc drives, removable cartridge drives and potentially other
technologies. While Conner has continued to invest in new products, business
development and customer and supplier relationships in connection with the tape
drive business, there can be no assurance that these efforts will be successful,
that the underlying business will grow, or that new products or technologies
will be successful. As a result, revenues and financial results of the tape
drive business could fluctuate substantially and have a material adverse effect
on Conner's business, results of operations and financial condition. In
addition, the Conner tape drive business includes a significant relationship
with Matsushita Kotobuki Electronics of Japan ("MKE"), which produces
substantially all of Conner's tape drives and which owns certain technology
rights related thereto. Pursuant to Conner's agreement with MKE, MKE has the
right to terminate its relationship with Conner six months after notification of
a transaction that would result in a change of control of Conner (the Merger
would be a change of control for purposes of such agreement). MKE also
manufactures disc drives for another leading independent disc drive manufacturer
that is a competitor of Seagate and Conner. As of December 29, 1995, MKE had not
notified Conner that it will terminate its relationship with Conner. If Conner's
ability to obtain tape drives from MKE were interrupted or impaired for any
reason, Conner's business, results of operations and financial condition could
be materially adversely affected.
RISKS ASSOCIATED WITH VARIABILITY OF CUSTOMER REQUIREMENTS. The rigid disc
drive industry has been characterized by large volume OEM purchase agreements
and large distributor orders. Typically, Seagate's and Conner's OEM purchase
agreements permit customers to cancel orders and reschedule delivery dates
without significant penalties. Anticipated orders from many of Seagate's and
Conner's OEM customers have in the past failed to materialize or delivery
schedules have been deferred as a result of changes in customer requirements.
Such OEM order fluctuations and deferrals have had a material adverse effect on
Seagate's and Conner's results of operations in the past, and there can be no
assurance that Seagate and/or Conner will not experience such effects in the
future. Distributors typically furnish Seagate and Conner with non-binding
indications of their near-term requirements, with product deliveries based on
weekly confirmations. To the extent actual orders from distributors decrease
from their non-binding forecasts, such variances could have a material adverse
effect on Seagate's and/or Conner's business, results of operations and
financial condition.
RELIANCE ON SINGLE OR LIMITED SOURCE SUPPLIERS; FLUCTUATIONS IN AVAILABILITY
OF COMPONENT SUPPLY. Each of Seagate and Conner relies on single or limited
source suppliers for certain components used in its products. There can be no
assurance that these suppliers will continue to be able to meet Seagate's and/or
Conner's requirements for these components or that the price of these components
will not increase. In the past, shortages have occurred in the market for
certain components, including heads, media, application specific integrated
circuits and motors. As a result, certain suppliers substantially increased the
price of such components, and each of Seagate and Conner is currently incurring
increased costs for certain of these components as a result of supply shortages.
Component shortages and resulting cost increases in the past have been periodic
and generally subsided within 90 days as component suppliers added capacity to
meet demand or each of Conner and Seagate pursued alternative sources of supply.
However, any extended interruption or reduction in the supply of any key
components could have a material adverse effect on Seagate's and/or Conner's
business, results of operations and financial condition.
NUMEROUS PENDING LEGAL PROCEEDINGS. Seagate is involved in a number of
judicial and administrative proceedings. Seagate has received a Notice of
Deficiency (the "Seagate Notice") from the Internal Revenue Service for fiscal
years 1988 through 1990. Proposed adjustments to income and tax credits in the
Seagate Notice for fiscal years 1988 through 1990 resulted in proposed tax
deficiencies of
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approximately $66.0 million, plus penalties and interest. The proposed income
adjustments would also eliminate tax net operating loss and tax credit
carryovers that have been used to offset taxable income and tax liabilities in
other fiscal years. The impact on tax net operating losses and tax credit
carryovers from the adjustments proposed in the Seagate Notice would result in
additional taxes of approximately $22.0 million plus interest for the three
years ended July 2, 1993. Seagate filed a Petition with the United States Tax
Court in June 1994 contesting the proposed tax deficiencies. In addition,
Seagate's federal income tax returns for fiscal years 1991 through 1993 are
presently under examination by the Internal Revenue Service. Seagate is also
currently involved in numerous additional legal proceedings, including
securities class actions, patent claims and claims for damages and costs
relating to environmental matters.
Seagate and certain of its officers and certain directors are defendants in
a series of securities class action lawsuits filed in 1988 in the United States
District Court for the Northern District of California by a group of plaintiffs
purporting to represent a class of investors that purchased Seagate Common Stock
or 6 3/4% Convertible Subordinated Debentures of Seagate between September 23,
1987 and October 8, 1988. The plaintiffs in this series of lawsuits have filed a
consolidated amended complaint, consolidating all of the lawsuits into a single
complaint. The complaint alleges violations of Sections 10(b) and 20(a) of the
Exchange Act and Rule 10b-5 promulgated thereunder. The complaint seeks
unspecified damages and reimbursement of costs of the suit. On February 8, 1995,
the court granted defendants' motion for summary judgment completely dismissing
all claims against Seagate and the other defendants. On March 31, 1995, the
court also denied plaintiffs' motion for reconsideration of the summary judgment
decision. Plaintiffs have appealed this judgment to the United States Court of
Appeals for the Ninth Circuit, which appeal is pending. While Seagate cannot
predict the ultimate outcome of this litigation, based upon its review of the
allegations and upon the district court's dismissal of the claims, Seagate
believes that the outcome of this matter will not have a material adverse effect
on Seagate's financial condition or results of operations.
Seagate, certain of its officers, directors and other employees, certain
underwriters retained by Seagate in connection with a public offering completed
in February 1991 and other parties are defendants in a series of securities
class action lawsuits filed in 1991 in the United States District Court for the
Northern District of California by a group of plaintiffs purporting to represent
a class of investors that purchased Seagate Common Stock between October 11,
1990 and June 26, 1991. The plaintiffs in this series of lawsuits have filed a
consolidated amended complaint, consolidating all of the lawsuits into a single
complaint. The complaint alleges violations of Sections 10(b) and 20(a) of the
Exchange Act and Rule 10b-5 promulgated thereunder. The complaint seeks
unspecified damages, equitable relief and reimbursement of costs of the suit.
The case is currently in discovery and a trial date has been set for February
1997. While Seagate cannot predict the ultimate outcome of this litigation,
based upon its review of the allegations and the discovery completed to date,
Seagate believes that the outcome of this matter will not have a material
adverse effect on Seagate's financial condition and results of operations.
In November 1992, Rodime, PLC ("Rodime") filed a complaint against Seagate
in the United States District Court for the Central District of California,
alleging infringement of U.S. Patent No. B1 4,638,383 and various state law
unfair competition claims. No trial date has been scheduled. The court has
granted several motions for summary judgment by Seagate holding claims of the
Rodime patent invalid and holding that many of Seagate's products did not
infringe any claims of Rodime's patent. With these holdings only one of
Seagate's products remains accused in this action. This product is no longer
being sold by Seagate. Based upon its review of the patent and the allegedly
infringing product in question, it is the opinion of Seagate's patent counsel
that the product did not and does not infringe any valid claims of the Rodime
patent. Therefore, while Seagate cannot predict the ultimate outcome of this
litigation, Seagate believes the outcome of this matter will not have a material
adverse effect on Seagate's financial condition and results of operations.
In October 1994, a patent infringement action was filed against Seagate by
an individual, James M. White, in the United States District Court of the
Northern District of California for alleged
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infringement of U.S. Patent No. 4,673,996 and 4,870,519. Both patents relate to
air bearing sliders. Prior to the filing of the lawsuit, Seagate filed a
Petition for Reexamination of U.S. Patent No. 4,673,996 with the United States
Patent and Trademark Office ("PTO") and this petition was granted shortly after
the lawsuit was filed. Subsequently, Seagate filed a Petition for Reexamination
of U.S. Patent No. 4,870,519. This second petition has also been granted by the
PTO. The court stayed the action pending the outcome of the reexaminations.
Based upon its review of the patents, it is the opinion of Seagate's patent
counsel that the claims of the two White patents are invalid.
Amstrad PLC ("Amstrad") initiated a lawsuit against Seagate in London,
England in the High Court of Justice, Official Referees' Business in December
1992 concerning Seagate's sale of allegedly defective disc drives to Amstrad.
Seagate replied to the allegations made against it by Amstrad by denying all
material points of Amstrad's claim and asserting many affirmative defenses.
Discovery is continuing and a trial date has been set for April 1996 with
various earlier dates for exchange of fact and expert statements. Seagate
intends to continue to defend itself rigorously. While Seagate cannot predict
the ultimate outcome of this litigation, based upon its review of the
allegations and discovery completed to date, Seagate believes this lawsuit is
without merit and, as a result, Seagate believes that the outcome of this matter
will not have a material adverse effect on its financial condition or results of
operations.
For a complete discussion of such legal proceedings see the "Income Taxes"
and "Litigation" footnotes of Seagate's consolidated financial statements
incorporated by reference in its Annual Report on Form 10-K for the year ended
June 30, 1995. Although Seagate believes that the outcome of each of the matters
described above will not have a material adverse effect on its financial
condition or results of operations, Seagate cannot predict the ultimate outcome.
Conner and certain of its officers and certain directors are defendants in a
securities class action lawsuit in the United States District Court for the
Northern District of California which purports to represent a class of investors
who purchased or otherwise acquired Conner Common Stock between January 1992 and
May 1993. Certain officers and directors are also defendants in a related
stockholders' derivative suit. The complaints seek unspecified damages and other
relief.
The hard disc drive industry has been characterized by significant
litigation relating to patent and other intellectual property rights. In 1992,
Conner filed a patent infringement lawsuit against Western Digital Corporation
("Western Digital") in the United States District Court for the Northern
District of California alleging the infringement of five of Conner's patents by
Western Digital. Western Digital has filed a counterclaim alleging infringement
of certain of its patents by Conner. The case is currently in discovery. On the
basis of the advice of outside counsel, Conner believes it has valid claims
against Western Digital and meritorious defenses to the claims asserted by
Western Digital, based on invalidity of the Western Digital patents and/or
non-infringement of the Western Digital patents by Conner. However, there can be
no assurance that Conner will prevail in this matter or that other intellectual
property litigation will not be commenced by or against Conner in the future.
In December 1994, the Internal Revenue Service concluded a field audit of
Conner's federal income tax returns for the fiscal years 1989 and 1990 and
issued to Conner a Notice of Deficiency (the "Conner Notice") with respect to
those fiscal years. The majority of the proposed adjustments to income in the
Conner Notice related to the allocation of income between Conner and its foreign
manufacturing subsidiaries. The Conner Notice resulted in proposed tax
deficiencies of approximately $43.0 million and assessed interest. On March 20,
1995, Conner filed a Petition in the United States Tax Court entitled Conner
Peripherals, Inc. v. Commissioner of Internal Revenue, Docket No. 4322-95
contesting such proposed tax deficiencies. On May 16, 1995, the Commissioner
filed her Answer to the Petition and, on August 4, 1995, a trial judge was
assigned to the case. The case is currently being reviewed by the Appeals Office
of the Internal Revenue Service.
RISKS ASSOCIATED WITH BUSINESS DIVERSIFICATION. In addition to pursuing its
core rigid disc drive business, each of Seagate and Conner has broadened its
business strategy to more fully address the markets for storage, retrieval and
management of data. Implementation of this broadened strategy entails risks of
entering markets in which Seagate and/or Conner may have limited or no
experience.
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In addition, such broadened strategy could result in the diversion of
management's attention from the core rigid disc drive business which could
adversely impact the core business. The strategy followed by each company to
sell selected magnetic recording components to other rigid disc drive
manufacturers may improve such manufacturers' ability to compete with Seagate
and/or Conner in its core business. The broadened strategy may also entail
acquisitions of, or investments in, businesses, products and technologies. Since
July 1, 1993, Seagate has completed the acquisition of seven businesses and made
significant equity investments in three additional companies. Six of such
acquisitions were for cash consideration and in the remaining acquisition,
Seagate issued an aggregate of approximately 737,000 shares of Seagate Common
Stock to the sole stockholder of the acquired company. Acquisitions involve
numerous risks, including potentially dilutive issuances of equity securities,
difficulties in the assimilation of the operations and products of the acquired
businesses and the potential loss of key employees or customers of the acquired
businesses.
HIGH FIXED COSTS. Seagate has pursued a strategy of vertical integration of
its manufacturing process in order to reduce unit costs, control quality and
assure availability of certain components. Conner has followed such a vertical
integration strategy in the area of magnetic recording media. A strategy of
vertical integration entails a high level of fixed costs and requires a high
volume of production and sales to be successful. During periods of decreased
demand, these high fixed costs have had, and could in the future have, a
material adverse effect on Seagate's and/or Conner's results of operations and
financial condition. In addition, the failure of Conner to follow such a
strategy in areas other than magnetic recording media may heighten its exposure
to other risks, such as availability of component supply.
MANUFACTURING RISKS. Continued improvement in manufacturing process
capabilities and reduced materials and manufacturing costs are critical factors
affecting Seagate's and Conner's results of operations. Each of Seagate and
Conner frequently changes the manufacturing processes for and constituent
components of many of its products and continually evaluates the transfer of
volume production of many of its components and products between facilities.
There can be no assurance that such changes and transfers will be implemented on
a timely or cost effective basis. Delays or problems encountered in any of the
foregoing could have a material adverse effect on Seagate's and/or Conner's
results of operations.
INTENSE COMPETITION. Each of Seagate and Conner has experienced and expects
to continue to experience intense competition from a number of domestic and
foreign companies. These companies include the other leading independent rigid
disc drive manufacturers, such as Quantum Corporation, Western Digital, Maxtor
Corporation, Syquest Technology, Inc., Integral Systems, Inc. and Micropolis
Corporation as well as large integrated multinational computer manufacturers
such as Fujitsu Limited, Hewlett-Packard Company, Hitachi, Ltd., Hyundai Motor
Company, International Business Machines Corporation, NEC Corporation, Samsung
Electronics Co., Ltd. and Toshiba Corporation. Each of Seagate and Conner also
continues to face indirect competition from present and potential customers,
including several of the computer manufacturers listed above, which continuously
evaluate whether to manufacture their own drives or purchase them from outside
sources. Such competition could materially adversely affect Seagate's and/or
Conner's business, results of operations and financial condition. The
introduction of products using alternative data storage and retrieval
technologies could also be a significant source of competition. Products based
upon such alternative technologies, which include optical recording technology
and semiconductor memory (flash memory, SRAM and DRAM), also compete or could
compete with Seagate's and Conner's products. There can be no assurance that
Seagate and/or Conner will be able to compete successfully against current or
future competitors or that competitive pressures faced by Seagate and/or Conner
will not materially adversely affect its business, operating results and
financial condition.
RISKS ASSOCIATED WITH FOREIGN CURRENCY FLUCTUATIONS. Each of Seagate's and
Conner's cash flows are substantially U.S. dollar denominated. However, both
Seagate and Conner are exposed to certain foreign currency fluctuations,
primarily British Pound Sterling, Malaysian Ringgit, Italian Lira, Singapore
Dollars, Chinese Renminbi, Thai Baht and Japanese Yen. Seagate and Conner each
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from time to time enter into foreign currency forward exchange and option
contracts to manage exposure related to certain foreign currency commitments,
certain foreign currency denominated balance sheet positions and anticipated
foreign currency denominated expenditures. At September 30, 1995, Conner had
outstanding foreign currency forward exchange contracts and foreign currency
purchase option contracts aggregating approximately $68.1 million and $12.0
million, respectively. At September 30, 1995, Seagate had outstanding foreign
currency forward exchange contracts and written option contracts aggregating
approximately $293.6 million and $190.3 million, respectively. These contracts
mature at various periods through September 1996 and are consistent with the
amounts and timing of the underlying anticipated cash flow requirements and
purchase commitments.
SUBSTANTIAL PRICE VOLATILITY OF THE SEAGATE COMMON STOCK AND THE CONNER
COMMON STOCK. The Seagate Common Stock and the Conner Common Stock historically
have been subject to substantial price volatility as a result of
quarter-to-quarter variations in the financial results of Seagate or Conner, as
the case may be, or its competitors, announcements of technological innovations
or new products by Seagate or Conner, as the case may be, or its competitors,
announcements of changing business conditions by competitors or other companies
within the computer industry, changes in financial estimates by securities
analysts or other events or factors. In addition, the stock market has
experienced and continues to experience extreme price and volume fluctuations
which have particularly affected the market prices of equity securities for many
technology companies and that have often been unrelated to the operating
performance of these companies. These broad market fluctuations, as well as
general economic and political conditions, may adversely affect the market
prices of the Seagate Common Stock and the Conner Common Stock. In addition,
Seagate's and/or Conner's revenue or results of operations may, in some future
quarter, be below the expectations of public market analysts and investors. In
such event, the price of the Seagate Common Stock or the Conner Common Stock, as
the case may be, could be materially adversely affected. In the past, following
periods of volatility in the market price of the Seagate Common Stock or the
Conner Common Stock, as the case may be, securities class action litigation has
been instituted against Seagate or Conner, respectively. Such litigation has in
the past and could in the future result in substantial costs and diversion of
management's attention and resources, which would have a material adverse effect
on such company's business, operating results and financial condition.
ANTI-TAKEOVER EFFECTS OF POTENTIAL ISSUANCE OF PREFERRED STOCK. The Seagate
Board has the authority to issue up to 1,000,000 shares of preferred stock, $.01
par value (the "Seagate Preferred Stock"), and to determine the price, rights,
preferences, privileges and restrictions thereof, including voting rights,
without any further vote or action by Seagate's stockholders. The rights of the
holders of Seagate Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Seagate Preferred Stock that may
be issued in the future. The issuance of Seagate Preferred Stock could have the
effect of delaying, deferring or preventing a change in control of Seagate.
Seagate does not have any present plans to issue any shares of preferred stock.
The Conner Board has the authority to issue up to 20,000,000 shares of
preferred stock of Conner and to determine the price, rights, preferences,
privileges and restrictions thereof, including voting rights, without any
further vote or action by Conner's stockholders. The rights of the holders of
the Conner Common Stock would be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock of Conner that may be issued in
the future. The issuance of preferred stock of Conner could have the effect of
delaying, interfering with or preventing a change in control of Conner.
Conner has designated a series of 1,000,000 shares of Series A Participating
Preferred Stock in connection with the Conner Rights, which are described in
Conner's Registration Statement on Form 8-A dated November 30, 1994 (which is
incorporated herein by reference). Other than pursuant to the terms of the
Conner Rights, if applicable, Conner does not have any present plans to issue
any shares of preferred stock.
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THE SEAGATE MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of
Seagate Common Stock as part of the solicitation of proxies by the Seagate Board
for use at the Seagate Meeting to be held on Friday, February 2, 1996 at 10:00
a.m., local time at Seagate's corporate headquarters at 920 Disc Drive, Scotts
Valley, California 95066, and at any adjournments or postponements thereof. This
Joint Proxy Statement/Prospectus, and the accompanying Proxy Card, are first
being mailed to holders of Seagate Common Stock on or about January 3, 1996.
The purpose of the Seagate Meeting is to consider and vote upon a proposal
to approve the issuance of shares of Seagate Common Stock pursuant to the Merger
Agreements. Upon consummation of the Merger, each outstanding share of Conner
Common Stock and the accompanying Conner Right will be converted into the right
to receive the Exchange Ratio of 0.442 of a share of Seagate Common Stock, with
cash paid in lieu of fractional shares. In addition, as a result of the Merger,
each outstanding Conner Option will be assumed by Seagate and converted into an
option to acquire such number of shares of Seagate Common Stock as the holder
would have been entitled to receive had such holder exercised such Conner Option
in full immediately prior to the effective time of the Merger. See "The Merger
and Related Transactions -- General -- Assumption of Options."
An additional purpose of the Seagate Meeting is to consider and vote upon a
proposal to ratify and approve amendments to the Executive Stock Plan which (i)
increase the number of shares of Seagate Common Stock reserved for issuance
under the Executive Stock Plan by 1,000,000 shares, (ii) change the eligibility
provisions of the Executive Stock Plan making all senior executive officers of
Seagate eligible to receive grants thereunder, and (iii) extend the term of the
Executive Stock Plan.
Based upon the number of shares of Seagate Common Stock and Conner Common
Stock outstanding at December 15, 1995, an aggregate of approximately 24,202,875
shares of Seagate Common Stock would be issued in connection with the Merger,
representing approximately 24.9% of the total number of shares of Seagate Common
Stock outstanding, after giving effect to such issuance. Based upon the number
of Conner Options outstanding at December 15, 1995, approximately 2,848,683
additional shares of Seagate Common Stock would be reserved for issuance to
holders of Conner Options in connection with Seagate's assumption of such Conner
Options. Consummation of the Merger is subject to a number of conditions,
including the receipt of required regulatory and stockholder approvals.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Seagate Common Stock at the close of business on
December 15, 1995 are entitled to notice of and to vote at the Seagate Meeting.
As of the close of business on the Seagate Record Date, there were 73,101,968
shares of Seagate Common Stock outstanding and entitled to vote, held of record
by 4,532 stockholders. A majority, or 36,550,985 of these shares, present in
person or represented by proxy, will constitute a quorum for the transaction of
business. Each Seagate stockholder is entitled to one vote for each share of
Seagate Common Stock held as of the Seagate Record Date.
VOTING OF PROXIES
The Seagate Proxy Card accompanying this Joint Proxy Statement/Prospectus is
solicited on behalf of the Seagate Board for use at the Seagate Meeting.
Stockholders are requested to complete, date and sign the accompanying proxy and
promptly return it in the accompanying envelope or otherwise mail it to Seagate.
All proxies that are properly executed and returned, and that are not revoked,
will be voted at the Seagate Meeting in accordance with the instructions
indicated thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF
THE ISSUANCE OF SHARES OF SEAGATE COMMON STOCK PURSUANT TO THE MERGER
AGREEMENTS. The Seagate Board does not presently intend to bring any business
before the Seagate Meeting other than the specific proposals referred to in this
Joint Proxy Statement/Prospectus and specified in the notice of the Seagate
Meeting. So far as is known to the
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Seagate Board, no other matters are to be brought before the Seagate Meeting. As
to any business that may properly come before the Seagate Meeting, including,
among other things, consideration of any motion made for adjournment of the
Seagate Meeting (including, without limitation, for purposes of soliciting
additional votes for approval of the issuance of Seagate Common Stock pursuant
to the Merger Agreements), however, it is intended that proxies, in the form
enclosed, will be voted in respect thereof in accordance with the judgment of
the persons voting such proxies. A Seagate stockholder who has given a proxy may
revoke it at any time before it is exercised at the Seagate Meeting, by (i)
filing a written notice of revocation with, or delivering a duly executed proxy
bearing a later date to, Mr. Donald L. Waite, Secretary, Seagate Technology,
Inc., 920 Disc Drive, Scotts Valley, California 95066, or (ii) attending the
Seagate Meeting and voting in person (although attendance at the Seagate Meeting
will not, by itself, revoke a proxy).
VOTE REQUIRED
Because the number of shares of Seagate Common Stock to be issued or
reserved for issuance in connection with the Merger will exceed 20% of the
number of shares of Seagate Common Stock outstanding prior to the Merger,
approval by holders of Seagate Common Stock of the issuance of Seagate Common
Stock pursuant to the Merger Agreements is required under the rules of the NYSE.
Under NYSE rules, the proposal to issue Seagate Common Stock pursuant to the
Merger Agreements must be approved by a majority of the votes cast at the
Seagate Meeting, provided that the total votes cast on the proposal represents
over 50% of the outstanding shares of Seagate Common Stock. If holders of
Seagate Common Stock do not vote to approve such issuance, the Merger will not
be consummated. Seagate is not a constituent corporation to the Merger and,
therefore, specific approval of the Merger Agreements by Seagate's stockholders
is not required under the DGCL or the Seagate Certificate of Incorporation or
the Seagate Bylaws. The ratification and approval of amendments to Seagate's
Executive Stock Plan will require the affirmative vote of not less than a
majority of the Seagate Common Stock represented and voting either in person or
by proxy at the Seagate Meeting.
THE MATTERS TO BE CONSIDERED AT THE SEAGATE MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF SEAGATE. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
It is expected that all of the 434,301 shares of Seagate Common Stock (which
excludes shares subject to stock options) beneficially owned by directors and
executive officers of Seagate and their affiliates at the Seagate Record Date
(representing approximately less than 1% of the total number of shares of
Seagate Common Stock outstanding at such date) will be voted for approval of the
issuance of Seagate Common Stock pursuant to the Merger Agreements. As of the
Seagate Record Date, Conner owned none, and its directors and executive officers
and their affiliates beneficially owned less than 1% in the aggregate, of the
outstanding shares of Seagate Common Stock. It is expected that any shares of
Seagate Common Stock beneficially owned by Conner's directors and executive
officers will be voted for approval and adoption of the issuance of shares of
Seagate Common Stock pursuant to the Merger Agreements.
ABSTENTIONS; BROKER NON-VOTES
If an executed Seagate proxy is returned and the stockholder has
specifically abstained from voting on any matter, the shares represented by such
proxy will be considered present at the Seagate Meeting for purposes of
determining a quorum and for purposes of calculating the vote, but will not be
considered to have been voted in favor of such matter. If an executed proxy is
returned by a broker holding shares in street name which indicates that the
broker does not have discretionary authority as to certain shares to vote on one
or more matters, such shares will be considered present at the meeting for
purposes of determining a quorum, but will not be considered to be represented
at the meeting for purposes of calculating the votes cast with respect to such
matter.
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SOLICITATION OF PROXIES AND EXPENSES
Seagate will bear the cost of the solicitation of proxies in the enclosed
form from its stockholders. In addition to solicitation by mail, the directors,
officers and employees of Seagate may solicit proxies from stockholders by
telephone, telegram, letter, facsimile or in person. Following the original
mailing of the proxies and other soliciting materials, Seagate will request that
brokers, custodians, nominees and other record holders forward copies of the
proxy and other soliciting materials to persons for whom they hold shares of
Seagate Common Stock and request authority for the exercise of proxies. In such
cases, Seagate, upon the request of the record holders, will reimburse such
record holders for their reasonable expenses. Seagate has retained Corporate
Investor Communications, Inc. to assist in the solicitation of proxies at a cost
of approximately $5,500, plus customary expenses.
THE CONNER MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
Conner Common Stock as part of the solicitation of proxies by the Conner Board
for use at the Conner Meeting to be Friday February 2, 1996 at 9:00 a.m., local
time at The Inn at Spanish Bay, 2700 17 Mile Drive, Pebble Beach, California,
93953 and at any adjournments or postponements thereof. This Joint Proxy
Statement/Prospectus, and the accompanying Proxy Card, are first being mailed to
holders of Conner Common Stock on or about January 3, 1996.
The purpose of the Conner Meeting is to consider and vote upon a proposal to
approve and adopt the Merger Agreements, which set forth the terms and
conditions of the Merger and the transactions contemplated thereby. Upon
consummation of the Merger, each outstanding share of Conner Common Stock and
the accompanying Conner Right will be converted into the right to receive the
Exchange Ratio of 0.442 of a share of Seagate Common Stock, with cash paid in
lieu of fractional shares. In addition, as a result of the Merger, each
outstanding Conner Option will be assumed by Seagate and converted into an
option to acquire such number of shares of Seagate Common Stock as the holder
would have been entitled to receive had such holder exercised such Conner Option
in full immediately prior to the effective time of the Merger. See "The Merger
and Related Transactions -- General -- Assumption of Options."
Based on the last reported sale price of Seagate Common Stock on the NYSE
composite tape on December 29, 1995, the Exchange Ratio would result in a per
share purchase price for Conner Common Stock of $21.00. If the Merger is
completed, Conner stockholders will no longer hold any interest in Conner other
than through their interest in shares of Seagate Common Stock. Consummation of
the Merger is subject to a number of conditions, including the receipt of
required regulatory and stockholder approvals.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Conner Common Stock at the close of business on
December 15, 1995 are entitled to notice of and to vote at the Conner Meeting.
As of the close of business on the Conner Record Date, there were 54,757,637
shares of Conner Common Stock outstanding and entitled to vote, held of record
by 1,838 stockholders. A majority, or 27,378,819 of these shares, present in
person or represented by proxy, will constitute a quorum for the transaction of
business. Each Conner stockholder is entitled to one vote for each share of
Conner Common Stock held as of the Conner Record Date.
VOTING OF PROXIES
The Conner Proxy Card accompanying this Joint Proxy Statement/Prospectus is
solicited on behalf of the Conner Board for use at the Conner Meeting.
Stockholders are requested to complete, date and sign the accompanying proxy and
promptly return it in the accompanying envelope or otherwise mail it to Conner.
All proxies that are properly executed and returned, and that are not revoked,
will be voted at the Conner Meeting in accordance with the instructions
indicated thereon.
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EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENTS. The Conner Board does not presently intend to bring any other
business before the Conner Meeting other than the specific proposals referred to
in this Joint Proxy Statement/Prospectus and specified in the notice of the
Conner Meeting. So far as is known to the Conner Board, no other matters are to
be brought before the Conner Meeting. As to any business that may properly come
before the Conner Meeting, including, among other things, consideration of any
motion made for adjournment of the Conner Meeting (including, without
limitation, for purposes of soliciting additional votes for approval and
adoption of the Merger Agreements), however, it is intended that proxies, in the
form enclosed, will be voted in respect thereof in accordance with the judgment
of the persons voting such proxies. A Conner stockholder who has given a proxy
may revoke it at any time before it is exercised at the Conner Meeting, by (i)
filing a written notice of revocation with, or delivering a duly executed proxy
bearing a later date to Thomas F. Mulvaney, Esq., Vice President, General
Counsel and Secretary, Conner Peripherals Inc., 3081 Zanker Road, San Jose,
California, 95134, or (ii) attending the Conner Meeting and voting in person
(although attendance at the Conner Meeting will not, by itself, revoke a proxy).
VOTE REQUIRED
Pursuant to the DGCL and the Conner Certificate of Incorporation and the
Conner Bylaws, approval and adoption of the Merger Agreements requires the
affirmative vote of at least a majority of the outstanding shares of Conner
Common Stock entitled to vote at the Conner Meeting. SINCE THE REQUIRED VOTE OF
THE CONNER STOCKHOLDERS IS BASED UPON THE NUMBER OF OUTSTANDING SHARES OF CONNER
COMMON STOCK, RATHER THAN UPON THE SHARES ACTUALLY VOTED, THE FAILURE BY THE
HOLDER OF ANY SUCH SHARES TO SUBMIT A PROXY OR TO VOTE IN PERSON AT THE CONNER
MEETING (INCLUDING ABSTENTIONS AND "BROKER NON-VOTES") WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST APPROVAL AND ADOPTION OF THE MERGER AGREEMENTS.
THE MATTERS TO BE CONSIDERED AT THE CONNER MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF CONNER. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS,
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
It is expected that all of the 1,456,783 shares of Conner Common Stock
(which excludes shares subject to Conner Options) beneficially owned by
directors and executive officers of Conner and their affiliates at the Conner
Record Date (representing approximately 2.7% of the total number of shares of
Conner Common Stock outstanding at such date) will be voted for approval and
adoption of the Merger Agreements. As of the Conner Record Date, Seagate and its
directors and executive officers and their affiliates beneficially owned none of
the outstanding shares of Conner Common Stock.
ABSTENTIONS; BROKER NON-VOTES
If an executed Conner proxy is returned and the stockholder has specifically
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the Conner Meeting for purposes of determining a
quorum. If an executed proxy is returned by a broker holding shares in street
name which indicates that the broker does not have discretionary authority as to
certain shares to vote on one or more matters, such shares will be considered
present at the meeting for purposes of determining a quorum. Since the required
vote of the Conner stockholders is based upon the number of outstanding shares
of Conner Common Stock, abstentions and broker non-votes will have the same
effect as a vote against approval and adoption of the Merger Agreements.
SOLICITATION OF PROXIES AND EXPENSES
Conner will bear the cost of the solicitation of proxies in the enclosed
form from its stockholders. In addition to solicitation by mail, the directors,
officers and employees of Conner may solicit proxies from stockholders by
telephone, telegram, letter, facsimile or in person. Following the original
mailing of the proxies and other soliciting materials, Conner will request that
brokers, custodians, nominees and other record holders forward copies of the
proxy and other soliciting materials to persons for whom they hold shares of
Conner Common Stock and request authority for the exercise of proxies. In
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such cases, Conner, upon the request of the record holders, will reimburse such
record holders for their reasonable expenses. Conner has retained Corporate
Investor Communications, Inc. to assist in solicitation of proxies at a cost of
approximately $6,500, plus customary expenses.
THE MERGER AND RELATED TRANSACTIONS
This section of the Joint Proxy Statement/Prospectus describes certain
aspects of the proposed Merger. The following description does not purport to be
complete and the discussion in this Joint Proxy Statement/Prospectus of the
Merger and the description of the principal terms of the Merger Agreements are
subject to and qualified in their entirety by reference to the Reorganization
Agreement and the Merger Agreement, copies of which are attached to this Joint
Proxy Statement/Prospectus as Appendices A and B, respectively, and the other
appendices hereto, all of which are incorporated herein by reference. All
holders of Seagate Common Stock and Conner Common Stock are urged to read the
Reorganization Agreement, the Merger Agreement and the other appendices in their
entirety.
GENERAL
The Merger Agreements provide for the merger of a newly formed, wholly-owned
subsidiary of Seagate with and into Conner, with Conner being the surviving
corporation of the Merger and becoming a wholly-owned subsidiary of Seagate. The
Conner Certificate of Incorporation, as amended to provide for an authorized
capital stock of 1,000 shares of Common Stock, $.001 par value per share, will
be the Certificate of Incorporation of the surviving corporation in the Merger
until further amended as provided therein and in accordance with applicable law.
The Bylaws of Sub as in effect immediately prior to the Merger will be the
Bylaws of the surviving corporation until further amended as provided therein
and in accordance with applicable law. The directors of Sub immediately prior to
the Merger will be the initial directors of the surviving corporation, and the
officers of Sub immediately prior to the Merger will be the initial officers of
the surviving corporation. If the Merger is completed, holders of Conner Common
Stock will no longer hold any interest in Conner other than through their
interest in shares of Seagate Common Stock. The stockholders of Conner will
become stockholders of Seagate (as described below), and their rights will be
governed by the Seagate Certificate of Incorporation and the Seagate Bylaws.
EFFECTIVE TIME OF THE MERGER. The Merger will become effective upon the
filing of the properly executed Merger Agreement with the Secretary of State of
Delaware (the "Effective Time"). The Merger Agreements provide that the parties
thereto will cause the Merger Agreement to be filed as soon as practicable after
the holders of Seagate Common Stock have approved the issuance of Seagate Common
Stock pursuant to the Merger Agreements, the holders of Conner Common Stock have
approved and adopted the Merger Agreements, all required regulatory approvals
and actions have been obtained or taken and all other conditions to the
consummation of the Merger have been satisfied or waived. See "-- Regulatory
Approvals Required" and "-- Conditions to Consummation of the Merger." There can
be no assurance that the conditions precedent to the Merger will be satisfied.
Moreover, the Merger Agreements may be terminated by either Seagate or Conner
under various conditions as specified in the Merger Agreements. See "--
Termination; Breakup Fees; Seagate Option to Purchase Conner Common Stock."
Therefore, there can be no assurance as to whether or when the Merger will
become effective.
CONVERSION OF SHARES. Upon the consummation of the Merger, each then
outstanding share of Conner Common Stock and the accompanying Conner Right will
automatically be converted at the Exchange Ratio into 0.442 of a share of
Seagate Common Stock. No fractional shares of Seagate Common Stock will be
issued in the Merger. The Merger Agreements provide that, in lieu of any
fractional share, each Conner stockholder who would otherwise be entitled to
receive a fraction of a share of Seagate Common Stock will receive from Seagate
an amount of cash equal to the per share market value of Seagate Common Stock
(based on the closing price of a share of Seagate Common Stock as reported on
the NYSE composite tape on the last full trading day prior to the Effective
Time)
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multiplied by the fraction of a share of Seagate Common Stock to which the
stockholder would otherwise be entitled. Based upon the number of shares of
Seagate Common Stock and Conner Common Stock outstanding at December 15, 1995,
an aggregate of approximately 24,202,875 shares of Seagate Common Stock would be
issued in connection with the Merger, representing approximately 24.9% of the
total number of shares of Seagate Common Stock outstanding after giving effect
to such issuance.
Because the Exchange Ratio is fixed and will not increase or decrease due to
fluctuations in the market price of either the Seagate Common Stock or the
Conner Common Stock, Conner stockholders will not be compensated for decreases
in the market price of Seagate Common Stock which could occur before the
Effective Time. In the event that the market price of Seagate Common Stock
decreases or increases prior to the Effective Time, the value at the Effective
Time of the Seagate Common Stock to be received by Conner stockholders in the
Merger would correspondingly decrease or increase. The market prices of Seagate
Common Stock and Conner Common Stock as of a recent date are set forth herein
under "Summary -- Markets and Price Data," and Conner stockholders are advised
to obtain recent market quotations for Seagate Common Stock and Conner Common
Stock. No assurance can be given as to the market prices of Seagate Common Stock
or Conner Common Stock at any time before the Effective Time or as to the market
price of Seagate Common Stock at any time thereafter.
ASSUMPTION OF OPTIONS. Upon consummation of the Merger, each outstanding
Conner Option will be assumed by Seagate and converted into an option to acquire
such number of shares of Seagate Common Stock as the holder would have been
entitled to receive had such holder exercised such Conner Option in full
immediately prior to the Effective Time, at an exercise price per share equal to
the exercise price per share of the Conner Common Stock under such Conner Option
immediately prior to the Effective Time divided by the Exchange Ratio of 0.442.
To avoid fractional shares, the number of shares of Seagate Common Stock subject
to an assumed Conner Option will be rounded down to the nearest whole share. The
vesting, duration and other terms of the new option will otherwise be the same
as the Conner Option, except to the extent that such vesting, duration or other
terms are modified pursuant to the terms of the plans or outstanding options or
change of control/ severance agreements of Conner. Pursuant to such plans,
options or agreements, all options and restricted stock awards held by members
of the Conner Board, Mr. Conner and Mr. Bell will become immediately exercisable
at the time of the Merger. The change of control/severance agreements between
Conner and Mr. Potashner and certain other members of Conner management provide
for full and immediate vesting of 50% of all options and restricted stock awards
should such individuals be terminated, under certain circumstances, following
the Merger. As soon as practicable after the Effective Time, Seagate will file a
registration statement on Form S-8 with the Commission with respect to the
shares of Seagate Common Stock subject to the assumed Conner Options. Based upon
the number of Conner Options outstanding at December 15, 1995, approximately
2,848,683 additional shares of Seagate Common Stock would be reserved for
issuance to holders of Conner Options in connection with Seagate's assumption of
such Conner Options.
TREATMENT OF CONNER DEBENTURES IN THE MERGER. Conner has entered into
Indenture Agreements, dated as of March 1, 1991 and March 1, 1992, with The
First National Bank of Boston as trustee thereunder (the "Trustee"), pursuant to
which Conner's $230,000,000 principal amount 6 3/4% Convertible Subordinated
Debentures due 2001 (the "6 3/4% Debentures") and Conner's $345,000,000
principal amount 6 1/2% Convertible Subordinated Debentures due 2002 (the
"6 1/2% Debentures," and collectively with the 6 3/4% Debentures, the "Conner
Debentures,") respectively, were issued. As of September 30, 1995, $209,412,000
in aggregate principal amount of the 6 3/4% Debentures (convertible into
7,221,104 shares of Conner Common Stock) and $309,486,000 of the 6 1/2%
Debentures (convertible into 12,895,250 shares of Conner Common Stock) were
issued and outstanding. Upon consummation of the Merger, Conner and Seagate
intend to enter into supplemental indentures (the "Supplemental Indentures")
with the Trustee providing that each holder of a Conner Debenture shall be
entitled to convert such Conner Debentures into the kind and amount of Seagate
Common Stock which such holder would have been entitled to receive had such
Conner Debentures been converted
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into Conner Common Stock immediately prior to consummation of the Merger and
that Seagate will become a co-obligor for the Conner Debentures. Under the terms
of the Reorganization Agreement, Conner has agreed to comply with all of the
notice requirements under the Conner Debentures.
BACKGROUND OF THE MERGER
Seagate regularly evaluates strategic opportunities, including business
combinations with other companies, that could complement and strengthen its disc
drive product offering, component business and software business. Since 1989,
when Seagate acquired Imprimis Technology Incorporated, a disc drive
manufacturer, from Control Data Corporation, Seagate has pursued a strategy of
growing its technology portfolio through internal development, acquisitions and
strategic investments. Since 1989, Seagate has entered into strategic
relationships with storage companies, manufacturers of disc drive components,
including media and heads, and during the past two years has acquired a number
of software companies, primarily in the area of storage and network and
information management.
On June 9, 1995, Stephen J. Luczo, Executive Vice President, Corporate
Development and Chief Operating Officer, Software Group, of Seagate, held
informal discussions with Mr. Conner, Chairman of the Board and Chief Executive
Officer of Conner, about the possibility of Seagate acquiring Conner's software
subsidiary, Arcada, and the status of Conner's tape business generally. In the
course of these discussions Mr. Luczo suggested to Mr. Conner that Seagate might
also be interested in a transaction combining the two companies. Mr. Conner
suggested that Mr. Luczo meet with Peter Knight, Senior Vice President, Business
Development, of Conner, to discuss the software and tape businesses.
On June 13, 1995, Mr. Luczo and Mr. Knight met and discussed Conner's
software and tape businesses, as well as the possibility of a commercial
relationship concerning the two companies' heads and media operations, as well
as a transaction combining the two companies. Subsequently, on June 19, 1995,
Mr. Conner and Mr. Bell, Executive Vice President and Chief Financial Officer of
Conner, met with Mr. Luczo and Donald L. Waite, Executive Vice President, Chief
Administrative Officer and Chief Financial Officer of Seagate, to discuss
possible transactions involving the two companies' software and disc drive
components businesses. At that meeting the possibility of a larger transaction
between Seagate and Conner was also discussed.
During the week of June 20, 1995, Seagate held preliminary discussions with
its financial advisor, Morgan Stanley, and requested that Morgan Stanley prepare
a preliminary analysis of a possible transaction.
At a meeting held on June 27, 1995, the Conner Board was advised of the
potential interest of Seagate in a transaction with Conner. At that meeting, the
Conner Board authorized the retention of Wachtell, Lipton, Rosen & Katz as
special counsel to the Conner Board. The Conner Board met again on July 6, 1995,
and authorized management, with the assistance of counsel, to negotiate
reciprocal confidentiality agreements with certain standstill provisions and to
continue preliminary discussions with Seagate. At the same time, the Conner
Board asked Goldman Sachs, Conner's financial advisor, to accelerate its
preparation of a review of the strategic alternatives available to Conner, which
the Conner Board had requested in April 1995. It was agreed that Goldman Sachs
would present its review at the Conner Board meeting scheduled for July 18,
1995. Conner and Goldman Sachs subsequently entered into an engagement letter
pursuant to which Conner engaged Goldman Sachs to act as Conner's financial
advisor in connection with a possible sale of all or a portion of Conner to
Seagate.
Following the July 6, 1995, Conner Board meeting, representatives of Conner
and Seagate negotiated a letter agreement (the "Confidentiality Agreement"),
which provided for, among other things, the parties' exchange of certain
non-public information regarding their businesses on a confidential basis, and
certain standstill provisions. On July 12, 1995, Seagate and Morgan Stanley
executed an engagement letter pursuant to which Seagate retained Morgan Stanley
to act as Seagate's financial advisor in connection with the proposed
transaction.
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On July 11, 1995, Seagate met with Morgan Stanley to review Morgan Stanley's
preliminary analysis of a possible transaction.
At a meeting of the Conner Board held on July 18, 1995, Goldman Sachs
discussed three major strategic business alternatives available to Conner:
continuing to execute Conner's stand-alone business plan; engaging in a
restructuring that could include the sale, spin-off or other disposition of all
or parts of various business units; or selling or merging Conner. The Conner
Board also authorized the execution of the Confidentiality Agreement, which took
place following the meeting and authorized management and Goldman Sachs to
continue discussions with Seagate and its financial advisor, Morgan Stanley, to
conduct due diligence of Seagate and to provide certain information to Seagate
pursuant to the terms of the Confidentiality Agreement. Based on the advice of
Goldman Sachs that a transaction with Seagate could prove to be more financially
attractive than the restructuring alternatives or continuing with Conner's
current business plan, and its own assessment of the potential risks related to
the restructuring alternatives, the Conner Board determined not to take further
action with respect to such alternatives while discussions with Seagate were
continuing. Mark S. Rossi, one of Conner's directors, did not participate in the
discussion of matters relating to a possible Seagate transaction due to a
potential conflict of interest resulting from his position as a director of
StorMedia Incorporated, which supplies thin film discs to manufacturers of hard
disc drives, including Seagate. Mr. Rossi continued to recuse himself from
Conner Board meetings and discussions regarding the possible Seagate transaction
and did not participate in the vote by the Conner Board to approve the Merger.
On July 19, 1995, representatives of Seagate and Conner, together with their
financial advisors, exchanged information and discussed the advantages and
benefits of a possible transaction.
At a meeting of the Seagate Board held on July 27, 1995, Alan F. Shugart,
Chairman of the Board, President and Chief Executive Officer of Seagate, and Mr.
Luczo discussed with the Seagate Board, as part of the general corporate
overview, the status of the preliminary discussions with Conner and the
strategic implications of a possible transaction with Conner. The Seagate Board
ratified the engagement of Morgan Stanley.
During early August 1995, representatives of Seagate and Conner, together
with their financial advisors, exchanged and reviewed certain confidential
information concerning both companies. On August 21 and 22, 1995,
representatives of Seagate and Conner and their financial advisors exchanged
information and discussed the possible structure of a transaction as well as
other business alternatives.
At a meeting of the Strategic Planning Committee of the Seagate Board held
on August 22, 1995, management reported to the committee on the status of the
discussions with Conner and the due diligence review of Conner. The Strategic
Planning Committee of the Seagate Board authorized management to continue
discussions.
At a meeting of the Seagate Board held on August 25, 1995, management
reported to the Seagate Board on the status of the discussions with Conner and
the due diligence review of Conner. The Seagate Board discussed the rationale
for and possible structure of a transaction with Conner. The Seagate Board
determined that further discussions were desirable and authorized management to
continue discussions.
On August 28, 1995, at a meeting held between representatives of Conner and
Seagate, Seagate made a preliminary, non-binding proposal for a tax-free merger
of the two companies qualifying for pooling of interests accounting treatment.
The terms of the proposal included a fixed exchange ratio of 0.40 shares of
Seagate Common Stock for each share of Conner Common Stock and a provision
prohibiting Conner from soliciting other offers for Conner. The preliminary
proposal also included the grant of an option to Seagate to purchase up to 15%
of the Conner Common Stock should Conner accept a competing bid, and a break-up
fee of $35 million payable to Seagate in the event (i) the Conner Board changed
its recommendation to approve the transaction, (ii) Conner accepted a superior
proposal, or (iii) a third party became the owner of 15% of Conner's Common
Stock. The preliminary proposal also
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contained a provision for a $15 million termination fee to be paid by Conner to
Seagate if Conner's stockholders did not approve the transaction, and by Seagate
to Conner if Seagate's stockholders did not approve the transaction. Seagate's
preliminary proposal contemplated a period of extensive due diligence
investigations, including management meetings and facilities tours outside the
United States, which Seagate indicated would take three to four weeks to
complete. Seagate also requested that Conner agree, pending the execution of a
definitive agreement, to negotiate exclusively with Seagate and to refrain from
soliciting other bids for Conner. At the conclusion of the meeting, the
representatives of Conner indicated that they would inform the Conner Board that
Seagate had made a preliminary proposal and that Conner's management and
financial and legal advisors would study the Seagate proposal and inform Seagate
of whether Conner was interested in pursuing a possible transaction.
On August 30, 1995, the Conner Board convened a meeting with Conner's
management and financial and legal advisors regarding Seagate's preliminary
proposal. The Conner Board authorized Conner's advisors to undertake
negotiations with Seagate regarding the proposal in order to determine whether
acceptable terms could be reached. Following the meeting, Conner's
representatives informed Seagate's representatives that Conner was interested in
pursuing the merger transaction proposed by Seagate, but that the exchange ratio
and certain other terms and conditions would require improvement.
As a result of arms'-length negotiations between the two companies which
continued during the week of September 1, 1995, Seagate made a revised proposal
which included an increase in the exchange ratio to 0.442, an increase to 20% in
the amount of Conner Common Stock which has to be acquired by a third party in
order to trigger the $35 million break-up fee, the agreement by Seagate to take
certain actions to resolve antitrust issues should they arise with respect to
the Merger, and other additional terms and conditions. The revised Seagate
proposal continued to contemplate several weeks of due diligence, and, in
connection with its revised proposal, Seagate again requested that, pending the
execution of a definitive agreement, Conner negotiate with Seagate exclusively
and refrain from seeking other offers.
At a special meeting of the Conner Board on September 10, 1995, the Conner
Board received reports of management, Goldman Sachs and Wachtell, Lipton, Rosen
& Katz with respect to the course of negotiations, the due diligence process and
an analysis of Seagate's revised proposal. Goldman Sachs reviewed with the
Conner Board certain risks and advantages associated with the merger proposal
and with other alternatives available to Conner, and advised that the Conner
Board should consider proceeding with its negotiations regarding the Seagate
proposal. At the conclusion of the meeting, the Conner Board directed management
and Conner's advisors to engage in further due diligence activities with Seagate
and to negotiate a definitive agreement and plan of reorganization for the
Conner Board's approval at a later date.
Between September 15, 1995 and September 21, 1995, representatives of
Seagate, its outside counsel and Morgan Stanley conducted extensive due
diligence of Conner, including interviews with Conner's management team, the
results of which were reviewed extensively with Seagate's management. Conner
conducted due diligence and similar interviews with Seagate's management later
that same week. During the same period, the parties continued to negotiate
definitive agreements, and thereafter such negotiation and additional mutual due
diligence continued. Also during this period, Seagate, through its financial
advisor Morgan Stanley, began negotiations with representatives of the minority
stockholders of Arcada regarding a possible acquisition of the minority
interests in Arcada. These arms'-length negotiations resulted in an
understanding whereby Seagate would acquire the minority interests in Arcada in
exchange for Seagate Common Stock at an exchange ratio of 0.1545 shares of
Seagate Common Stock for each outstanding share of Arcada capital stock and each
share of Arcada capital stock issuable upon exercise of outstanding options to
purchase Arcada capital stock.
During this period of negotiation and due diligence, Conner became aware of
certain rumors in the market and unusual trading activity in Conner Common
Stock. Both Conner and Seagate and their respective advisors determined that it
would be appropriate to announce the agreement in
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principle and ongoing negotiations. On September 20, 1995, Conner and Seagate
issued a joint press release announcing that they were involved in negotiations
concerning a possible business combination of the two companies and had agreed
in principle that the stockholders of Conner would receive 0.442 of a share of
Seagate Common Stock for each share of Conner Common Stock. While Seagate had
requested that in connection with issuing the press release Conner agree to pay
Seagate a "topping" fee should Conner enter into a business combination with a
third party, Conner did not agree.
At a Seagate Board meeting held on September 27, 1995, Seagate management
reported to the Seagate Board on the results of its due diligence review of
Conner, including its technical, engineering, operational and legal review, and
noted that such due diligence was continuing. Management answered questions
regarding the results of its investigation and its views on the proposed
transaction. Wilson, Sonsini, Goodrich & Rosati, Seagate's counsel, reviewed
with the Seagate Board the terms of the proposed transaction including the
proposed structure as a tax-free reorganization with pooling of interests
accounting treatment, and the other terms of the proposed Reorganization
Agreement, the Merger Agreement, the Seagate Option and related agreements.
Wilson, Sonsini, Goodrich & Rosati also reviewed the antitrust review process
with the Seagate Board, and responded to questions regarding the structure and
proposed terms of the transaction. Morgan Stanley then reviewed with the Seagate
Board a summary of the financial and valuation analyses of the transaction. At
the conclusion of the presentation, Morgan Stanley delivered its oral opinion
(later confirmed in writing) that, as of such date the Merger is fair, from a
financial point of view, to Seagate. The Seagate Board discussed the potential
benefits and risks of the proposed transaction. Thereafter, the Seagate Board,
by a unanimous vote of the directors, approved the Merger Agreements and related
agreements and the transactions contemplated thereby, subject to satisfactory
completion of due diligence as determined by Seagate management. At this meeting
the Seagate Board also approved, by a unanimous vote of the directors, the terms
of the Seagate acquisition of the minority interests in Arcada.
At a special Conner Board meeting held on September 27, 1995, Wachtell,
Lipton, Rosen & Katz reported to the Conner Board that the parties had
negotiated nearly final drafts of the Reorganization Agreement, the Merger
Agreement and the Seagate Option, and reviewed the terms of those agreements
with the Conner Board. Conner management reported to the Conner Board the
results of its due diligence review of Seagate, and responded to questions from
the Conner Board regarding the due diligence and management's views on the
business and operations of Seagate. Goldman Sachs discussed various analyses
relating to the Merger and answered questions regarding such analyses and prior
analyses that had been discussed with the Conner Board. Goldman Sachs and
representatives of Conner management advised the Conner Board that, since the
public announcement of the agreement in principle between Conner and Seagate,
there had been no indications of interest from any third parties regarding an
offer for Conner. At the September 27 meeting, the Conner Board received the
oral opinion of Goldman Sachs that, as of such date and subject to review of the
definitive agreements, the Exchange Ratio pursuant to the draft Reorganization
Agreement is fair to the holders of shares of Conner Common Stock and the Conner
Board approved the Merger and drafts of the Reorganization Agreement, the Merger
Agreement and the Seagate Option subject to finalization by Conner's management
and advisors, and to the receipt of the opinion of Goldman Sachs in written
form.
Thereafter, on October 3, 1995, Goldman Sachs delivered its written opinion
that, as of such date, the Exchange Ratio pursuant to the Reorganization
Agreement is fair to the holders of shares of Conner Common Stock. On that same
date, Morgan Stanley delivered its written opinion that, as of such date, the
Exchange Ratio pursuant to the Reorganization Agreement is fair to Seagate from
a financial point of view. Conner and Seagate entered into the Reorganization
Agreement and the Seagate Option, and the execution of these agreements was
announced in a joint press release on October 3, 1995.
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REASONS FOR THE MERGER
REASONS OF SEAGATE FOR THE MERGER
The Seagate Board has unanimously approved the Merger Agreements and the
Merger, has determined that the terms of the Merger Agreements are fair to, and
that the Merger is in the best interest of, Seagate and its stockholders and
therefore unanimously recommends that the holders of Seagate Common Stock vote
FOR approval of the issuance of Seagate Common Stock pursuant to the Merger
Agreements.
In reaching its determination to approve the Merger Agreements and the
transactions contemplated thereby, the Seagate Board has identified the
following potential benefits of the Merger that it believes will contribute to
the success of the combined company:
- ENHANCED RESEARCH AND DEVELOPMENT. Seagate believes that the Merger will
enhance its research and development efforts, which should enable the
combined company to develop products more advanced than could be developed
by either company independently.
- STRONGER COMPONENT CAPABILITIES. Seagate has traditionally pursued a
strategy of vertical integration by designing and manufacturing many of
the components used in its rigid disc drives, which Seagate believes
provides it with significant advantages in maintaining control over the
quality and cost of its disc drive products. Seagate believes that the
Merger will strengthen its component capability through the addition of
Conner's media design, development and production capability. Seagate also
believes that the Merger will enable it to leverage more fully its
advanced recording head technology and production capability.
- BROADENED PRODUCT LINE IN CORE DISC DRIVE BUSINESS. Seagate believes that
the two companies disc drive product offerings are largely complementary,
and that the Merger will result in a stronger, expanded product line for
the disc drive business of the combined company. Seagate believes that its
product offering will benefit from the integration of Conner's business
process for the design, development, manufacture and sale of disc drive
products focused on a cost-sensitive market and Seagate's business process
for disc drive products focused on a performance-based market.
- SIGNIFICANT EFFICIENCIES AND COST SAVINGS. The Merger should result in
significant manufacturing and operational efficiencies and cost savings
over time as the result of (i) utilization of lower cost components in the
production of the disc drives of the combined company, particularly low
cost heads from Seagate and low cost media from Conner, (ii) production
efficiencies resulting from increased utilization of the vertically
integrated manufacturing operations of the combined company as a result of
increased manufacturing volumes, the use of the most efficient
manufacturing processes of each company to produce the combined company's
disc drives and the combining of the most efficient product designs in the
production of the combined company's disc drives and (iii) elimination of
duplicative and excess operational functions and facilities.
- EXPANDED STORAGE MANAGEMENT SOFTWARE BUSINESS. As a result of the Merger,
Seagate's existing storage management software operations will be expanded
to include Arcada, Conner's software subsidiary, thereby enabling Seagate
to expand its storage management software product offering. Seagate
believes that Arcada will complement and strengthen Seagate's existing
software product line by expanding its products, technology and customer
base, and by providing important synergies for new product development.
- ADDITIONAL TAPE DRIVE PRODUCT LINE. Consistent with Seagate's broadened
strategy as a data technology company, the Merger will expand Seagate's
existing product line in the storage management area to include tape
drives, which are offered both directly to OEMs, distributors and end
users as a system level solution, as well as to other system manufacturers
as a storage
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component. Seagate also believes that the tape drive business will
complement its storage management software products by expanding its
product offering and its marketing efforts directly to a broader base of
end users.
In the course of its deliberations, the Seagate Board reviewed and
considered a number of other factors relevant to the Merger. In particular, the
Seagate Board considered, among other things, the following factors:
(i) The Seagate Board considered information concerning Seagate's and
Conner's respective businesses, financial position, results of operations,
product development schedules, technologies and properties;
(ii) The Seagate Board considered the reports and opinions of Seagate's
management and Morgan Stanley, including reports relating to the extensive
due diligence review which had been conducted regarding Conner's business,
operations, technology and competitive position, and possible synergistic
and expansion opportunities for the two companies;
(iii) The Seagate Board, with the assistance of Seagate's financial
advisors, considered the comparative stock prices of Seagate and Conner
Common Stock, the premiums to market and multiples paid in other comparable
merger and acquisition transactions in the storage product and other
industries and an analysis of the respective contributions to revenues,
operating profits and net profits of the combined companies based on
industry analysts' estimates;
(iv) The Seagate Board considered the oral opinion of Morgan Stanley
delivered September 27, 1995, subsequently confirmed in writing on October
3, 1995 that, as of such date, the Exchange Ratio of 0.442 of a share of
Seagate Common Stock for each outstanding share of Conner Common Stock is
fair, from a financial point of view, to Seagate (see "-- Opinions of
Financial Advisors -- Opinion of Morgan Stanley & Co. Incorporated");
(v) The Seagate Board considered the expectation that the Merger will
qualify for pooling of interests treatment for financial reporting purposes
and will be tax free for federal income tax purposes to Seagate;
(vi) The Seagate Board considered, with the assistance of Seagate's legal
counsel, the domestic and foreign antitrust review process relating to the
Merger;
(vii) The Seagate Board considered a review with Seagate's legal counsel
of the terms of the Merger Agreements and the Seagate Option, including the
obligation of Conner not to solicit or encourage other acquisition
proposals, the breakup fee provisions, the circumstances under which either
Seagate or Conner can terminate the Reorganization Agreement and the closing
conditions to the Merger;
(viii) The Seagate Board considered the compatibility of the corporate
cultures of Seagate and Conner which the Seagate Board believed was
important for the successful integration of the companies; and
(ix) The Seagate Board considered that the issuance of Seagate Common
Stock pursuant to the Merger Agreements is conditioned upon approval by a
majority of the votes cast at the Seagate Meeting and that the Merger is
conditioned upon approval by the holders of a majority of the outstanding
voting power of the Conner Common Stock of the Reorganization Agreement and
the Merger Agreement.
The Seagate Board also considered a variety of potentially negative factors
in its deliberations concerning the Merger, including the following factors: (i)
the potential dilutive effect of the issuance of Seagate Common Stock in the
Merger; (ii) the substantial charges expected to be incurred, primarily in the
quarter ended March 31, 1996, in connection with the Merger, including the
transaction expenses arising from the Merger and costs associated with combining
the operations of the two companies; (iii) the risk that, despite the intentions
and the efforts of the parties, the benefits sought
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to be achieved in the Merger will not be achieved; (iv) the risk that the market
price of Seagate Common Stock might be adversely affected by the public
announcement of the Merger; (v) the risk that despite the intentions and efforts
of the parties the key technical and management personnel of Conner may not be
retained by Seagate; and (vi) the other risks described above under "Risk
Factors."
The foregoing discussion of the information and factors considered by the
Seagate Board is not intended to be exhaustive but is believed to include all
material factors considered by the Seagate Board. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Seagate
Board did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Seagate Board may have
given different weights to different factors. In the course of its
deliberations, the Seagate Board did not establish a range of value for Conner;
however, based on the factors outlined above and on the advice of its financial
advisor, Morgan Stanley, the Seagate Board determined that the terms of the
Merger Agreement are fair to, and that the Merger is in the best interests of,
Seagate and its stockholders.
REASONS OF CONNER FOR THE MERGER
The Conner Board has approved the Reorganization Agreement and the Merger
Agreement, has determined that the Merger is advisable and fair and in the best
interests of Conner and its stockholders and recommends that holders of shares
of Conner Common Stock vote FOR approval and adoption of the Reorganization
Agreement and the Merger Agreement.
The Conner Board's decision to approve the Reorganization Agreement and the
Merger Agreement was based, in large part, on its assessment that Conner is
engaged in an extremely competitive business, with short product cycles that
require a high level of execution for any business strategy to succeed. The
Conner Board recognized that Conner's ability to achieve its business plan may
depend upon future technological developments and access to and availability of
certain components, particularly thin-film and MR heads, and that the
combination with Seagate could provide a more attractive solution to the
challenge of obtaining such technology than the alternatives for Conner as an
independent company. The Conner Board also examined other risks associated with
the strategic alternatives to the Merger, including the fact that, during the
preceding six months, Conner had lost its President and Chief Operating Officer
and certain other members of its executive management, and that such changes in
management might impact Conner's ability to consummate either its existing
business plan or any strategic restructuring alternatives which the Conner Board
had considered. Against these considerations it weighed, among other things, the
fact that the Exchange Ratio offered a premium to Conner stockholders and,
because the consideration was stock in the ongoing enterprise combining Conner
and Seagate, that Conner's stockholders would have the opportunity to benefit
from any synergies to be achieved by such combination, which Conner's management
advised the Conner Board would be significant. Conner management identified the
following synergies and cost savings that may be obtained from the Merger: (i)
because the rigid disc drive product lines of Seagate and Conner are largely
complementary, the combined product line would address a broad spectrum of the
market for rigid disc drive products; (ii) each of Conner and Seagate has
substantial manufacturing capabilities and certain excess production capacity in
key disc drive components that could benefit the other company's products; (iii)
while it is difficult to quantify the benefits of combining technical resources,
it is believed that in the disc drive business, where technical innovation is
crucial, increasing the critical mass of technical personnel would permit more
basic, long-range research to support long-term competitiveness; and (iv) cost
savings may be achieved by taking advantage of the broader range of production
techniques and manufacturing locations in the combined companies to identify the
most cost-effective and efficient locations and processes for a particular need.
Such assessments of potential synergies and cost savings are necessarily
preliminary in nature and based on incomplete information, and there can be
assurance that such synergies or cost savings will actually be achieved.
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In reaching its decision to approve the Reorganization Agreement and the
Merger Agreement, and to recommend that Conner's stockholders vote to approve
the Reorganization Agreement and the Merger Agreement, the Conner Board also
considered, among other things, the following factors, both positive and
potentially negative:
(i) The Conner Board considered its knowledge of the business,
operations, properties, assets, financial condition and operating results of
Conner;
(ii) The Conner Board considered the reports and opinions of Conner's
management and Goldman Sachs, including as a result of their due diligence
investigations concerning the businesses, technology, products, operations,
financial condition and prospects of Seagate;
(iii) The Conner Board considered Conner's future prospects and that such
prospects were likely to be enhanced as a result of the Merger;
(iv) The Conner Board considered the detailed financial analyses, pro
forma and other information with respect to Conner and Seagate presented by
Goldman Sachs in its oral and written presentations (see "-- Opinions of
Financial Advisors -- Opinion of Goldman, Sachs & Co.");
(v) The Conner Board considered the effect on stockholder value of
Conner continuing as an independent entity, compared to the effect of a
combination with Seagate, in light of the financial condition and prospects
of Conner and the current economic and industry environment, including, but
not limited to, (A) other possible strategic alternatives for Conner which
the Conner Board had examined, including continuing to execute its
stand-alone business plan or engaging in various restructuring strategies
involving the sale, spin-off or other disposition of all or parts of certain
of Conner's businesses, and (B) the potential for increased value in the
combined Seagate/ Conner enterprise, as compared to either Seagate or Conner
alone, the possibility of synergies from combining Seagate's and Conner's
largely complementary product lines, component manufacturing, and research
programs and potential cost savings to the combined Seagate/Conner
operations following the Merger;
(vi) The Conner Board considered the oral opinion of Goldman Sachs that,
as of such date and subject to review of the definitive agreements, the
Exchange Ratio pursuant to the draft Reorganization Agreement is fair to the
holders of shares of Conner Common Stock (see "-- Opinions of Financial
Advisors -- Opinion of Goldman, Sachs & Co."). On October 3, 1995, after
Goldman Sachs' review of the definitive agreements, Goldman Sachs delivered
its written opinion that, as of such date, the Exchange Ratio pursuant to
the Reorganization Agreement is fair to the holders of shares of Conner
Common Stock;
(vii) The Conner Board, with the assistance of Conner's financial
advisors, also considered recent and current market prices of the Seagate
Common Stock, and concluded that Seagate Common Stock was trading in a
reasonable range prior to the announcement of the transaction;
(viii) The Conner Board considered the terms and conditions of the
Reorganization Agreement, the Merger Agreement and the Stock Option
Agreement, which were the product of extensive arm's-length negotiations
(see "The Merger and Related Transactions");
(ix) The Conner Board considered that the Exchange Ratio represented a
premium of approximately 36.5% to the market value of Conner Common Stock on
September 8, 1995, the last NYSE trading day prior to the decision of the
Conner Board to authorize negotiation of definitive agreements;
(x) The Conner Board considered the compatibility of the respective
business philosophies of Seagate and Conner;
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(xi) The Conner Board considered the opportunity for Conner stockholders
to participate, as holders of Seagate Common Stock, in a larger company of
which former Conner stockholders would hold approximately 26% of the equity
of the combined company following the Merger, and to do so by means of a
transaction which is designed to be tax-free to Conner's stockholders;
(xii) The Conner Board considered the "no-solicitation" provisions of the
Reorganization Agreement, and the fact that the Reorganization Agreement
would permit Conner to negotiate with a third party who made an unsolicited
offer that is reasonably likely to be financially superior to the Merger
and, as long as Conner paid the Breakup Fee to Seagate provided for in the
Reorganization Agreement, would permit Conner to enter into a transaction
with such party. The Conner Board noted that, although the agreement in
principle between Conner and Seagate had been announced on September 20,
1995, Conner management and Goldman Sachs both advised the Conner Board that
they had received no proposals after that announcement from third parties
for alternative business combination transactions;
(xiii) The Conner Board considered the level of review that was likely to
be given to the Merger by United States and foreign antitrust authorities;
(xiv) The Conner Board considered that the Merger is conditioned upon
approval by the holders of a majority of the outstanding voting power of the
Conner Common Stock of the Merger Agreements and that the issuance of
Seagate Common Stock in the Merger is conditioned upon the vote of a
majority of the Seagate Common Stock voting thereon;
(xv) The Conner Board considered the impact of the Merger on the
interests of Conner's customers, suppliers, employees, and the communities
in which Conner has operated;
(xvi) The Conner Board considered the risks that the synergies and cost
savings anticipated to be achieved in the Merger would not be achieved;
(xvii) The Conner Board considered the risk that the operations of the two
companies would not be successfully integrated;
(xviii) The Conner Board considered the risk that key technical and
management personnel might be lost prior to or after consummation of the
Merger;
(xix) The Conner Board considered the adverse effects on Conner's
business, operations and financial condition should it not be possible to
consummate the Merger following public announcement that the Reorganization
Agreement had been entered into; and
(xx) The Conner Board considered the other risks associated with
Seagate's and Conner's businesses described above under "Risk Factors."
The foregoing discussion of the information and factors considered by the
Conner Board is not intended to be exhaustive but is believed to include all
material factors considered by the Conner Board. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Conner
Board did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Conner Board may have
given different weights to different factors. In the course of its
deliberations, the Conner Board did not establish a range of value for Conner;
however, based on the factors outlined above and on the advice of its financial
advisor, Goldman Sachs, the Conner Board determined that the Merger is advisable
and fair and in the best interests of Conner and its stockholders. The directors
voting on the Merger, who did not include Mr. Rossi, who recused himself due to
the conflict of interest described above, voted unanimously to recommend to the
holders of Conner Common Stock that the Reorganization Agreement and the Merger
Agreement be approved. For a discussion of the interests of certain members of
Conner's management and the Conner Board in the Merger, see "-- Interests of
Certain Persons in the Merger."
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BOARD RECOMMENDATIONS
THE SEAGATE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENTS AND THE
MERGER AND BELIEVES THAT THE TERMS OF THE MERGER AGREEMENTS ARE FAIR TO, AND
THAT THE MERGER IS IN THE BEST INTERESTS OF, SEAGATE AND ITS STOCKHOLDERS AND
THEREFORE UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF SEAGATE COMMON STOCK VOTE
FOR APPROVAL OF THE ISSUANCE OF SEAGATE COMMON STOCK PURSUANT TO THE MERGER
AGREEMENTS.
THE CONNER BOARD HAS APPROVED THE MERGER AGREEMENTS AND THE MERGER AND
BELIEVES THAT THE TERMS OF THE MERGER AGREEMENTS ARE FAIR TO, AND THAT THE
MERGER IS IN THE BEST INTERESTS OF, CONNER AND ITS STOCKHOLDERS AND THEREFORE
RECOMMENDS THAT THE HOLDERS OF CONNER COMMON STOCK VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENTS.
CERTAIN INFORMATION CONCERNING SEAGATE
As a matter of course, Seagate does not publicly disclose forward-looking
financial information. Nevertheless, in connection with its review of Seagate's
business, Goldman Sachs and the management and Board of Directors of Conner, as
well as Morgan Stanley and the management and Board of Directors of Seagate,
reviewed preliminary financial targets furnished by Seagate. Such financial
targets indicated that, in fiscal 1996 and 1997, Seagate may achieve earnings
per share which are not materially different than those reflected in the high
end of the current range of the estimates of public market securities analysts.
As of the date hereof, the high end of the current range of such analysts'
estimates of Seagate's earnings per share is $5.60 and $6.90 for fiscal 1996 and
1997, respectively. The statement regarding Seagate's preliminary financial
targets constitutes a "forward-looking statement" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act and is subject to
the safe harbors created thereby. These preliminary financial targets were based
on the assumptions that Seagate would continue to develop and introduce new
products on a timely basis, that competitive conditions within the disc drive
industry would not change materially or adversely, that the market for computer
systems, storage upgrades to computer systems and multimedia applications, such
as digital video and video on demand, and hence the market for rigid disc
drives, would remain strong, and that there would be no material adverse change
in Seagate's operations or business. Such assumptions involve judgments with
respect to, among other things, future economic, competitive and regulatory
conditions, financial market conditions and future business decisions, all of
which are difficult or impossible to predict accurately and many of which are
beyond the control of Seagate. While Seagate believes that the assumptions
underlying the preliminary financial targets are reasonable, any of the
assumptions could prove inaccurate and therefore, there can be no assurance that
the forward-looking financial information will prove to be accurate. In
addition, as disclosed elsewhere in this Joint Proxy Statement/Prospectus under
"Risk Factors," the business and operations of Seagate are subject to
substantial risks which increase the uncertainty inherent in such preliminary
financial targets. Any of the factors disclosed under "Risk Factors" could cause
the actual earnings of Seagate to differ materially from the preliminary
financial targets described above. In addition, the preliminary financial
targets do not contemplate the combination of the operations of Seagate and
Conner. Accordingly, for these reasons it is expected that there will be
differences between the actual and targeted results, and actual results may be
materially higher or lower than those indicated above.
In light of the significant uncertainties inherent in forward-looking
financial information of any kind, the inclusion of such information herein
should not be regarded as a representation by Seagate or any other person that
the preliminary financial targets will be achieved. Investors are cautioned that
these preliminary financial targets should not be regarded as fact and should
not be relied upon as an accurate representation of future results. Further, the
preliminary financial targets furnished by Seagate were not prepared with a view
to public disclosure or in compliance with the established guidelines concerning
financial projections promulgated by the American Institute of Certified Public
Accountants. In addition, such preliminary financial targets do not purport to
present operations in
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accordance with generally accepted accounting principles and have not been
audited, compiled or otherwise examined by Ernst & Young LLP, Seagate's
independent auditors, or by any other independent auditor. Accordingly, neither
Ernst & Young LLP nor any other independent auditor assumes any responsibility
for the preliminary financial targets disclosed herein. The preliminary
financial targets are being presented solely because they were furnished to
Conner, Goldman Sachs and Morgan Stanley, and they should not be interpreted as
suggesting that Conner, Goldman Sachs or Morgan Stanley relied solely upon such
targets in evaluating any proposed transaction. Seagate has advised Conner,
Goldman Sachs and Morgan Stanley that its preliminary financial targets are, in
general, prepared solely for internal use and capital budgeting and other
management decisions, and are subjective in many respects and thus susceptible
to interpretations and periodic revision based on actual experience and business
developments. None of Conner, Seagate or any of their financial advisors or any
of their respective directors or officers assumes any responsibility as a result
of the inclusion of such preliminary financial targets in this Joint Proxy
Statement/Prospectus for the accuracy of such information. Seagate does not
intend publicly to update or otherwise publicly to revise the preliminary
financial targets disclosed above to reflect circumstances existing after the
date hereof.
CERTAIN INFORMATION CONCERNING THE MERGER
In connection with its review of the Merger, Morgan Stanley and the
management and Board of Directors of Seagate reviewed preliminary estimates of
certain cost savings and other synergies that could result from the Merger
furnished by Seagate. Such estimates indicated approximately $23 million and
$224 million of pre-tax cost savings and other synergies, net of offsetting
diminished gross profit resulting from a decrease in the otherwise anticipated
revenues of the two stand-alone entities, might be realized from the Merger in
fiscal 1996 and 1997, respectively. The statement regarding estimates of certain
cost savings and other synergies that could result from the Merger constitutes a
"forward-looking statement" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act and is subject to the safe harbors
created thereby. These estimates were based on the assumptions that Seagate
would be able to combine successfully the operations, product offerings and
research and development and sales and marketing efforts of Seagate and Conner
after the Merger in order to realize the potential benefits of the Merger, that
Seagate would continue to develop and introduce new products on a timely basis,
that competitive conditions within the disc drive industry would not change
materially or adversely, that the market for computer systems, storage upgrades
to computer systems and multimedia applications, such as digital video and video
on demand, and hence the market for rigid disc drives, would remain strong, and
that there would be no material adverse change in Seagate's operations or
business. Such assumptions involve judgments with respect to, among other
things, future economic, competitive and regulatory conditions, financial market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of
Seagate. While Seagate believes that the assumptions underlying the preliminary
estimates of cost savings and other synergies that could result from the Merger
are reasonable, any of the assumptions could prove inaccurate and therefore,
there can be no assurance that the forward-looking financial information will
prove to be accurate. In addition, as disclosed elsewhere in this Joint Proxy
Statement/Prospectus under "Risk Factors," the anticipated benefits of the
Merger will not be achieved unless the operations of Conner are successfully
combined with those of Seagate in a timely manner. As further disclosed under
"Risk Factors," the business and operations of Seagate are subject to
substantial risks. These risks increase the uncertainty inherent in such
preliminary estimates. Any of the factors disclosed under "Risk Factors" could
cause the actual cost savings and other synergies that could result from the
Merger to differ materially from the preliminary estimates described above.
Accordingly, for these reasons it is expected that there will be differences
between the actual and estimated results, and actual results may be materially
higher or lower than those indicated above.
In light of the significant uncertainties inherent in forward-looking
financial information of any kind, the inclusion of such information herein
should not be regarded as a representation by Seagate
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or any other person that the preliminary estimates of cost savings and other
synergies that could result from the Merger will be achieved. Investors are
cautioned that these preliminary estimates should not be regarded as fact and
should not be relied upon as an accurate representation of future results.
Further, the preliminary estimates furnished by Seagate were not prepared with a
view to public disclosure or in compliance with the established guidelines
concerning financial projections promulgated by the American Institute of
Certified Public Accountants. In addition, such preliminary estimates of cost
savings and other synergies do not purport to present information prepared in
accordance with generally accepted accounting principles and have not been
audited, compiled or otherwise examined by Ernst & Young LLP, Seagate's
independent auditors, or by any other independent auditor. Accordingly, neither
Ernst & Young LLP nor any other independent auditor assumes any responsibility
for the preliminary estimates of cost savings and other synergies disclosed
herein. Such preliminary estimates are being presented solely because they were
furnished to Morgan Stanley, and they should not be interpreted as suggesting
that Morgan Stanley relied solely upon such estimates in evaluating any proposed
transaction. Seagate has advised Morgan Stanley that its preliminary estimates
of cost savings and other synergies that could result from the Merger were, in
general, prepared solely for internal use and budgeting and other management
decisions, and are subjective in many respects and thus susceptible to
interpretations and periodic revision based on actual experience and business
developments. None of Conner, Seagate or any of their financial advisors or any
of their respective directors or officers assumes any responsibility as a result
of the inclusion of such preliminary estimates of cost savings and other
synergies that could result from the Merger in this Joint Proxy
Statement/Prospectus for the accuracy of such information. Seagate does not
intend publicly to update or otherwise publicly to revise the preliminary
estimates of cost savings and other synergies that could result from the Merger
disclosed above to reflect circumstances existing after the date hereof.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF MORGAN STANLEY & CO. INCORPORATED
Seagate retained Morgan Stanley to act as financial advisor in connection
with the Merger. Morgan Stanley was selected by the Seagate Board to act as
Seagate's financial advisor based on Morgan Stanley's qualifications, expertise
and reputation. At the meeting of the Seagate Board on September 27, 1995,
Morgan Stanley rendered its oral opinion, subsequently confirmed in writing on
October 3, 1995, that, as of such date, based upon and subject to the various
considerations set forth in the opinion, the Exchange Ratio was fair from a
financial point of view to Seagate.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY DATED AS OF OCTOBER
3, 1995, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN BY MORGAN STANLEY, IS ATTACHED AS APPENDIX D TO THIS
JOINT PROXY STATEMENT/PROSPECTUS. SEAGATE STOCKHOLDERS ARE URGED TO READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY IN CONJUNCTION WITH THIS JOINT PROXY
STATEMENT/PROSPECTUS. MORGAN STANLEY DID NOT RECOMMEND TO SEAGATE THAT ANY
SPECIFIC EXCHANGE RATIO CONSTITUTED THE ONLY APPROPRIATE EXCHANGE RATIO FOR THE
MERGER. MORGAN STANLEY'S OPINION ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE
RATIO FROM A FINANCIAL POINT OF VIEW TO SEAGATE AS OF THE DATE OF THE OPINION
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF SEAGATE AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE SEAGATE MEETING. THE SUMMARY OF THE OPINION
OF MORGAN STANLEY SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In rendering its opinion, Morgan Stanley, among other things: (i) analyzed
certain publicly available financial statements and other information of Conner
and Seagate, respectively; (ii) analyzed certain internal financial statements
and other financial and operating data concerning Conner prepared by the
management of Conner; (iii) analyzed certain financial projections relating to
Conner prepared by the managements of Conner and Seagate; (iv) discussed the
past and current operations and financial condition and the prospects of Conner
with senior executives of Conner and Seagate; (v) discussed the past and current
operations and financial condition and the prospects of Seagate with senior
executives of Seagate, and analyzed the pro forma impact of the Merger on
Seagate's earnings per share and consolidated capitalization; (vi) analyzed
certain internal financial
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statements and other financial and operating data concerning Seagate prepared by
the management of Seagate; (vii) analyzed certain financial projections relating
to Seagate prepared by the management of Seagate; (viii) reviewed the reported
prices and trading activity of the Conner Common Stock; (ix) compared the
financial performance of Conner and the prices and trading activity of the
Conner Common Stock with that of certain other comparable publicly-traded
companies and their securities; (x) reviewed the reported prices and trading
activity for the Seagate Common Stock; (xi) compared the financial performance
of Seagate and the prices and trading activity of the Seagate Common Stock with
that of certain other comparable publicly-traded companies and their securities;
(xii) reviewed the financial terms, to the extent publicly available, of certain
comparable merger and acquisition transactions; (xiii) reviewed and discussed
with the senior management of Seagate the strategic rationale for the Merger and
certain benefits of the Merger to Seagate; (xiv) participated in discussions and
negotiations among representatives of Conner and Seagate and their financial and
legal advisors; (xv) reviewed the Merger Agreements and certain related
agreements; and (xvi) performed such other analyses as Morgan Stanley deemed
appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
projections, Morgan Stanley assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of Conner and Seagate, respectively. Morgan Stanley also
relied upon, without independent verification, Seagate management's estimate of
the cost savings and other synergies that will be achieved if the Merger is
consummated and its assessment of the validity of, and the risks associated
with, Conner's products and technology. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities of Seagate or
Conner, respectively, and was not furnished with any such appraisals. Morgan
Stanley's opinion states that, in arriving at its opinion, Morgan Stanley
assumed that the Merger would be accounted for as a "pooling-of-interests"
business combination in accordance with U.S. Generally Accepted Accounting
Principles and would be consummated in accordance with the terms set forth in
the Merger Agreements. Morgan Stanley's opinion states that it is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to Morgan Stanley as of, the date of the opinion.
The following is a brief summary of all material financial analyses
performed by Morgan Stanley and reviewed with the Seagate Board in connection
with the Morgan Stanley opinion:
COMPARATIVE STOCK PRICE PERFORMANCE. As part of its analysis, Morgan
Stanley reviewed the recent stock market performance of Conner and Seagate and
compared such performance with that of a group of disc drive companies including
Quantum Corporation, Western Digital and Maxtor Corporation (the "Disc Drive
Comparables"), Exabyte Corporation (the "Tape Drive Comparable"), a group of
disc drive components companies including Komag, Inc., StorMedia Inc. and
Read-Rite Corporation (the "Components Comparables") and a group of software
companies including Cheyenne Software Inc., Symantec Corporation, Veritas
Software Company and Legato Systems Inc. (the "Software Comparables"). Morgan
Stanley observed that over the period January 1, 1994 to September 15, 1995, one
trading day prior to the release of published rumors of a potential acquisition
of Conner by Samsung Electronics (the "Unaffected Date"), the market price of
the Conner Common Stock appreciated 2%, compared with appreciation of 55% for an
index of the Disc Drive Comparables, 231% for an index of the Components
Comparables, 73% for an index of the Software Comparables, 89% for Seagate and a
decline of 17% for the Tape Drive Comparable.
EXCHANGE RATIO ANALYSIS. Morgan Stanley reviewed the ratios of the daily
closing stock prices of Conner to Seagate over various periods starting as far
back as January 1, 1993 and ending on the Unaffected Date and computed the
premium represented by the Exchange Ratio of 0.442 over the average of these
ratios over various periods of time ending on the Unaffected Date. The average
of the ratios of the daily closing stock prices of Conner to Seagate for the
various periods ending on the Unaffected Date were 0.4856 for the previous two
years; 0.3831 for the previous one year; 0.3475 for the previous 180 days;
0.3081 for the previous 60 days; 0.3054 for the previous 30 days; and 0.3305 on
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the Unaffected Date. The Exchange Ratio of 0.442 represented a discount of 9.0%
and premiums of 15.4%, 27.2%, 43.5%, 44.7% and 33.7%, respectively, over the
aforementioned average ratios of Conner and Seagate stock prices.
PEER GROUP COMPARISON. Morgan Stanley compared certain financial
information of Conner and Seagate with the Disc Drive Comparables, the Tape
Drive Comparable, the Components Comparables and the Software Comparables. Such
financial information included, among other things, market valuation, stock
price as a multiple of earnings per share and aggregate market capitalization as
a multiple of revenues. In particular, such analysis showed that (i) as of the
Unaffected Date for Conner, (ii) as of September 19, 1995, the day before the
public disclosure of merger discussions between Seagate and Conner (the
"Disclosure Date"), for Seagate, the Disc Drive Comparables, the Tape Drive
Comparable and the Components Comparables, and (iii) as of September 22, 1995
(the last day of trading before delivery of the oral presentation of the
fairness opinion to the Seagate Board) for the Software Comparables, based on a
compilation of earnings projections by securities research analysts, Conner and
Seagate traded at 10.5 and 9.4 times forecasted earnings per share for the
calendar year 1996, respectively, and at 0.39 and 0.60 times latest twelve
months revenue, respectively, compared to a median of 6.4 times forecasted
calendar year 1996 earnings per share and 0.37 times latest twelve months
revenues for the Disc Drive Comparables, 11.2 times forecasted calendar year
1996 earnings per share and 0.64 times latest twelve months revenues for the
Tape Drive Comparable, a median of 15.0 times forecasted calendar year 1996
earnings per share and 3.88 times latest twelve months revenues for the
Components Comparables and a median of 24.1 times forecasted calendar year 1996
earnings per share and 7.15 times latest twelve months revenues for the Software
Comparables.
SEGMENT TRADING VALUATION. Morgan Stanley performed an analysis of the
equity value per share of the Conner Common Stock based on a range of estimated
per share values for the individual business segments of Conner using Seagate
management financial projections and a range of multiples of the respective
business segments' revenue or net earnings based on the trading statistics of
the Disc Drive Comparables, the Tape Drive Comparable, the Components
Comparables and the Software Comparables. Such analysis resulted in a range of
trading values of $26.95 to $34.81 per share for the Conner Common Stock. Morgan
Stanley observed that the implied value per share of Conner Common Stock of
$20.88 based on the Exchange Ratio of 0.442 and the closing stock price of the
Seagate Common Stock of $47.25 on the day prior to the Disclosure Date was below
the aforementioned range.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Morgan Stanley reviewed the
following 13 stock-for-stock transactions involving public companies in the
technology sector since 1993: the mergers of Bay Networks, Inc. with Xylogics,
Inc., Broderbund Software, Inc. with The Learning Company, 3Com Corporation with
Chipcom Corporation, Symantec Corporation with Delrina Corporation, Adobe
Systems, Inc. with Frame Technology, Inc., Madge NV with Lannet, Inc., Silicon
Graphics, Inc. with Alias Research, Inc. and Wavefront Technologies, Inc.,
Sybase, Inc. with PowerSoft Corporation, Microsoft Corporation with Intuit, Inc.
(not completed), Adobe Systems, Inc. with Aldus Corporation, Microsoft
Corporation with SOFTIMAGE, Inc. and Intuit, Inc. with ChipSoft, Inc. The
analysis showed transaction exchange ratios resulting, on average, in a premium
of approximately 34% over the average of the ratios of the closing stock prices
of the companies involved in such mergers over various periods ending the day
preceding the public announcement of these transactions. Morgan Stanley observed
that the Exchange Ratio represented an average premium of approximately 36% over
the average of the ratios of the daily closing stock prices of Conner to Seagate
for comparable periods ending on the Unaffected Date.
Morgan Stanley reviewed 13 proposed or completed storage products
transactions since 1988, including (i) Digital Equipment (data storage
business)/Quantum Corporation, (ii) Sunward Technologies, Inc./Read-Rite
Corporation, (iii) Maxtor Corporation (40% stake in Maxtor)/Hyundai Electronics
Industries Co., (iv) Amperif Corporation/Storage Technology Corporation, (v)
Archive Corporation/Conner Peripherals, Inc., (vi) Colorado Memory Systems,
Inc./Hewlett-Packard Company, (vii) Compaq Computer Corporation (20% stake in
Conner Peripherals, Inc.)/Conner Peripherals, Inc. (viii) Dastek, Inc./Komag,
Inc., (ix) Miniscribe Corporation/Maxtor Corporation, (x) Cipher
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Data Products, Inc./Archive Corporation, (xi) Control Data Corporation (Imprimis
Technology, Inc.)/ Seagate Technology, Inc., (xii) Irwin Magnetic Systems,
Inc./Cipher Data Products, Inc. and (xiii) Emulex Corporation/TA Associates,
Inc. The analysis showed a median multiple of projected next twelve months
earnings of 18.1 times and a median multiple of latest twelve months revenues of
0.9 times. These statistics were then applied to a range of next twelve months
earnings estimates as well as the latest twelve months revenues for Conner,
resulting in an implied price range of $22.09 to $35.23 per share (the "Multiple
Price Range") for the Conner Common Stock based on such precedent transactions.
The analysis also showed a median premium paid to the closing stock price of the
acquired companies of 50.6% based on the closing price of the acquired company's
common stock one day prior to announcement of the transaction and a median
premium to the closing stock price of the acquired companies of 44.1% based on
the closing price of the acquired company's common stock one month prior to
announcement of the transaction. Morgan Stanley noted that, applying such
premium to the closing stock prices of Conner Common Stock on the appropriate
dates would result in a range of $19.45 to $22.40 per share (the "Premium Price
Range") of Conner Common Stock. Morgan Stanley observed that the value per share
of $20.88 based on the Exchange Ratio of 0.442 and the closing stock price of
the Seagate Common Stock of $47.25 on the day prior to the Disclosure Date was
below the Multiple Price Range and within the Premium Price Range.
PRO FORMA ANALYSIS OF THE MERGER. Morgan Stanley analyzed the pro forma
impact of the Merger on Seagate's earnings per share for the second half of
Seagate's fiscal year ended June 30, 1996 and the full fiscal years 1996 and
1997. Such analysis was based on earnings estimates for Seagate and Conner
prepared by the management of Seagate as well as earnings estimates for both
companies based on research analyst forecasts for the corresponding periods.
Morgan Stanley observed that, based on the Exchange Ratio, assuming that the
Merger was treated as a pooling-of-interests for accounting purposes and after
giving effect to certain cost savings and other synergies estimated by Seagate
management (see "Certain Information Concerning the Merger"), the Merger would
result in a decrease in Seagate's earnings per share in the second half of
fiscal year 1996 and the full fiscal year 1996 and an increase in Seagate's
earnings per share in fiscal year 1997.
STOCK PRICE ANALYSIS. Morgan Stanley computed future trading values per
share for the Conner Common Stock based on a range of earnings estimates for
calendar year 1997 and forward multiples of net earnings for such calendar year.
Such future values were then discounted back to the present at discount rates
ranging from 17% to 25%. Such analysis showed, based on an illustrative forward
earnings multiple of 9.0 times and an illustrative discount rate of 17%, a
present value of the Conner common stock ranging from $13.16 to $19.15 per
share. Morgan Stanley observed that the closing stock price of Conner Common
Stock of $14.875 on the Unaffected Date fell within such value range.
CONTRIBUTION ANALYSIS. Morgan Stanley analyzed the pro forma contribution
of each of Seagate and Conner to the combined company if the Merger were to be
consummated. Such analysis was based on financial data provided by the
managements of Seagate and Conner. Such analysis showed that for the fiscal year
ended June 30, 1996, Conner would contribute, based on Seagate management
estimates, 32.1%, 13.4% and 9.1% of the revenues, operating income and net
income, respectively, of the combined company, and based on Conner management
estimates, Conner would contribute 33.0%, 15.6% and 11.3% of the respective
financial results of the combined company. For the fiscal year ended June 30,
1997, Conner would contribute, based on Seagate management estimates, 33.3%,
18.6% and 13.9% of the revenues, operating income and net income, respectively,
of the combined company, and based on Conner management estimates, Conner would
contribute 36.0%, 25.6% and 21.6% of the respective financial results of the
combined company. Such analysis did not take into account any of the cost
savings or other synergies that would be achieved if the Merger is consummated.
These figures, as adjusted to reflect Conner's capital structure, were compared
to the pro forma ownership of the combined company by Conner shareholders of
25.7% on a primary basis and 28.0% of a fully converted basis, based on the
Exchange Ratio.
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In connection with the review of the Merger by the Seagate Board, Morgan
Stanley performed a variety of financial and comparative analyses for purposes
of its opinion given in connection therewith. The summary set forth above does
not purport to be a complete description of the presentation by Morgan Stanley
to the Seagate Board or the analyses performed by Morgan Stanley in arriving at
its opinion. The preparation of a fairness opinion is a complex process and is
not necessarily susceptible to partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create a misleading view of the
process underlying its opinion. In addition, Morgan Stanley may have given
various analyses more or less weight than other analyses, and may have deemed
various assumptions more or less probable than other assumptions, so that the
range of valuation resulting from any particular analysis described above should
not be taken to be Morgan Stanley's view of the actual value of Seagate or
Conner. In performing its analyses, Morgan Stanley made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Seagate and Conner.
Any estimates contained therein are not necessarily indicative of future results
or actual values, which may be significantly more or less favorable than those
suggested by such estimates. In addition, estimates relating to the value of
businesses or assets do not purport to be appraisals or to necessarily reflect
the prices at which businesses or assets may actually be sold. The analyses
performed were prepared solely as part of Morgan Stanley's analysis of the
fairness of the Exchange Ratio, from a financial point of view, to Seagate and
were provided to the Seagate Board in connection with the delivery of Morgan
Stanley's opinion.
The Seagate Board retained Morgan Stanley to act as Seagate's financial
advisor based upon Morgan Stanley's qualifications, experience and expertise.
Morgan Stanley is an internationally recognized investment banking and advisory
firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the ordinary course of
Morgan Stanley's trading and brokerage activities, Morgan Stanley or its
affiliates may at any time hold long or short positions, may trade or otherwise
effect transactions, for its own account or for the account of customers in debt
or equity securities of Seagate or Conner.
Pursuant to a letter agreement dated as of July 12, 1995, Seagate has agreed
to pay Morgan Stanley a fee of $1,000,000 which is currently payable and, if the
Merger is consummated, a total fee equal to $5,250,000 (against which any
previously paid fees would be credited). In addition to the foregoing
compensation, Seagate has agreed to reimburse Morgan Stanley for its
out-of-pocket expenses and to indemnify Morgan Stanley and its affiliates, their
respective directors, officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against certain liabilities
and expenses, including certain liabilities under the federal securities laws,
related to Morgan Stanley's engagement.
OPINION OF GOLDMAN, SACHS & CO.
On October 3, 1995, Goldman Sachs delivered its written opinion to the
Conner Board that, as of the date of such opinion, the Exchange Ratio pursuant
to the Reorganization Agreement and the Merger Agreement is fair to the holders
of shares of Conner Common Stock.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED OCTOBER 3,
1995, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
APPENDIX E TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN
BY REFERENCE. STOCKHOLDERS OF CONNER ARE URGED TO, AND SHOULD, READ SUCH OPINION
IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Reorganization Agreement and the Merger Agreement; (ii) Annual Reports
to Stockholders and Annual Reports on Form 10-K of Conner for the five years
ended December 31, 1994; (iii) certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of Conner; (iv) certain other communications from
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Conner to its stockholders; (v) certain internal financial analyses and
forecasts for Conner prepared by its management; (vi) Annual Reports to
Stockholders and Annual Reports on Form 10-K of Seagate for the five fiscal
years ended June 30, 1995; (vii) certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of Seagate; (viii) certain other communications
from Seagate to its stockholders; and (ix) certain internal financial analyses
and forecasts for Seagate prepared by its management. Goldman Sachs also held
discussions with members of the senior management of Conner and Seagate
regarding the past and current business operations, financial condition and
future prospects of their respective companies as well as prospective cost
savings available to the combined company. In addition, Goldman Sachs reviewed
the reported price and trading activity for the Conner Common Stock and the
Seagate Common Stock, compared certain financial and stock market information
for Conner and Seagate with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In addition, Goldman Sachs has not made an independent
evaluation or appraisal of the assets and liabilities of Conner or Seagate or
any of their subsidiaries and Goldman Sachs has not been furnished with any such
evaluation or appraisal.
The following is a summary of all material financial analyses used by
Goldman Sachs in connection with providing its written opinion to the Conner
Board on October 3, 1995.
(i) HISTORICAL STOCK TRADING ANALYSIS. Goldman Sachs reviewed the
historical trading prices for the Conner Common Stock and the Seagate Common
Stock and the relationship between movements of such common stock and
movements in a composite index of certain disc drive companies (the "Disc
Drive Composite Index"). The Disc Drive Composite Index is composed of the
following companies: Maxtor Corporation, Quantum Corporation and Western
Digital. This analysis indicated that, since September 22, 1992 the Seagate
Common Stock has outperformed the Disc Drive Composite Index and the Conner
Common Stock has underperformed the Disc Drive Composite Index. Such
analysis indicated that the price per share of Conner Common Stock to be
paid pursuant to the Merger Agreement represented a premium of 36.5% based
on a market price of $14.25 per share of Conner Common Stock (the price on
September 8, 1995, the last NYSE trading day prior to the decision of the
Conner Board to authorize negotiation of definitive agreements).
(ii) SELECTED COMPANIES ANALYSIS. Goldman Sachs reviewed certain
financial information relating to Conner and Seagate and compared such
information to corresponding financial information, ratios and public market
multiples for two publicly traded corporations: Quantum Corporation and
Western Digital (the "Selected Companies"). The Selected Companies were
chosen because they are publicly-traded companies with operations that for
purposes of analysis may be considered similar to Conner and Seagate.
Goldman Sachs calculated and compared various financial multiples and
ratios. The multiples of Conner and Seagate were calculated using prices of
$17.75 per share of Conner Common Stock and $44.00 per share of Seagate
Common Stock, the respective closing prices of the Conner Common Stock and
the Seagate Common Stock on the NYSE on September 22, 1995. The multiples
and ratios for Conner and Seagate were based on public information and
information provided by the managements of Conner and Seagate, respectively,
and the multiples and ratios for each of the Selected Companies were based
on the most recent publicly available information. This analysis showed,
among other things, that the price/ earnings ratio using estimated 1995
calendarized earnings (based on First Call estimates as of September 22,
1995) for each of Western Digital and Quantum Corporation was 9.4x and
13.3x, respectively, as compared to a ratio of 18.7x for Conner and 9.6x for
Seagate, and the price/ earnings ratio using estimated 1996 calendarized
earnings (based on First Call estimates as of September 22, 1995) for each
of Western Digital and Quantum Corporation was 6.9x and 10.0x,
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respectively, as compared to a ratio of 12.9x for Conner and 8.7x for
Seagate. First Call is a data service which monitors and publishes a
compilation of earnings estimates produced by selected research analysts on
companies of interest to investors.
(iii) SELECTED TRANSACTIONS ANALYSIS. Goldman Sachs analyzed certain
information relating to the following selected transactions in the disc
drive industry since October 1989: Quantum Corporation's acquisition of the
disc drive division of Digital Equipment Corporation, Hyundai Electronics'
acquisition of a minority interest in Maxtor Corporation, Conner's
acquisition of Archive Corporation and Seagate's acquisition of Imprimis
Technology Incorporated, a subsidiary of Control Data Corporation (together
the "Selected Transactions"). Such analysis indicated that for the Selected
Transactions (1) levered aggregate consideration as a multiple of latest
twelve month ("LTM") sales ranged from a low of .41x to a high of .75x, with
a mean of .56x and a median of .44x, as compared to .50x for the levered
aggregate consideration to be received in the Merger, (2) levered aggregate
consideration as a multiple of LTM earnings before interest and taxes
("EBIT") ranged from a low of 10.5x to a high of 50.7x, with a mean of 24.0x
and a median of 10.9x, as compared to 20.0x for the levered aggregate
consideration to be received in the Merger, (3) levered aggregate
consideration as a multiple of LTM earnings before interest, taxes and
depreciation ("EBITD") ranged from a low of 5.0x to a high of 6.6x, with a
mean of 5.7x and a median of 5.0x, as compared to 7.7x for the levered
aggregate consideration to be received in the Merger, and (4) aggregate
consideration as a multiple of LTM net income ranged from a low of 13.8x to
a high of 21.1x, with a mean of 17.6x and a median of 17.9x, as compared to
22.2x for the aggregate consideration to be received in the Merger. In
addition, this analysis indicated that the acquisition of a minority
interest of Maxtor Corp. by Hyundai Electronics in 1994 resulted in a
premium over market value of 43.8% and the acquisition of Archive Corp. by
Conner in 1992 resulted in a premium over market value of 57.9%.
(iv) PRO FORMA MERGER ANALYSIS. Goldman Sachs prepared pro forma
analyses of the financial impact of the Merger relying on financial
projections prepared by the managements of Conner and Seagate, respectively,
and estimates made by management of Conner of approximately $37.0 million
and approximately $197.0 million of pre-tax cost savings expected to be
realized from the Merger in fiscal 1996 and fiscal 1997, respectively.
Goldman Sachs compared the earnings per share ("EPS") of the Seagate Common
Stock, on a standalone basis, to the EPS of the common stock of the combined
company on a pro forma basis. Goldman Sachs assumed that the Merger would be
accounted for using pooling of interests accounting. Goldman Sachs performed
this analysis based on a price of $17.75 per share of Conner Common Stock
(the per share price of Conner on September 22, 1995) and $44.00 per share
of Seagate Common Stock (the per share price of Seagate on September 22,
1995). Based on such analyses, the Merger would provide EPS dilution to
Seagate stockholders of approximately 10.7% for 1996 and EPS accretion to
Seagate shareholders of approximately 9.7% for 1997.
(v) CONTRIBUTION ANALYSIS. Goldman Sachs reviewed certain historical
and estimated future operating and financial information (including, among
other things, revenues, earnings, and balance sheet data) for Conner,
Seagate and the pro forma combined company resulting from the Merger based
on Conner and Seagate managements' financial projections for each of Conner,
Seagate and the pro forma combined company. The analysis indicated that the
Conner stockholders would receive 26% of the outstanding common equity of
the combined company after the Merger (based on the Exchange Ratio). Goldman
Sachs also analyzed the relative income statement contribution of Conner and
Seagate to the combined company on a pro forma basis before taking into
account any of the possible benefits that may be realized following the
Merger based on actual fiscal year 1995 and estimated fiscal years 1996 and
1997 (in the case of Conner, restated to reflect Seagate's June 30 fiscal
year-end), based on financial data provided to Goldman Sachs by Conner and
Seagate managements. This analysis indicated that Conner would have
contributed 35%, 33% and 36% to combined revenues and 12%, 12% and 21% to
combined net income in actual fiscal year 1995, estimated fiscal year 1996
and estimated fiscal year 1997, respectively.
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The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is identical to Conner or
Seagate or the contemplated transaction. The analyses were prepared solely for
purposes of Goldman Sachs' providing its opinion to the Conner Board as to the
fairness of the Exchange Ratio to the holders of shares of Conner Common Stock
and do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or their respective
advisors, none of Conner, Seagate, Goldman Sachs or any other person assumes
responsibilities if future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Conner Board was one of
many factors taken into consideration by the Conner Board in making its
determination to approve the Merger Agreement. The foregoing summary does not
purport to be a complete description of the analysis performed by Goldman Sachs
and is qualified by reference to the written opinion of Goldman Sachs set forth
in Appendix E.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Conner selected Goldman
Sachs as its financial advisor because it is a nationally recognized investment
banking firm that has substantial experience in transactions similar to the
Merger.
Pursuant to a letter agreement dated July 6, 1995 (the "Engagement Letter"),
Conner engaged Goldman Sachs to act as its financial advisor in connection with
the possible sale of all or a portion of Conner to Seagate. Pursuant to the
terms of the Engagement Letter, Conner has agreed to pay Goldman Sachs upon
consummation of the Merger a transaction fee of 0.625% of the aggregate
consideration paid in the Merger. Conner has agreed to reimburse Goldman Sachs
for its reasonable out-of-pocket expenses, including attorney's fees, and to
indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
CHANGE OF CONTROL/SEVERANCE AGREEMENTS. In October 1994, Conner entered
into change of control/severance agreements with each of Mr. Conner, its
Chairman and Chief Executive Officer, and Mr. Bell, its Executive Vice President
and Chief Financial Officer. The agreements provide for the following benefits
if the executive is employed as of the date of a change of control (the Merger
would be a change of control for purposes of such agreements): (i) upon the
change of control, a lump sum cash payment equal to two times (in the case of
Mr. Bell) or three times (in the case of Mr. Conner) the sum of (a) the then
current annual salary of such executive, plus (b) the then current maximum
target bonus amount for such executive; (ii) at Conner's expense, two years' (in
the case of Mr. Bell) or three years' (in the case of Mr. Conner) continuation
of life, health and dental benefits equivalent to those provided to the
executive immediately prior to the change of control; and (iii) the full and
immediate vesting of all outstanding options and shares of restricted stock and
an extension of the post-termination exercisability of any non-statutory stock
options held by such executive such that they remain exercisable for three
months following such termination. In addition, if the benefits to which the
executive is entitled pursuant to the change of control/severance agreement or
otherwise give rise to the 20% excise tax applicable to excess parachute
payments pursuant to Section 280G of the Code, Conner must pay the executive an
amount sufficient to put the executive in the same after-tax position that such
executive would have been in had such executive not been required to pay the
excise
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tax. Conner believes that the 20% excise tax will not be payable in the case of
each of Messrs. Conner and Bell. If any payment under the change of
control/severance agreements were to constitute an excess parachute payment
pursuant to Section 280G of the Code, the payment would not be deductible by
Conner for federal income tax purposes. Pursuant to two separate letter
agreements entered into at the request of Seagate, and dated December 21, 1995,
by and among Conner, Seagate and each of Mr. Conner and Mr. Bell, Mr. Conner and
Mr. Bell have agreed to accept from Conner in 1995 the lump sum cash payments to
which they are entitled under their respective change of control/severance
agreements. In the event that the Merger is not consummated after such payments
have been made, each of Mr. Conner and Mr. Bell have agreed to repay to Conner
the amount of the lump sum cash payments received by each of them, net of taxes
withheld, paid or reasonably expected to be paid, and Seagate has agreed to pay
to Conner the sum of the amounts of such taxes. In the event that Conner, Mr.
Conner or Mr. Bell, as the case may be, receives a refund from any taxing
authority with respect to any of the amounts of the taxes withheld, paid or
reasonably expected to be paid, then Conner, Mr. Conner or Mr. Bell, as the case
may be, shall reimburse Seagate in the amount of such refund, net of any taxes
imposed thereon. Whether or not the Merger is consummated, Seagate has agreed to
indemnify Conner, Mr. Conner and Mr. Bell from any tax liability incurred in
connection with the letter agreements.
In April 1995, Conner also entered into a change of control/severance
agreement with Mr. Potashner, its Executive Vice President and General Manager
of Disc Drive Operations. The agreement provides for certain benefit payments if
Mr. Potashner is employed as of the date of a change of control (the Merger
would be a change of control for purposes of such agreement) and his employment
is terminated or "constructively terminated" within the 24-month period
following the date of a change of control, other than for cause. For purposes of
such agreement, a "constructive termination" is deemed to have occurred if Mr.
Potashner's duties, compensation or benefits are significantly reduced, if he is
forced to relocate or if a successor entity fails to assume Conner's obligations
under the agreement. In the event of a qualifying termination of employment, the
agreement provides for the following benefits: (i) a lump sum cash payment equal
to Mr. Potashner's then current annual base salary; (ii) at Conner's expense,
one year continuation of life, health and dental benefits equivalent to those
provided immediately before termination of employment; and (iii) full and
immediate vesting of 50% of all outstanding unvested stock options and shares of
restricted stock and an extension of the post-termination exercisability of any
nonstatutory stock options held by Mr. Potashner such that they remain
exercisable for three months following such termination.
In addition, in August 1993, Conner entered into an employment
contract/termination agreement with Mr. Bell. In the event that Mr. Bell's
employment with Conner is terminated for any reason other than cause, he shall
be entitled to receive a lump sum payment equal to his then current annual
salary and to continue to receive benefits for a one-year period.
EMPLOYMENT, CONSULTING AND NONCOMPETITION AGREEMENT WITH FINIS F.
CONNER. On October 3, 1995, after execution by the parties thereto of the
Reorganization Agreement, Seagate entered into an employment, consulting and
noncompetition agreement (the "Conner Employment Agreement") with Mr. Conner to
be effective only upon consummation of the Merger. If the Merger is not
consummated, the Employment Agreement will be null and void. Pursuant to the
Conner Employment Agreement, Seagate has agreed to cause Conner, after the
Merger, to honor the terms of the change of control/severance agreement between
Mr. Conner and Conner described above. Seagate has agreed that, for purposes of
calculating the payments to be made under the change of control/severance
agreement, Mr. Conner's annual base salary is $850,000 and his annual maximum
target bonus is $2,310,000, which will result in an aggregate total lump sum
payment under such change of control/ severance agreement of $9,480,000.
Pursuant to the Employment Agreement, Mr. Conner will be engaged for a period of
24 months beginning immediately upon the closing of the Merger to perform such
employment, advisory and consulting services within the scope of Seagate's or
Conner's businesses as may be requested by the Chief Executive Officer or the
Seagate Board. During the first six months of the 24-month period of the Conner
Employment Agreement, Mr. Conner shall be a full-time
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employee of Conner providing services principally involved with the transition
and integration of Conner with Seagate. Thereafter, for the ensuing 18 months
Mr. Conner shall be an independent consultant to Seagate and Conner providing
advisory services with respect to product design, sales and marketing, marketing
strategy, customer relations, corporate strategy and business development. Such
consulting services will be subject to the request and direction of Seagate and
may involve one day per week. As compensation for these services pursuant to the
Conner Employment Agreement, Mr. Conner will receive $8,750 per month during the
24-month period of the agreement. The Conner Employment Agreement also contains
non-competition terms providing that beginning on the closing date of the Merger
and continuing for the ensuing 24 months, Mr. Conner will not, as an employee,
agent, consultant, advisor, independent contractor, general partner, officer,
director, stockholder, investor, lender or guarantor of any entity, or in any
other capacity, directly or indirectly (i) participate or engage in the design,
development, production, sale, marketing or servicing of any type of rigid or
flexible disc drives, tape drives and other data storage products (other than
software products), and the heads, media and motors constituting components
thereof ("Business") in the United States or throughout the rest of the world;
(ii) solicit any person who at the time of such solicitation is an employee of
Seagate or Conner to perform work or services for any other person or entity; or
(iii) permit his name to be used in connection with a competitive Business. The
foregoing restrictions will not apply to a tape drive product or a tape drive
business after the first anniversary of the closing of the Merger. Mr. Conner
has also agreed to use his best efforts to ensure that good employee, customer
and supplier relations are maintained at Conner during the 24-month term of the
Conner Employment Agreement and has agreed not to induce or assist others in
inducing Conner employees to leave the employ of Conner or Seagate during such
period.
EMPLOYMENT AGREEMENT WITH P. JACKSON BELL. Seagate entered into an
employment agreement dated December 7, 1995 (the "Bell Employment Agreement")
with Mr. Bell to be effective only upon consummation of the Merger. If the
Merger is not consummated, the Bell Employment Agreement will be null and void.
Pursuant to the Bell Employment Agreement, Seagate has agreed to cause Conner,
after the Merger, to honor the terms of the change of control/severance
agreement between Mr. Bell and Conner described above. Seagate has agreed that,
for purposes of calculating the payments to be made under the change of
control/severance agreement, Mr. Bell's annual base salary is $475,000 and his
annual maximum target bonus is $1,197,000, which will result in an aggregate
total lump sum payment under such change of control/severence agreement of
$3,344,000. Pursuant to the Bell Employment Agreement, Mr. Bell will be engaged
for a period of up to 6 months, beginning immediately upon the closing of the
Merger, to perform such employment as may be requested by the Chief Executive
Officer or the Seagate Board. As compensation for these services pursuant to the
Bell Employment Agreement, Mr. Bell will receive $8,333 per month during the
6-month period of this agreement. At the end of Mr. Bell's employment period and
pursuant to his employment/contract termination agreement with Conner entered
into in August 1993, Mr. Bell will receive a lump sum severance payment of
$425,000.
INDEMNIFICATION AND INSURANCE. The Reorganization Agreement provides that
Seagate will assume all of the obligations of Conner under Conner's existing
indemnification agreements with each of the directors and officers of Conner, as
such agreements relate to the indemnification of such persons for expenses and
liabilities arising from facts or events that occurred prior to the Effective
Time or relating to the transactions contemplated by the Merger Agreements. In
addition, the Reorganization Agreement provides that the Bylaws and Certificate
of Incorporation of the surviving corporation in the Merger shall contain
provisions regarding indemnification identical to those in the Conner
Certificate of Incorporation and the Conner Bylaws and that such provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely affect the rights
thereunder of the directors or officers of Conner.
The Reorganization Agreement also requires the surviving corporation in the
Merger, or Seagate, to maintain in effect for three years after the Effective
Time, directors' and officers' liability insurance for the benefit of the
directors and officers of Conner with respect to matters arising before the
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Effective Time, containing terms and conditions no less advantageous to the
directors and officers of Conner than those contained in the insurance currently
provided by Conner and having the maximum available coverage, subject to maximum
annual premiums not in excess of $1.6 million. In lieu of the purchase of such
insurance by the surviving corporation in the Merger, or Seagate, Conner may
purchase a three-year extended reporting period endorsement under its current
policies of directors' and officers' liability insurance at a cost of up to $4.8
million.
Pursuant to the Reorganization Agreement, Seagate has agreed that,
subsequent to the Effective Time, it will fund one counsel's representation of
the officers and directors of Conner as defendants in all stockholder litigation
commenced prior to the Effective Time concerning the performance of their duties
under federal or state law (including litigation under federal and state
securities laws) and Seagate's proposal respecting the Merger Agreements and
transactions contemplated thereby.
INTERESTS IN CONNER COMMON STOCK AND OPTIONS. As of the Conner Record Date,
the executive officers and directors of Conner beneficially owned an aggregate
of 2,147,111 shares of Conner Common Stock (including 690,328 shares of Conner
Common Stock subject to Conner Options exercisable within 60 days of the Conner
Record Date). Based upon the closing sale price of the Seagate Common Stock on
the Conner Record Date of $46.75, and assuming the exercise of outstanding
Conner Options exercisable within 60 days of the Conner Record Date, the
aggregate dollar value of Seagate Common Stock to be received in the Merger by
the executive officers and directors of Conner is approximately $44,366,825.
Pursuant to certain plans, options or change of control/severance agreements of
Conner, all options and restricted stock awards held by members of the Conner
Board, Mr. Conner and Mr. Bell, will become immediately exercisable at the time
of the Merger. The change of control/severance agreements between Conner and Mr.
Potashner provide for full and immediate vesting of 50% of all options and
restricted stock awards should he be terminated, under certain circumstances,
following the Merger. See "-- General -- Assumption of Options."
INTERESTS IN ARCADA HOLDINGS, INC. Certain executive officers of Conner
hold options to purchase shares of capital stock of the majority-owned Arcada
subsidiary of Conner. Seagate has agreed to acquire, after consummation of the
Merger, all of the outstanding shares of Arcada capital stock, other than those
shares of Arcada capital stock held by Conner, and to assume and convert into
options to purchase Seagate Common Stock all options to purchase Arcada capital
stock. See "-- Seagate Acquisition of the Minority Interests in Arcada Holdings,
Inc." Pursuant to Seagate's acquisition of the minority interests in Arcada, the
executive officers of Conner will receive options to purchase an aggregate of
162,225 shares of Seagate Common Stock at an exercise price of $9.7087 per
share.
The foregoing interests of the directors and certain members of management
of Conner in the Merger may mean that such persons have personal interests in
the Merger which may not be identical to the interests of other stockholders.
REPRESENTATIONS AND COVENANTS
Under the Reorganization Agreement, Seagate and Conner made a number of
representations relating to, among other things: (i) their organization and
similar corporate matters and the organization and similar corporate matters
regarding the subsidiaries of Seagate and Conner; (ii) the capital structure of
Seagate and Conner; (iii) authorization, execution, delivery, performance and
enforceability of the Merger Agreements and related matters; (iv) the absence of
conflicts under certificates of incorporation or bylaws, required consents or
approvals and violations of any instruments or law; (v) documents filed with the
Commission and the accuracy of the information contained therein; (vi) absence
of certain specified material adverse changes, material litigation or material
undisclosed liabilities; (vii) certain tax, labor and employee benefit matters;
(viii) title to properties and certain intellectual property matters; (ix)
compliance with applicable law including environmental law; (x) the accuracy of
information supplied by each of Seagate and Conner in connection with the
preparation of this Joint Proxy Statement/Prospectus and the related
Registration Statement; (xi) the receipt of fairness opinions from their
respective financial advisors; and (xii) the approval of the Merger Agreements
by the Seagate Board and the Conner Board and the inapplicability of the
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provisions of Section 203 of the DGCL (concerning business combinations with
interested stockholders) to the transactions contemplated thereby. Each party
has agreed promptly to notify the other of any event likely to result in the
failure of a representation or warranty to be true in any material respect, or
the material breach of a covenant under the Reorganization Agreement.
Each party covenanted as to itself and its subsidiaries that, until the
consummation of the Merger or the termination of the Merger Agreements, it will,
among other things, maintain its business, conduct its operations in the
ordinary course, not take certain actions outside the ordinary course without
the other's consent (which consent will not be unreasonably withheld), provide
the other with reasonable access to its financial, operating and other
information, and use all reasonable efforts to consummate the Merger. Seagate
and Conner further agreed that Conner will comply with all of the notice
requirements under the Conner Debentures and Conner and, if required, Seagate
shall execute the Supplemental Indentures.
Seagate has agreed to honor in accordance with their terms all employment,
severance and similar agreements to which Conner is a party and to pay or
deliver all accrued benefits that are vested as of the consummation of the
Merger. Seagate has further agreed that Conner employees who continue to be
employed by Conner after the consummation of the Merger may continue to
participate in their current benefit programs until June 30, 1996. Subsequent to
such date, Conner employees shall participate in Seagate employee programs or
comparable programs under substantially the same terms and conditions as all
other Seagate employees. Conner has agreed to amend the Conner Employee Stock
Purchase Plan (the "Conner Purchase Plan") as necessary (i) to provide that the
shares of Conner Common Stock to be purchased thereunder shall be purchased on
the last trading day immediately prior to the Effective Time, or such earlier
time as the Conner Board shall specify, (ii) to provide that any shares so
purchased shall be automatically converted on the same basis as all other shares
of Conner Common Stock into shares of Seagate Common Stock and (iii) to provide
that immediately following such purchase of shares of Conner Common Stock, the
Conner Purchase Plan shall terminate. Seagate has agreed that from and after the
Effective Time, employees of Conner may participate in the Seagate Employee
Stock Purchase Plan, subject to the terms and conditions of such Plan.
Seagate has also made certain covenants regarding Conner's existing
indemnification agreements, maintenance of directors' and officers' liability
insurance and representation of officers and directors of Conner as defendants
in certain litigation. See "-- Interests of Certain Persons in the Merger --
Indemnification and Insurance."
CONDITIONS TO CONSUMMATION OF THE MERGER
In addition to the approvals of the stockholders of Seagate and Conner
sought hereby, the obligations of Seagate and Conner to consummate the Merger
are subject to the satisfaction of a number of other conditions, including among
others, the effectiveness and the absence of any stop orders or proceedings
seeking a stop order with respect to the Registration Statement; the absence of
any temporary restraining order, preliminary or permanent injunction, or other
legal restraint or prohibition issued or pending by any court or governmental
authority, or any action taken or any statute or regulation that would prohibit
or render illegal the consummation of the Merger; and the receipt of all
material consents, orders and approvals and the expiration of any waiting
periods imposed by, any governmental entity necessary for the consummation of
the Merger. See "-- Regulatory Approvals Required."
Each party's obligations under the Reorganization Agreement are also
conditioned upon the accuracy of the representations and warranties made by the
other party (without regard to materiality qualifiers) except such inaccuracies
as would not have a material adverse effect individually or in the aggregate;
the performance in all material respects by the other party of its covenants;
the receipt of written opinions from the legal counsel of both Seagate and
Conner to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code; the receipt of a letter dated as of the
effective date of the Merger from the independent auditors of both Seagate and
Conner
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regarding the appropriateness of pooling of interests accounting for the Merger
under APB No. 16; and the authorization for listing on the NYSE, upon official
notice of issuance, of the shares of Seagate Common Stock to be issued in the
Merger.
REGULATORY APPROVALS REQUIRED
Under the Reorganization Agreement, the obligations of both Seagate and
Conner to consummate the Merger are subject to, among others, the following
conditions: (i) the expiration or termination of any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act and no action having been instituted by the Department of Justice or the FTC
challenging or seeking to enjoin the consummation of the Merger, which action
shall not have been withdrawn or terminated and (ii) all material
authorizations, consents, orders or approvals of, or declarations or filings
with, or expiration of waiting periods imposed by, any governmental entity,
shall have been filed, expired or have been obtained, other than those that,
individually or in the aggregate, the failure to be filed, expired or obtained,
would not, in the reasonable opinion of Seagate, have a material adverse effect
on Conner or Seagate. There can be no assurance that any applicable regulatory
authority will approve or take other required action with respect to the Merger,
or as to the timing of such regulatory approval or other action. Seagate and
Conner are not aware of any governmental approvals or actions that are required
in order to consummate the Merger except in connection with the Securities Act,
the filing of merger-related documents under the DGCL or as described below.
Should such other approval or action be required, it is contemplated that
Seagate and Conner would seek such approval or action. There can be no assurance
as to whether or when any such approval or action, if required, could be
obtained.
Transactions such as the Merger are reviewed by the Department of Justice
and the FTC to determine whether they comply with applicable antitrust laws.
Under the provisions of the HSR Act, the Merger may not be consummated until
such time as certain information has been furnished to the Department of Justice
and the FTC and the specified waiting period requirements of the HSR Act have
been satisfied. Pursuant to the HSR Act, on October 13, 1995, Seagate and Conner
each furnished notification of the Merger and provided certain information to
the Department of Justice and the FTC. The specified waiting period requirements
of the HSR Act expired on November 12, 1995.
Transactions such as the Merger are also reviewed by the Commission of the
European Communities to determine whether they comply with the merger control
regulations of the EEC. Pursuant to such merger control regulations, Seagate
furnished notification of the Merger and certain required information to the
EEC's Merger Trade Task Force on October 13, 1995. On November 17, 1995, the
Commission of the EEC issued a decision in which it stated that it had concluded
its review and that it would not oppose the Merger.
At any time before or after the Effective Time, the Department of Justice,
the FTC, state attorneys general, the Commission of the European Communities,
the antitrust regulatory agencies of various foreign countries or a private
person or entity could challenge the Merger under antitrust laws and seek, among
other things, to enjoin the Merger or to cause Seagate to divest itself, in
whole or in part, of Conner or of other businesses conducted by Seagate. Based
on information available to them, Seagate and Conner believe that the Merger
will not violate federal, state or foreign antitrust laws. There can be no
assurance, however, that a challenge to the Merger on antitrust grounds will not
be made or that, if such a challenge is made, Seagate and Conner would prevail
or would not be required to accept certain conditions, possibly including
certain divestitures or hold-separate agreements in order to consummate the
Merger.
Any person or persons receiving Seagate Common Stock pursuant to the Merger
may be required to make a filing pursuant to the HSR Act. In general, if (i) a
person receiving Seagate Common Stock pursuant to the Merger would own, upon
consummation of the Merger, Seagate Common Stock that exceeds $15 million in
value; (ii) certain jurisdictional requirements are met; and (iii) no exemption
applies, the HSR Act would require that such person file a Premerger
Notification and Report Form
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and observe the applicable waiting periods under the HSR Act prior to acquiring
such Seagate Common Stock pursuant to the Merger. If such waiting periods have
not expired or been terminated at the Effective Time with respect to any Conner
stockholder, Seagate may be required to deliver the Seagate Common Stock to be
received by such stockholder in the Merger into an escrow facility pending the
expiration or termination of such waiting period. Holders of Conner Common Stock
are urged to consult legal counsel to determine whether the requirements of the
HSR Act will apply to the receipt by them of Seagate Common Stock pursuant to
the Merger.
LIMITATION ON NEGOTIATIONS
The Reorganization Agreement provides that Conner will not, directly or
indirectly, through any officer, director, employee, representative or agent of
Conner or any of its subsidiaries, solicit or encourage (including by way of
furnishing nonpublic information) or take other action to facilitate, any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to an Acquisition Proposal (as defined below) from any person
or engage in any discussions or negotiations with any person with respect to any
Acquisition Proposal or in furtherance thereof or accept any Acquisition
Proposal. Notwithstanding the foregoing, the Conner Board, in the exercise of
and as required by its fiduciary duties as determined after consultation with
outside legal counsel, may engage in discussions or negotiations with, and
furnish information to, a third party who makes a written, unsolicited
Acquisition Proposal that constitutes a Superior Proposal, provided that Seagate
has been notified in writing of the principal financial terms and conditions of
such Acquisition Proposal. The Reorganization Agreement also requires Conner to
immediately notify Seagate of any unsolicited offer or proposal to enter into
negotiations relating to an Acquisition Proposal and to provide Seagate with
information as to the identity of the party making such offer or proposal and
the principal financial terms and conditions of such offer or proposal. See "--
Termination; Breakup Fees; Seagate Option to Purchase Conner Common Stock."
WAIVER AND AMENDMENT
At any time before the Effective Time, Seagate or Conner may (i) extend the
time for the performance of any of the obligations or other acts of the parties
under the Reorganization Agreement; (ii) waive any inaccuracies in the
representations and warranties of the other contained in the Reorganization
Agreement; or (iii) waive compliance by the other with any of the agreements or
conditions contained in the Reorganization Agreement.
The Reorganization Agreement may be amended by Seagate and Conner at any
time before or after the approval by the stockholders of Seagate of the issuance
of Seagate Common Stock in the Merger and by the stockholders of Conner of the
Merger Agreements, but after any such stockholder approval, no amendment may be
made which by law requires the further approval of such stockholders without
obtaining such further approval.
TERMINATION; BREAKUP FEES; SEAGATE OPTION TO PURCHASE CONNER COMMON STOCK
TERMINATION. The Merger Agreements may be terminated any time before the
Effective Time, before or after approval of the issuance of Seagate Common Stock
by the stockholders of Seagate and of the Merger Agreements by the stockholders
of Conner (i) by mutual written consent of Seagate and Conner; (ii) by Seagate
or Conner if the Merger has not become effective on or before April 3, 1996
(unless the Merger has not been consummated due to the waiting period (or any
extension thereof) under the HSR Act not having expired or been terminated, or
due to an action having been instituted by the Department of Justice or FTC
challenging or seeking to enjoin the consummation of the Merger, in which case
such date shall be extended to June 3, 1996), unless caused by the action or
failure to act of the party seeking to terminate the Merger Agreements in breach
of such party's obligations thereunder; (iii) by Seagate or Conner if any court
or governmental entity of competent jurisdiction shall (a) have taken any action
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which action is final and nonappealable or (b) seek to enjoin the
Merger and the terminating party reasonably believes that the time period
required to resolve such governmental action and the related uncertainty is
reasonably likely to have a material adverse effect
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on either Seagate or Conner; (iv) by Seagate or Conner if the required approvals
of the stockholders of Seagate or Conner are not obtained at the Seagate Meeting
or the Conner Meeting, respectively, or any adjournment thereof, unless caused
by the action or failure to act of the party seeking to terminate the Merger
Agreements in breach of such party's obligations thereunder; (v) by Seagate or
Conner if Conner shall have accepted or recommended to the stockholders of
Conner a Superior Proposal and, in the case of the termination of the Merger
Agreements by Conner, Conner shall have paid to Seagate the Breakup Fee; (vi) by
Seagate if the Conner Board withdraws, modifies or refrains from making its
recommendation for approval in respect of the Merger or if a third party
acquires beneficial ownership of, or the right to acquire beneficial ownership
of, at least 20% of Conner's outstanding voting equity securities; (vii) by
Seagate or Conner upon a breach of any representation, warranty, covenant or
agreement of the other party, or if any representation or warranty of the other
party shall have become untrue, in either case such that the conditions to the
consummation of the Merger would not be satisfied as of the time of such breach
or as of the time such representation or warranty shall have become untrue,
provided that if such inaccuracy in the representations and warranties or breach
is curable by the party through the exercise of its reasonable efforts and for
so long as such party continues to exercise such reasonable efforts, the other
party may not terminate the Merger Agreements pursuant to this provision; or
(viii) by Seagate, at any time if, as a result of any structural damage to the
main manufacturing building at the Conner Penang facility, there is, or is
reasonably expected to be, a cost to Conner (after insurance) in excess of
$20,000,000 or a substantial cessation of operations at the Conner Penang
facility for at least 15 work days.
In the event the Reorganization Agreement is terminated pursuant to any of
the foregoing provisions, the Merger will be deemed abandoned and such
termination will be without liability of any party thereto, except for liability
for breach of the Reorganization Agreement and except as set forth below under
the caption "-- Breakup Fees." In the event of such termination, the provisions
of the Reorganization Agreement regarding fees and expenses and termination
shall survive.
BREAKUP FEES. Upon the occurrence of any of the following events, Conner
shall immediately make payment to Seagate of a Breakup Fee of $35,000,000: (i)
Conner shall have accepted a Superior Proposal; (ii) the Conner Board shall have
withdrawn, modified or refrained from making its recommendation or approval in
respect of the Merger, or shall have disclosed its intention to change such
recommendation; or (iii) a third party acquires beneficial ownership of, or the
right to acquire beneficial ownership of, at least 20% of Conner's outstanding
voting equity securities. Payment of the Breakup Fee will be subject to offset
as described below under "-- Seagate Option to Purchase Conner Common Stock,"
and shall be reduced by any amount paid by Conner pursuant to the agreement set
forth in the following sentence. In addition, Conner has agreed to immediately
make a $15,000,000 payment to Seagate in the event that the Merger Agreements
have been submitted to a vote of the Conner stockholders and such stockholders
have failed for any reason (other than as a result of Seagate's breach of the
Merger Agreements) to approve the Merger Agreements by the requisite vote,
provided, however, that if the Breakup Fee has been paid in full by Conner, then
no amount shall be payable by Conner pursuant to this provision. Seagate has
agreed to immediately make a $15,000,000 payment to Conner in the event that the
issuance of Seagate Common Stock pursuant to the Merger Agreements has been
submitted to a vote of the Seagate stockholders and such stockholders have
failed for any reason (other than as a result of Conner's breach of the Merger
Agreements) to approve the Merger by the requisite vote. Payment of the fees
described in this paragraph will not be in lieu of damages incurred in the event
of a breach of the Merger Agreements.
SEAGATE OPTION TO PURCHASE CONNER COMMON STOCK. Upon the execution of the
Reorganization Agreement, Conner granted Seagate the Seagate Option to purchase
up to 8,015,420 shares of Conner Common Stock, at an exercise price of $17.90
per share, which amount equals 0.442 times the closing price per share of the
Seagate Common Stock on the date of the Reorganization Agreement. The Seagate
Option includes customary antidilution provisions and upon any issuance of
shares of Conner Common Stock after September 2, 1995, the number of shares of
Conner Common Stock subject to the Seagate Option is adjusted to equal at least
15% of the number of shares of Conner Common Stock
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then outstanding (other than shares of Conner Common Stock issued pursuant to
the Seagate Option). Subject to certain conditions, the rights granted to
Seagate in the Seagate Option become exercisable in the event a third party
acquires or is granted any option or right to acquire more than 20% of the
outstanding Conner Common Stock, or commences a tender offer or exchange offer
(or enters into an agreement to make such a tender offer or exchange offer) for
at least 20% of the outstanding Conner Common Stock, or Conner enters into a
written definitive agreement or written agreement in principle with a third
party in connection with a liquidation, dissolution, recapitalization, merger,
consolidation or acquisition or purchase of all or a material portion of the
assets or the equity interest in Conner. The right of Seagate to exercise the
Seagate Option is subject to the expiration of any applicable waiting periods
under the HSR Act and other customary conditions. In the event that a third
party acquires 50% or more of the outstanding shares of Conner Common Stock, or
makes a publicly disclosed proposal with respect to a tender offer or exchange
offer for 50% or more of the outstanding shares of Conner Common Stock, a
merger, consolidation or other business combination or any acquisition of a
material portion of the assets of Conner, then Seagate, in lieu of exercising
the Seagate Option, can request that Conner pay to Seagate, in cancellation of
the Seagate Option, a cancellation fee. The cancellation fee will be equal to
the excess over the exercise price of the Seagate Option of the greater of (i)
the last sale price of a share of Conner Common Stock as reported on the NYSE on
the last trading day prior to the date that Seagate gives notice of its exercise
of the Seagate Option or (ii) the highest price per share of Conner Common Stock
offered to be paid or paid pursuant to such acquisition or proposal, multiplied
by the number of shares subject to the Seagate Option. Any Breakup Fee due and
payable by Conner will be offset by the amount received by Seagate upon exercise
of the Seagate Option and sale of the underlying shares less the exercise price
of the Seagate Option or by any option cancellation fee paid to Seagate, and, if
Conner has already paid to Seagate the Breakup Fee, then Seagate will
immediately remit to Conner the amount of the offset. In the agreement relating
to the Seagate Option, Conner has granted to Seagate certain demand and
piggyback registration rights with respect to the shares of Conner Common Stock
underlying the Seagate Option. The obligation of Conner to issue shares of
Conner Common Stock upon exercise of the Seagate Option is subject to the
expiration or termination of any waiting periods applicable to the acquisition
of such shares by Seagate under the HSR Act. The Seagate Option expires upon the
earlier of (i) the Effective Time or (ii) 200 days after termination of the
Reorganization Agreement in accordance with its terms.
SEAGATE ACQUISITION OF THE MINORITY INTERESTS IN ARCADA HOLDINGS, INC.
Arcada is an approximately 79.4%-owned (approximately 68.6%-owned on a fully
diluted basis) subsidiary of Conner. Pursuant to an Agreement and Plan of
Reorganization (the "Arcada Agreement") dated as of December 21, 1995, by and
between Seagate, Conner, Arcada and certain holders of Arcada capital stock and
options to purchase Arcada capital stock (the "Arcada Minority Stockholders"),
Seagate has agreed to acquire, after consummation of the Merger, all of the
capital stock of Arcada held by the Arcada Minority Stockholders. In addition,
all outstanding options to purchase Arcada capital stock will be assumed by
Seagate and converted into options to purchase Seagate Common Stock. Pursuant to
the Arcada Agreement, Seagate will issue an aggregate of approximately 1,215,000
shares of Seagate Common Stock to the Arcada Minority Stockholders and an
additional approximately 977,000 shares of Seagate Common Stock will be reserved
for issuance to the Arcada Minority Stockholders in connection with Seagate's
assumption of options to purchase Arcada capital stock. Upon the closing of
Seagate's acquisition of the minority interests in Arcada, Arcada will be a
wholly-owned subsidiary of the surviving corporation in the Merger and an
indirect wholly-owned subsidiary of Seagate. Seagate's acquisition of the
minority interests in Arcada is subject to the satisfaction of a number of
conditions, including, among others, the approval of the transaction by the
Arcada Minority Stockholders. If Seagate's acquisition of the minority interests
in Arcada were to not close, such minority interests would remain outstanding
and, although Seagate or its subsidiaries would own a substantial majority of
the Capital Stock of Arcada upon the closing of the Merger, Arcada would not
become an indirect wholly-owned subsidiary of Seagate. In addition, if such
acquisition were to not close, certain of the Arcada Minority Stockholders would
have the contractual right,
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pursuant to an existing stockholder agreement, to require Arcada to file a
registration statement under the Securities Act in order to register the shares
of capital stock of Arcada held by them or, in the alternative, the right, in
certain instances, to require Arcada to purchase all or a portion of the capital
stock of Arcada held by them. See "-- Interests of Certain Persons in the Merger
- -- Interests in Arcada Holdings, Inc."
CERTAIN FEDERAL INCOME TAX MATTERS
The following discussion summarizes the material federal income tax
considerations relevant to the exchange of shares of Conner Common Stock for
Seagate Common Stock pursuant to the Merger. This summary is based upon opinions
of counsel delivered by Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation, and Wachtell, Lipton, Rosen & Katz (collectively "Counsel") which
are included as Exhibits to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part (the "Tax Opinions") that the Merger will
constitute a "reorganization" within the meaning of Section 368 of the Code (a
"Reorganization").
Conner stockholders should be aware that this discussion does not deal with
all federal income tax considerations that may be relevant to particular
stockholders of Conner in light of their particular circumstances, such as
stockholders who are banks, insurance companies, tax-exempt organizations,
dealers in securities, who are foreign persons, who do not hold their Conner
Common Stock as capital assets, or who acquired their shares in connection with
stock option or stock purchase plans or in other compensatory transactions. In
addition, the following discussion does not address the tax consequences of the
Merger under foreign, state or local tax laws or the tax consequences of
transactions effectuated prior or subsequent to or concurrently with the Merger
(whether or not such transactions are in connection with the Merger), including,
without limitation, transactions in which Conner Common Stock is acquired or
Seagate Common Stock is disposed of. ACCORDINGLY, CONNER STOCKHOLDERS ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES TO THEM OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
Subject to the limitations and qualifications referred to herein, Counsel is
of the opinion that qualification of the Merger as a Reorganization will result
in the following federal income tax consequences:
(a) No gain or loss will be recognized by holders of Conner Common Stock
solely upon their receipt of Seagate Common Stock solely in exchange for
Conner Common Stock in the Merger (except to the extent of cash received in
lieu of a fractional share of Seagate Common Stock).
(b) The aggregate tax basis of the Seagate Common Stock received by
Conner stockholders in the Merger will be the same as the aggregate tax
basis of Conner Common Stock surrendered in exchange therefor including any
tax basis allocated to fractional share interests.
(c) The holding period of the Seagate Common Stock received in the
Merger will include the period for which the Conner Common Stock surrendered
in exchange therefor was held, provided that the Conner Common Stock is held
as a capital asset at the time of the Merger.
(d) Cash payments received by holders of Conner Common Stock in lieu of
a fractional share will be treated as if a fractional share of Seagate
Common Stock had been issued in the Merger and then redeemed by Seagate. A
stockholder of Conner receiving such cash will generally recognize gain or
loss upon such payment, equal to the difference (if any) between such
stockholder's basis in the fractional share and the amount of cash received.
(e) Neither Seagate, Sub nor Conner will recognize gain or loss solely
as a result of the Merger.
No ruling has been or will be obtained from the Internal Revenue Service in
connection with the Merger. Conner stockholders should be aware that the Tax
Opinions do not bind the Internal Revenue
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Service and that the Internal Revenue Service is therefore not precluded from
successfully asserting a contrary opinion, in which case Seagate Common Stock to
be received in the Merger could be taxable to Conner stockholders. The Tax
Opinions are also subject to certain assumptions, and are subject to the truth
and accuracy of certain customary representations made by Seagate and Conner.
ACCOUNTING TREATMENT
The obligations of Seagate and Conner to consummate the Merger are
conditioned upon the receipt by Seagate and Conner from Ernst & Young LLP and
Price Waterhouse LLP, respectively, of letters dated as of the Effective Date
regarding the appropriateness of pooling of interests accounting for the Merger
under APB No. 16, if closed and consummated in accordance with the Merger
Agreements. In order for the Merger to qualify for pooling of interests
accounting treatment, numerous conditions must be satisfied. Seagate and Conner
have agreed in the Reorganization Agreement (i) not to take any action that
would jeopardize treatment of the Merger as a pooling of interests for
accounting purposes, and (ii) to take such action as may be reasonably required
to negate the impact of any past actions which would jeopardize treatment of the
Merger as a pooling of interests for accounting purposes.
Under the pooling of interests method of accounting, the historical basis of
the assets and liabilities of Seagate and Conner will be combined when the
Merger becomes effective and carried forward at their previously recorded
amounts, the stockholders' equity account of Seagate and Conner will be combined
on Seagate's consolidated balance sheet, and no goodwill or other intangible
assets will be created. Financial statements of Seagate issued after
consummation of the Merger will be restated retroactively to reflect the
consolidated operations of Seagate and Conner as if the Merger had been in
effect for the periods presented therein.
The unaudited pro forma financial information presented in this Joint Proxy
Statement/Prospectus has been prepared using the pooling of interests accounting
method to account for the Merger. See "Unaudited Pro Forma Combined Condensed
Financial Statements."
Representatives of Ernst & Young LLP are expected to be present at the
Seagate Meeting, and representatives of Price Waterhouse LLP are expected to be
present at the Conner Meeting. In each case, such representatives will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
RESTRICTIONS ON RESALE OF SEAGATE COMMON STOCK
The shares of Seagate Common Stock issuable to stockholders of Conner upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely without restriction by those stockholders who are
not deemed to be "affiliates" of Conner or Seagate, as that term is defined in
the rules under the Securities Act.
Shares of Seagate Common Stock received by those stockholders of Conner who
are deemed to be "affiliates" of Conner may be resold without registration under
the Securities Act only as permitted by Rule 145 under the Securities Act or as
otherwise permitted under the Securities Act. Conner has agreed in the
Reorganization Agreement to use all reasonable efforts to obtain, at least 30
days prior to the Effective Time, agreements by each stockholder of Conner who
is an "affiliate" of Conner to the effect that such persons will not offer to
sell, transfer or otherwise dispose of, or reduce such person's risk relative to
, (i) any of the shares of Seagate Common Stock distributed to them pursuant to
the Merger except in compliance with Rule 145 under the Securities Act, or in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act, or in an offering which is registered under the Securities Act;
and (ii) any shares of Seagate Common Stock or Conner Common Stock held by them
in the 30-day period immediately preceding the Effective Time and, until Seagate
has publicly released combined financial results of Seagate and Conner for a
period of at least 30 days of combined operations, any shares of Seagate Common
Stock distributed to them pursuant to the Merger. In addition, Seagate has
agreed to use all reasonable efforts to obtain at least 30 days prior to the
Effective Time agreements by each stockholder of Seagate who is an "affiliate"
of Seagate to the
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effect that such persons will not offer to sell, transfer or otherwise dispose
of, or reduce such person's risk relative to, any shares of Seagate Common Stock
or Conner Common Stock held by them during the period commencing 30 days
immediately preceding the Effective Time and continuing until Seagate has
publicly released combined financial results of Seagate and Conner for a period
of at least 30 days of combined operations. This Joint Proxy
Statement/Prospectus does not cover any resales of Seagate Common Stock received
by persons who are deemed to be "affiliates" of Conner.
NO DISSENTERS' RIGHTS
Both Seagate and Conner are incorporated in the State of Delaware, and,
accordingly, are governed by the provisions of the DGCL. Pursuant to Section
262(b) of the DGCL, the stockholders of Conner are not entitled to appraisal
rights in connection with the Merger because Conner Common Stock is quoted on
the NYSE and such stockholders will receive as consideration in the Merger only
shares of Seagate Common Stock, which shares will be listed on the NYSE upon the
closing of the Merger, and cash in lieu of fractional shares. In addition, the
stockholders of Seagate are not entitled to appraisal rights under Section 262
of the DGCL because even though approval of such stockholders is required for
the issuance of Seagate Common Stock in the Merger, the approval of the
stockholders of Seagate is not required for the Merger itself.
STOCK EXCHANGE LISTING OF SEAGATE COMMON STOCK
It is a condition to the obligations of Conner and Seagate to consummate the
Merger that the shares of Seagate Common Stock to be issued in the Merger be
approved for listing on the NYSE, upon official notice of issuance. Seagate will
file a listing application with the NYSE covering such shares, and it is
anticipated that such application will be approved, subject to notice of
issuance, at or before the Effective Time.
EXPENSES
The Reorganization Agreement provides that all costs and expenses incurred
in connection with such agreement and the transactions contemplated thereby will
be paid by the party incurring such costs and expenses, except for expenses
(other than attorney's fees) incurred in connection with printing the
Registration Statement and this Joint Proxy Statement/Prospectus, and the filing
fees with the Commission with respect to the Registration Statement and this
Joint Proxy Statement/ Prospectus, which will be shared equally by Conner and
Seagate.
SURRENDER OF CONNER COMMON STOCK CERTIFICATES
As soon as practicable after the Effective Time, Seagate will cause Harris
Trust Company of California (the "Exchange Agent") to mail to each Conner
stockholder of record a letter of transmittal with instructions to be used by
such stockholder in surrendering certificates which, prior to the Merger,
represented shares of Conner Common Stock in exchange for certificates
representing shares of Seagate Common Stock. Letters of transmittal will also be
available as soon as practicable after the Effective Time at the offices of the
Exchange Agent. After the Effective Time, there will be no further registration
of transfers on the stock transfer books of the Surviving Corporation of shares
of Conner Common Stock which were outstanding immediately prior to the Effective
Time. SHARE CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE PRIOR TO
APPROVAL AND ADOPTION OF THE MERGER AGREEMENTS BY THE CONNER STOCKHOLDERS AND
APPROVAL OF THE ISSUANCE OF SHARES OF SEAGATE COMMON STOCK PURSUANT TO THE
MERGER AGREEMENTS BY THE SEAGATE STOCKHOLDERS.
Upon the surrender of a Conner Common Stock certificate to the Exchange
Agent or to such other agent as may be appointed by Seagate together with a duly
executed letter of transmittal and such other documents as may be reasonably
required by the Exchange Agent, the holder of such certificate will be entitled
to receive in exchange therefor a certificate representing the number of shares
of Seagate Common Stock to which the holder of Conner Common Stock is entitled
pursuant to the provisions of the Merger Agreements plus cash in lieu of
fractional shares. In the event of a transfer of ownership of Conner Common
Stock which is not registered in the transfer records of Conner, a
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certificate representing the appropriate number of shares of Seagate Common
Stock may be issued to a transferee if the certificate representing such Conner
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid, along with a duly executed
letter of transmittal.
Until a certificate representing Conner Common Stock has been surrendered to
the Exchange Agent, each such certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
certificate representing the number of shares of Seagate Common Stock to which
the Conner stockholder is entitled under the Merger Agreements plus cash in lieu
of fractional shares. Upon consummation of the Merger, shares of Conner Common
Stock will cease to be traded on the NYSE, and there will be no further market
for Conner Common Stock.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
assume a business combination between Seagate and Conner accounted for on a
pooling of interests basis and are based on the respective historical financial
statements and the notes thereto, which are incorporated by reference in this
Joint Proxy Statement/Prospectus. The pro forma combined condensed balance sheet
combines Seagate's September 30, 1995 consolidated balance sheet with Conner's
September 30, 1995 consolidated balance sheet. The pro forma statements of
operations combine Seagate's historical results for each of the three fiscal
years ended June 30, 1995, 1994 and 1993, and the three months ended September
30, 1995 and 1994, with the corresponding Conner results for the twelve months
ended June 30, 1995, the fiscal years ended December 31, 1994 and 1993, and the
three months ended September 30, 1995 and 1994, respectively.
In addition, in connection with the Merger, Seagate is to acquire the
outstanding minority interest of Arcada Holdings, Inc., a majority-owned
subsidiary of Conner, in a transaction to be accounted for as a purchase. The
minority interest of Arcada amounts to a 31.4% ownership interest on a fully
diluted basis. The pro forma combined condensed balance sheet includes
adjustments necessary to give effect to the acquisition of the minority interest
of Arcada assuming the transaction was consummated at September 30, 1995. The
pro forma combined condensed statements of operations for the twelve months
ended June 30, 1995, and for the three months ended September 30, 1995 and 1994,
include adjustments which give effect to this transaction assuming the
acquisition of the Arcada minority interest was consummated at the beginning of
Seagate's fiscal year 1995.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger and the acquisition of the Arcada minority
interest had been consummated in an earlier period, nor is it necessarily
indicative of the future operating results or financial position.
These pro forma financial statements are based on, and should be read in
conjunction with, the historical consolidated financial statements and the
related notes thereto of Seagate and Conner, incorporated by reference in the
Joint Proxy Statement/Prospectus.
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PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ARCADA
COMBINED PRO FORMA PRO FORMA
SEAGATE CONNER (a) SEAGATE & CONNER ADJUSTMENT (b) COMBINED
------------- ------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales......................... $ 1,453,626 $ 687,179 $ 2,140,805 $ -- $ 2,140,805
Cost of sales..................... 1,161,975 581,555 1,743,530 -- 1,743,530
------------- ------------- ----------------- -------------- --------------
Gross profit...................... 291,651 105,624 397,275 -- 397,275
------------- ------------- ----------------- -------------- --------------
Operating expenses:
Product development............. 67,676 29,670 97,346 -- 97,346
Marketing and administrative.... 69,969 46,586 116,555 -- 116,555
Amortization of goodwill and
other intangibles.............. 7,616 2,694 10,310 2,074 12,384
In-process research and
development.................... -- 2,817 2,817 -- 2,817
------------- ------------- ----------------- -------------- --------------
Total operating expenses...... 145,261 81,767 227,028 2,074 229,102
------------- ------------- ----------------- -------------- --------------
Income from operations............ 146,390 23,857 170,247 (2,074) 168,173
Interest income................... 18,040 5,302 23,342 -- 23,342
Interest expense.................. (8,868) (8,671) (17,539) -- (17,539)
Other............................. (1,211) (482) (1,693) -- (1,693)
------------- ------------- ----------------- -------------- --------------
Other income (expense), net... 7,961 (3,851) 4,110 -- 4,110
------------- ------------- ----------------- -------------- --------------
Income before income taxes and
extraordinary gain............... 154,351 20,006 174,357 (2,074) 172,283
Provision for income taxes........ 46,305 6,602 52,907 -- 52,907
------------- ------------- ----------------- -------------- --------------
Income before extraordinary
gain............................. $ 108,046 $ 13,404 $ 121,450 $ (2,074) $ 119,376
------------- ------------- ----------------- -------------- --------------
------------- ------------- ----------------- -------------- --------------
Income per share before
extraordinary gain:
Primary......................... $ 1.44 $ 0.56 $ 1.23 $ 1.18
Fully diluted................... $ 1.23 $ 0.56 $ 1.05 $ 1.02
Number of shares used in per share
computations:
Primary......................... 75,088 23,974 99,062 101,254
Fully diluted................... 91,681 33,093 124,774 126,966
</TABLE>
- ------------------------
(a) Income per share and number of shares reflect Seagate equivalent numbers of
0.442 share of Seagate Common Stock for each share of Conner Common Stock.
(b) Pro forma adjustment to reflect the acquisition of the minority interest of
Arcada in conjunction with the Merger as discussed in Note 5.
See Accompanying Notes to Pro Forma Combined Condensed Financial Statements.
73
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ARCADA
COMBINED PRO FORMA PRO FORMA
SEAGATE CONNER (a) SEAGATE & CONNER ADJUSTMENT (b) COMBINED
------------- ------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales......................... $ 933,146 $ 559,504 $ 1,492,650 $ -- $ 1,492,650
Cost of sales..................... 735,001 458,323 1,193,324 -- 1,193,324
------------- ------------- ----------------- -------------- --------------
Gross profit...................... 198,145 101,181 299,326 -- 299,326
------------- ------------- ----------------- -------------- --------------
Operating expenses:
Product development............. 47,252 32,297 79,549 -- 79,549
Marketing and administrative.... 56,163 43,375 99,538 -- 99,538
Amortization of goodwill and
other intangibles.............. 4,250 3,774 8,024 2,074 10,098
In-process research and
development.................... 43,000 -- 43,000 -- 43,000
------------- ------------- ----------------- -------------- --------------
Total operating expenses...... 150,665 79,446 230,111 2,074 232,185
------------- ------------- ----------------- -------------- --------------
Income from operations............ 47,480 21,735 69,215 (2,074) 67,141
Interest income................... 14,698 4,036 18,734 -- 18,734
Interest expense.................. (8,207) (11,496) (19,703) -- (19,703)
Other............................. 1,322 997 2,319 -- 2,319
------------- ------------- ----------------- -------------- --------------
Other income (expense), net... 7,813 (6,463) 1,350 -- 1,350
------------- ------------- ----------------- -------------- --------------
Income before income taxes and
extraordinary gain............... 55,293 15,272 70,565 (2,074) 68,491
Provision for income taxes........ 32,756 5,042 37,798 -- 37,798
------------- ------------- ----------------- -------------- --------------
Income before extraordinary
gain............................. $ 22,537 $ 10,230 $ 32,767 $ (2,074) $ 30,693
------------- ------------- ----------------- -------------- --------------
------------- ------------- ----------------- -------------- --------------
Income per share before
extraordinary gain:
Primary......................... $ 0.30 $ 0.44 $ 0.33 $ 0.31
Fully diluted................... $ 0.29 $ 0.44 $ 0.32 $ 0.30
Number of shares used in per share
computations:
Primary......................... 74,904 23,076 97,980 100,172
Fully diluted................... 85,223 23,076 108,299 110,491
</TABLE>
- ------------------------
(a) Income per share and number of shares reflect Seagate equivalent numbers of
0.442 share of Seagate Common Stock for each share of Conner Common Stock.
(b) Pro forma adjustment to reflect the acquisition of the minority interest of
Arcada in conjunction with the Merger as discussed in Note 5.
See Accompanying Notes to Pro Forma Combined Condensed Financial Statements.
74
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ARCADA
COMBINED PRO FORMA PRO FORMA
SEAGATE CONNER (a) SEAGATE & CONNER ADJUSTMENT (b) COMBINED
------------- ------------- ----------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales........................... $ 4,539,570 $ 2,403,848 $ 6,943,418 $ -- $ 6,943,418
Cost of sales....................... 3,607,661 1,993,978 5,601,639 -- 5,601,639
------------- ------------- ----------------- -------------- -------------
Gross profit........................ 931,909 409,870 1,341,779 -- 1,341,779
------------- ------------- ----------------- -------------- -------------
Operating expenses:
Product development............... 220,024 138,065 358,089 -- 358,089
Marketing and administrative...... 245,811 198,919 444,730 -- 444,730
Amortization of goodwill and other
intangibles...................... 23,092 12,680 35,772 8,297 44,069
In-process research and
development...................... 70,360 5,000 75,360 -- 75,360
Restructuring costs............... -- (38,019) (38,019) -- (38,019)
------------- ------------- ----------------- -------------- -------------
Total operating expenses........ 559,287 316,645 875,932 8,297 884,229
------------- ------------- ----------------- -------------- -------------
Income from operations.............. 372,622 93,225 465,847 (8,297) 457,550
Interest income..................... 65,560 20,171 85,731 -- 85,731
Interest expense.................... (32,966) (43,369) (76,335) -- (76,335)
Other............................... 4,123 27,211 31,334 -- 31,334
------------- ------------- ----------------- -------------- -------------
Other income, net............... 36,717 4,013 40,730 -- 40,730
------------- ------------- ----------------- -------------- -------------
Income before income taxes and
extraordinary gain................. 409,339 97,238 506,577 (8,297) 498,280
Provision for income taxes.......... 149,257 26,002 175,259 -- 175,259
------------- ------------- ----------------- -------------- -------------
Income before extraordinary gain.... $ 260,082 $ 71,236 $ 331,318 $ (8,297) $ 323,021
------------- ------------- ----------------- -------------- -------------
------------- ------------- ----------------- -------------- -------------
Income per share before
extraordinary gain:
Primary........................... $ 3.52 $ 3.06 $ 3.41 $ 3.25
Fully diluted..................... $ 3.06 $ 2.84 $ 3.00 $ 2.88
Number of shares used in per share
computations:
Primary........................... 73,839 23,305 97,144 99,336
Fully diluted..................... 91,474 32,214 123,688 125,880
</TABLE>
- ------------------------
(a) Income per share and number of shares reflect Seagate equivalent numbers of
0.442 share of Seagate Common Stock for each share of Conner Common Stock.
(b) Pro forma adjustment to reflect the acquisition of the minority interest of
Arcada in conjunction with the Merger as discussed in Note 5.
See Accompanying Notes to Pro Forma Combined Condensed Financial Statements.
75
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------
1994 (a) 1993 (a)
------------- -------------
<S> <C> <C>
Net Sales........................................................................... $ 5,865,255 $ 5,195,276
Cost of Sales....................................................................... 4,692,324 4,284,394
------------- -------------
Gross Profit........................................................................ 1,172,931 910,882
------------- -------------
Operating expenses:
Product development............................................................... 302,678 291,470
Marketing and administrative...................................................... 397,931 408,340
Amortization of goodwill and other intangibles.................................... 27,820 35,073
In-process research and development............................................... 5,000 --
Restructuring costs............................................................... (38,019) 121,457
Non-recurring items............................................................... -- 231,945
------------- -------------
Total operating expenses........................................................ 695,410 1,088,285
------------- -------------
Income (loss) from operations....................................................... 477,521 (177,403)
Interest income..................................................................... 53,384 41,359
Interest expense.................................................................... (73,576) (74,724)
Other............................................................................... 18,808 11,228
------------- -------------
Other (expense), net.............................................................. (1,384) (22,137)
------------- -------------
Income (loss) before income taxes and extraordinary gain............................ 476,137 (199,540)
Provision for income taxes.......................................................... 141,340 50,340
------------- -------------
Income (loss) before extraordinary gain............................................. $ 334,797 $ (249,880)
------------- -------------
------------- -------------
Income (loss) per share before extraordinary gain:
Primary........................................................................... $ 3.48 $ (2.80)
Fully diluted..................................................................... $ 3.16 $ (2.80)
Number of shares used in per share computations:
Primary........................................................................... 96,160 89,187
Fully diluted..................................................................... 117,967 89,187
</TABLE>
- ------------------------
(a) For the years ended June 30, 1994 and 1993 there were no pro forma
conforming adjustments and the above pro forma information reflects the
combination of Seagate and Conner for the fiscal periods as discussed in
Note 2.
See Accompanying Notes to Pro Forma Combined Condensed Financial Statements.
76
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEAGATE &
CONNER PRO FORMA
PRO FORMA COMBINED
ADJUSTMENTS SEAGATE &
SEAGATE CONNER (a) CONNER
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents........................................... $ 684,192 $ 164,156 $ -- $ 848,348
Short-term investments.............................................. 562,710 185,294 -- 748,004
Accounts receivable................................................. 662,097 418,377 -- 1,080,474
Inventories......................................................... 427,922 265,356 -- 693,278
Deferred income taxes............................................... 136,138 51,950 10,600 198,688
Other current assets................................................ 138,636 118,157 (1,500) 255,293
---------- ---------- ----------- ----------
Total Current Assets.............................................. 2,611,695 1,203,290 9,100 3,824,085
Property, equipment and leasehold improvements, net................. 721,688 242,076 (16,400) 947,364
Goodwill and other intangibles, net................................. 183,011 35,099 218,110
Other assets........................................................ 106,161 10,322 -- 116,483
---------- ---------- ----------- ----------
Total Assets...................................................... $3,622,555 $1,490,787 $ (7,300) $5,106,042
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
LIABILITIES:
Accounts payable.................................................... $ 539,534 $ 259,649 $ -- $ 799,183
Accrued employee compensation....................................... 130,758 37,212 86,700 254,670
Accrued expenses.................................................... 284,126 98,521 32,300 414,947
Accrued income taxes................................................ 38,179 45,660 -- 83,839
Current portion of long-term debt................................... 10,479 3,014 -- 13,493
---------- ---------- ----------- ----------
Total Current Liabilities......................................... 1,003,076 444,056 119,000 1,566,132
Deferred income taxes............................................... 269,909 129,346 (28,400) 370,855
Other liabilities................................................... 138,161 2,298 23,100 163,559
Long-term debt, less current portion................................ 539,804 527,961 -- 1,067,765
Minority interest................................................... -- 3,411 -- 3,411
---------- ---------- ----------- ----------
Total Liabilities................................................. 1,950,950 1,107,072 113,700 3,171,722
---------- ---------- ----------- ----------
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in capital......................... 402,284 271,233 -- 673,517
Retained earnings and other......................................... 1,269,321 112,482 (121,000) 1,260,803
---------- ---------- ----------- ----------
Total Stockholders' Equity........................................ 1,671,605 383,715 (121,000) 1,934,320
---------- ---------- ----------- ----------
Total Liabilities and Stockholders' Equity........................ $3,622,555 $1,490,787 $ (7,300) $5,106,042
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
<CAPTION>
ARCADA
PRO FORMA PRO FORMA
ADJUSTMENT (b) COMBINED
--------------- ----------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents........................................... $ -- $ 848,348
Short-term investments.............................................. -- 748,004
Accounts receivable................................................. -- 1,080,474
Inventories......................................................... -- 693,278
Deferred income taxes............................................... -- 198,688
Other current assets................................................ -- 255,293
--------------- ----------
Total Current Assets.............................................. -- 3,824,085
Property, equipment and leasehold improvements, net................. -- 947,364
Goodwill and other intangibles, net................................. 64,224 282,334
Other assets........................................................ -- 116,483
--------------- ----------
Total Assets...................................................... $ 64,224 $5,170,266
--------------- ----------
--------------- ----------
LIABILITIES:
Accounts payable.................................................... $ -- $ 799,183
Accrued employee compensation....................................... -- 254,670
Accrued expenses.................................................... -- 414,947
Accrued income taxes................................................ -- 83,839
Current portion of long-term debt................................... -- 13,493
--------------- ----------
Total Current Liabilities......................................... -- 1,566,132
Deferred income taxes............................................... 3,744 374,599
Other liabilities................................................... -- 163,559
Long-term debt, less current portion................................ -- 1,067,765
Minority interest................................................... (352) 3,059
--------------- ----------
Total Liabilities................................................. 3,392 3,175,114
--------------- ----------
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in capital......................... 97,838 771,355
Retained earnings and other......................................... (37,006) 1,223,797
--------------- ----------
Total Stockholders' Equity........................................ 60,832 1,995,152
--------------- ----------
Total Liabilities and Stockholders' Equity........................ $ 64,224 $5,170,266
--------------- ----------
--------------- ----------
</TABLE>
- ------------------------------
(a) Pro forma adjustment to reflect the restructuring charges as discussed in
Note 4.
(b) Pro forma adjustment to reflect the acquisition of the minority interest of
Arcada in conjunction with the Merger as discussed in Note 5.
See Accompanying Notes to Pro Forma Combined Condensed Financial Statements.
77
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited pro forma combined condensed financial statements reflect the
issuance of 0.442 of a share of Seagate Common Stock in exchange for each
share of Conner Common Stock. In addition, Seagate will issue options to
purchase 0.442 of a share of Seagate Common Stock in exchange for each
outstanding Conner Option. The actual number of shares of Seagate Common
Stock and stock options to be issued in the Merger will be determined at the
Effective Time based on the Exchange Ratio and the number of shares of
Conner Common Stock and Conner Options then outstanding.
As of September 30, 1995, Conner had outstanding Common Stock of 53,537,032
shares and outstanding Conner Options to purchase 7,286,268 shares of Conner
Common Stock. Based on the Exchange Ratio as described above, as of
September 30, 1995, Seagate would issue approximately 23,663,368 shares of
Seagate Common Stock in exchange for all outstanding shares of Conner Common
Stock and would issue options to purchase approximately 3,220,530 shares of
Seagate Common Stock in exchange for all outstanding Conner Options.
2. The unaudited pro forma financial data combines Seagate's financial data for
the three fiscal years ended June 30, 1995, 1994, and 1993 and the three
months ended September 30, 1995 and 1994 with Conner's financial data for
the twelve months ended June 30, 1995, the fiscal years ended December 31,
1994 and 1993, and the three months ended September 30, 1995 and 1994,
respectively. The operating results of Conner for the six months ended
December 31, 1994 (revenue and net income of $1,151 million and $54 million,
respectively) are included in the unaudited pro forma statements of
operations for both fiscal years 1995 and 1994.
3. Seagate's fiscal year ends on the Friday closest to June 30 and includes 52
weeks in all fiscal years and 13 weeks in all quarterly periods presented.
Conner's fiscal year ends on the Saturday closest to December 31 and also
includes 52 weeks in all fiscal years and 13 weeks in all quarterly periods
presented. For clarity of presentation in the unaudited pro forma combined
condensed financial statements, fiscal periods are reported as ending on a
calendar month end.
4. Seagate expects to incur charges to operations currently estimated to range
from $140 million to $180 million in the quarter ending March 31, 1996, the
quarter in which the Merger is expected to be consummated. An estimated
charge at the midpoint of the above range of $121 million, net of estimated
tax benefits of $39 million, is reflected in the unaudited pro forma
combined condensed balance sheet. The charge, before estimated tax benefits,
primarily relates to costs associated with combining the operations of the
two companies and includes employee severance benefits of $87 million,
closure of duplicate and excess facilities of $53 million and fees of
financial advisors, attorneys and accountants of $20 million. The future
cash requirements related to these charges are estimated to range from $100
million to $120 million. These ranges are preliminary estimates only and are
therefore subject to change.
5. In connection with the Merger, Seagate is to acquire the outstanding
minority interest of Arcada (including stock options) in exchange for
approximately 1,215,000 shares of Seagate Common Stock and options to
acquire 977,000 shares of Seagate Common Stock. The fair value of the
Seagate Common Stock and stock options approximates $97.8 million based on a
value of $44.625 per share of Seagate Common Stock. The minority interest in
Arcada amounts to a 31.4% ownership interest on a fully diluted basis. The
acquisition will be accounted for as a purchase, and accordingly, the
acquired assets and liabilities pertaining to the minority interest will be
recorded at estimated fair values at the date of the acquisition. The
unaudited pro forma combined condensed balance sheet reflects the
elimination of Arcada's minority interest and the estimated allocation of
purchase price to the assets acquired including goodwill and other
intangibles of approximately $64.2 million and the write-off of
non-recurring charges of approximately $37.1 million relating to in-process
research and development. The effect of recurring
78
<PAGE>
charges relating to the purchase, primarily the amortization of goodwill and
other intangibles, has been reflected as pro forma adjustments in the
unaudited pro forma combined condensed statements of operations and totals
approximately $8.3 million for fiscal year 1995, $2.1 million for the three
months ended September 30, 1995, and $2.1 million for the three months ended
September 30, 1994. These amounts are estimates based on a preliminary
purchase price allocation and assume the issuance of 2,192,000 shares of
Seagate Common Stock valued at $44.625 per share.
6. Certain amounts have been reclassified to conform to the pro forma
presentation. Intercompany transactions were not material for any period
presented.
7. There were no material differences between the accounting policies of
Seagate and Conner.
79
<PAGE>
DISCUSSION AND ANALYSIS OF PRO FORMA INFORMATION
The following discussion should be read in conjunction with the unaudited
pro forma combined condensed financial statements presented above, the
historical financial statements that are incorporated by reference in this Joint
Proxy Statement/Prospectus and from which such information was derived, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for both Seagate and Conner incorporated by reference in this Joint
Proxy Statement/Prospectus.
Seagate expects to incur charges to operations currently estimated to be
between $140 million and $180 million in the quarter ending March 31, 1996, the
quarter in which the Merger is expected to be consummated. An estimated charge
at the midpoint of the above range of $121 million, net of estimated tax
benefits of $39 million, is reflected in the unaudited pro forma combined
condensed balance sheet. The charge, before estimated tax benefits, primarily
relates to costs associated with combining the operations of the two companies
and includes employee severance benefits of $87 million, closure of duplicate
and excess facilities of $53 million and fees of financial advisors, attorneys,
and accountants of $20 million. This range, and the ranges described below, are
preliminary estimates only and are therefore subject to change.
In addition, in connection with the acquisition of the Arcada minority
interest, Seagate estimates based on preliminary information that it will incur
a charge to operations of approximately $37.1 million for the three months
ending March 31, 1996, to write off in-process research and development. The
actual amount of the write-off is subject to change based on completion of the
final purchase price allocation.
There can be no assurance that the revenues of Seagate will be equal to or
greater than the combined revenues of Seagate and Conner. Seagate believes that
future revenues will depend on, among other factors, demand for Seagate's
products, its ability to differentiate its products from competitors and general
economic conditions. Combined revenues in past periods may not be indicative of
revenue in the future.
The future cash requirements related to the above charges are estimated to
be in the range of $100 million to $120 million, of which approximately $29
million relates to lease payments for duplicate facilities which will be paid on
a monthly basis over periods extending through 2018. On a pro forma basis as of
September 30, 1995, before paying for the transaction and restructuring costs,
Seagate and Conner would have had an aggregate of $1.6 billion in cash, cash
equivalents and short-term investments. Seagate and Conner believe that this
cash, together with cash generated from operations, will be sufficient to meet
the combined Company's future cash requirements through the next 12 months.
80
<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS OF SEAGATE AND CONNER
The rights of Seagate's stockholders are governed by the Seagate Certificate
of Incorporation, the Seagate Bylaws and the laws of the State of Delaware. The
rights of Conner's stockholders are governed by the Conner Certificate of
Incorporation, the Conner Bylaws and the laws of the State of Delaware. After
the effective time of the Merger, the rights of Conner stockholders who become
Seagate stockholders will be governed by the Seagate Certificate of
Incorporation, Seagate Bylaws and the laws of the State of Delaware. In most
respects, the rights of Seagate stockholders and Conner stockholders are
similar. The following discussion of certain similarities and material
differences between the rights of Seagate stockholders and the rights of Conner
stockholders under their respective Certificates of Incorporation and Bylaws is
only a summary of certain provisions and does not purport to be a complete
description of such similarities and differences. The following discussion is
qualified in its entirety by reference to the laws of Delaware and the full
texts of the respective Certificates of Incorporation and Bylaws of Seagate and
Conner, which texts are incorporated by reference as exhibits to the
Registration Statement of which this Joint Proxy Statement/Prospectus is a part.
STOCKHOLDER MEETINGS
The Seagate Bylaws provide that Seagate stockholders holding shares
representing not less than 10% of the outstanding votes entitled to vote at a
stockholders meeting may call a special meeting of stockholders. Any stockholder
request for a special meeting of stockholders must be in writing, specifying the
time of such meeting and the general nature of the business proposed to be
transacted,
and must be delivered to the chairman of the board, president, any vice
president or secretary of Seagate. Under the Conner Bylaws, Conner's
stockholders cannot call a special meeting of stockholders.
STOCKHOLDER ACTION BY WRITTEN CONSENT
The Seagate Bylaws provide that, subject to exceptions contained in the
Seagate Certificate of Incorporation, any action that may be taken at any annual
or special meeting of the stockholders may be taken without a meeting, without
prior notice, and without a vote, if a consent in writing setting forth the
action taken is signed by the holders of outstanding stock having the number of
votes that would be necessary to take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Under the Conner Bylaws,
Conner stockholders may not take action by written consent.
DIRECTOR NOMINATIONS
The Seagate Bylaws currently provide for an eight member Board of Directors.
Directors are elected at each annual meeting of stockholders to hold office
until the next annual meeting and until his or her successor is elected and
qualified or until his or her earlier resignation or removal. The Conner Bylaws
provide that the number of directors shall be not less than five nor more than
eleven, which number may be changed by a Bylaw amendment duly adopted by the
Conner Board or by the stockholders of Conner. The Conner Board currently
consists of six directors. Directors are elected at each annual meeting of
stockholders to hold office until the next annual meeting and until his or her
successor is duly elected and qualified or until his or her earlier resignation
or removal.
The Conner Bylaws provide that no nominations for directors of Conner by any
person other than the Conner Board may be presented at any annual meeting of
stockholders unless the person making the nomination is a record stockholder and
has delivered a written notice to the secretary of Conner no later than 90
business days in advance of the stockholder meeting or 10 days after the date on
which notice of the meeting is first given to the stockholders, whichever is
later. The Seagate Certificate of Incorporation and Bylaws do not impose
comparable conditions on the submission of director nominations by stockholders.
81
<PAGE>
STOCKHOLDER PROPOSALS
The Conner Bylaws provide that no proposal by any person other than the
Conner Board may be submitted for the approval of the Conner stockholders at any
regular meeting of stockholders unless the person advancing the proposal has
delivered a written notice to the Secretary of Conner no later than 90 business
days in advance of the stockholder meeting or 10 days after the date on which
notice of the meeting is first given to the stockholders, whichever is later.
The Seagate Certificate of Incorporation and Seagate Bylaws do not impose
comparable conditions on the submission of stockholder proposals.
INDEMNIFICATION
The Seagate Certificate of Incorporation and the Conner Certificate of
Incorporation provide that directors will not be personally liable to their
respective companies or stockholders for monetary damages for breach of their
fiduciary duty as directors and shall be indemnified to the fullest extent
authorized by Delaware law. The Seagate Bylaws provide that directors, officers
and certain other persons will be indemnified with respect to third-party
actions or suits, provided such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
Seagate. The Seagate Bylaws further provide that directors, officers and certain
other persons will be indemnified with respect to actions or suits by or in the
right of Seagate, provided that such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests of
Seagate; except that no indemnification shall be made in the event that such
person shall be adjudged to be liable to Seagate, unless a court determines that
indemnification is fair and reasonable in view of all the circumstances. The
Seagate Bylaws require Seagate to pay all expenses incurred by a director,
officer, employee or agent in defending any proceeding within the scope of the
indemnification provisions as such expenses are incurred in advance of its final
disposition, subject to repayment if it is ultimately determined that such party
was not entitled to indemnity by Seagate. The Conner Bylaws provide that Conner
shall indemnify its officers and directors to the fullest extent authorized by
Delaware law and may elect to indemnify its employees and agents to the fullest
extent authorized by Delaware law. The Conner Bylaws do not contain a comparable
provision regarding the advancement of expenses.
ELECTION OF DIRECTORS
The Seagate Bylaws provide that the Seagate Board has the right to fill any
vacancy created on the Seagate Board, unless the directors then in office
constitute less than a majority of the whole board, in which case the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the outstanding shares, summarily order a stockholder election to fill the
vacancies. Under the Conner Bylaws, the Conner Board has the right to fill any
vacancy created on the Conner Board; however, a vacancy created by the removal
of a director by the vote of the stockholders or by court order may be filled
only by the vote of the majority of the shares represented and voting at a duly
held stockholder meeting.
PREFERRED SHARES RIGHTS AGREEMENT
Conner adopted a Preferred Shares Rights Agreement, dated November 29, 1994,
which authorized and declared a dividend of one Conner Right for each share of
Conner Common Stock outstanding on January 10, 1995. The Conner Rights are
designed to protect and maximize the value of the outstanding equity interest of
Conner in the event of an attempt by an acquiror to gain control of Conner
without the approval of the Conner Board. For a description of the Conner Rights
and the terms of the Conner Preferred Share Rights Agreement, see Conner's
Registration Statement on Form 8-A dated November 30, 1994 which is incorporated
herein by reference. Seagate has no comparable preferred shares rights
agreement.
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DESCRIPTION OF SEAGATE CAPITAL STOCK
The authorized capital stock of Seagate consists of 200,000,000 shares of
Seagate Common Stock, $.01 par value, and 1,000,000 shares of Seagate Preferred
Stock of which 800,000 shares are designated Series A Participating Preferred
Stock, $.01 par value.
COMMON STOCK
As of September 1, 1995, there were 72,637,095 shares of Seagate Common
Stock outstanding held of record by 5,907 registered stockholders.
Subject to preferences that may be applicable to any outstanding Seagate
Preferred Stock, holders of Seagate Common Stock are entitled to receive ratably
such dividends as may be declared by the Seagate Board out of funds legally
available therefor. Seagate has not paid any cash dividends on the Seagate
Common Stock. Each holder of Seagate Common Stock is entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders,
except that upon giving notice required by law, stockholders may cumulate their
votes in the election of directors. In the event of a liquidation, dissolution
or winding up of Seagate, holders of Seagate Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of any outstanding Seagate Preferred Stock. Holders of Seagate Common
Stock have no preemptive rights and have no rights to convert their Seagate
Common Stock into any other securities and there are no redemption provisions
with respect to such shares. All of the outstanding shares of Seagate Common
Stock are, and the shares of Seagate Common Stock issuable upon conversion of
Seagate's outstanding debentures will be, fully paid and non-assessable.
The transfer agent and registrar for the Seagate Common Stock is Harris
Trust Company of California.
PREFERRED STOCK
As of October 3, 1995, there were no shares of Seagate Preferred Stock
outstanding. The Seagate Preferred Stock may be issued from time to time in one
or more series. The Seagate Board has authority to fix the designation, powers,
preferences and rights of each such series and the qualifications, limitations
and restrictions thereon and to increase or decrease the number of shares of
such series (but not below the number of shares of such series then
outstanding), without any further vote or action by the stockholders. Seagate
has no present plans to issue any shares of Seagate Preferred Stock.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, Seagate
is subject to Section 203 of the DGCL which restricts certain business
combinations between Seagate and an "interested stockholder" (in general, a
stockholder owning 15% or more of the company's outstanding voting stock) or its
affiliates or associates for a period of three years following the date on which
the stockholder becomes an "interested stockholder." The restrictions do not
apply if (i) prior to an interested stockholder becoming such, the Seagate Board
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder, (ii) upon consummation of the
transaction in which any person becomes an interested stockholder, such
interested stockholder owns at least 85% of the voting stock of Seagate
outstanding at the time the transaction commences (excluding shares owned by
certain employee stock ownership plans and persons who are both directors and
officers of Seagate) or (iii) on or subsequent to the date an interested
stockholder becomes such, the business combination is both approved by the
Seagate Board and authorized at an annual or special meeting of Seagate's
stockholders, not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock not owned by the interested stockholder.
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PROPOSED RATIFICATION AND APPROVAL OF AMENDMENTS
TO THE EXECUTIVE STOCK PLAN
The Executive Stock Plan (the "Plan") was adopted by the Seagate Board in
December 1989, and approved by the stockholders of Seagate in September 1990.
1,000,000 shares of Common Stock were approved for issuance under the Plan.
250,000 shares remain available for issuance under the Plan.
PROPOSED AMENDMENTS
On November 20, 1995, the Seagate Board approved, subject to stockholder
approval, the following amendments to the Plan: (i) an increase in the number of
shares reserved for issuance thereunder by 1,000,000 shares, (ii) a change in
the eligibility provisions of the Plan to make all senior executive officers of
Seagate eligible to receive grants under the Plan, and (iii) an extension to the
term of the Plan. At this meeting, the Seagate Stockholders are being requested
to ratify and approve these amendments. The Seagate Board believes that it is in
Seagate's best interest to increase the number of shares reserved for issuance
under the Plan, to expand the Plan's eligibility criteria, and to extend the
term of the Plan so that Seagate may continue to provide incentives to its key
employees through the opportunity to purchase Seagate Common Stock under the
Plan.
The Seagate Board believes that in order to retain the continued services of
its key employees (individually, an "Executive" and collectively, the
"Executives"), and to provide incentives for the Executives to exert maximum
efforts for the success of Seagate, it is necessary to grant the right to
purchase Seagate Common Stock ("Stock Purchase Rights") to such Executives. The
Seagate Board therefore recommends that the Seagate stockholders ratify and
approve the above amendments to the Plan. The affirmative vote of not less than
a majority of the Common Stock represented and voting either in person or by
proxy will be required to approve the amendments to the Plan.
PURPOSE
The purpose of the Plan is to increase shareholder value and advance the
success of Seagate by increasing the desire of key employees to continue their
employment with Seagate and by increasing Seagate stock ownership among key
employees.
GRANTS
On November 20, 1995, the Seagate Board approved grants of Stock Purchase
Rights covering 777,500 shares of Seagate's Common Stock to the Executives at a
purchase price of $0.01 per share, subject to Seagate stockholder approval of
the amendments to the Plan described above and the amendment of the registration
statement covering the sale of shares under the Plan.
ADMINISTRATION
(a) PROCEDURE. The Plan is administered by (i) the Seagate Board if the
Seagate Board may administer the Plan in compliance with Rule 16b-3 of the
Securities Exchange Act of 1934 ("Rule 16b-3"), or (ii) a committee (the
"Committee") designated by the Seagate Board to administer the Plan, which
Committee shall be constituted to permit the Plan to comply with Rule 16b-3.
Once appointed, the Committee continues to serve until otherwise directed by the
Seagate Board. Subject to the preceding sentence, from time to time the Seagate
Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan.
(b) POWERS OF THE SEAGATE BOARD. Subject to the provisions of the Plan,
the Seagate Board has the authority in its discretion (i) to interpret the Plan,
(ii) to prescribe, amend and rescind rules and regulations relating to the Plan,
(iii) with the consent of the holder, to modify or amend such holder's written
Stock Purchase Agreement, (iv) to authorize any person to execute on behalf of
Seagate any instrument required to effect the Plan, and (v) to make other
determinations deemed necessary or advisable for the administration of the Plan.
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(c) EFFECT OF THE SEAGATE BOARD'S DECISION. All decisions, determinations
and interpretations of the Seagate Board shall be final and binding on the
Executives.
ELIGIBILITY
Stock Purchase Rights may be granted to the Executives in the discretion of
the Seagate Board.
PARTICIPATION IN THE PLAN
Eligible Executives become participants in the Plan by delivering to Seagate
an executed Stock Purchase Agreement.
TERM OF PLAN
The Plan became effective upon adoption by the Seagate Board on December 21,
1989. The Plan continues in effect for an indefinite term unless terminated by
the Seagate Board. (See "-- Amendment and Termination of the Plan" below.)
EXERCISABILITY AND NON-TRANSFERABILITY OF STOCK PURCHASE RIGHTS
Stock Purchase Rights granted to an Executive pursuant to the Plan must be
exercised within sixty (60) days after the later to occur of Seagate Board
approval of the grant of the Stock Purchase Right or delivery of notice of such
grant. Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner and shall expire immediately upon the
death of an Executive or the termination of such Executive's employment with
Seagate.
REPURCHASE OPTION; VESTING
Under the Plan, the Seagate Board has the discretion to determine the terms
and conditions that apply to Stock Purchase Rights, including any vesting
restrictions. It is anticipated that, at least initially, shares purchased under
the Plan will be subject to a Seagate repurchase right that lapses based upon
the purchaser's continued employment with Seagate over a predetermined period of
time. In the event of the Executive's termination or cessation of employment or
association with Seagate or any subsidiary in which Seagate has a majority
ownership interest for any reason whatsoever, with or without cause (including
death or disability), Seagate will, upon the date of such termination, have an
irrevocable, exclusive option to repurchase (the "Repurchase Option") at the
original purchase price all or any portion of the shares held by the Executive
that are subject to the Repurchase Option as of such date (the "Unvested
Shares"). The shares held by the Executive will be released from the Repurchase
Option according to the vesting schedule contained in the Executive's Stock
Purchase Agreement.
Within 90 days after the date of the Executive's termination of employment
by Seagate, Seagate must notify the Executive as to whether it wishes to
repurchase the Unvested Shares pursuant to the exercise of the Repurchase
Option. If Seagate elects to repurchase said shares, it will set a date for the
closing of the transaction at a place specified by Seagate not later than 30
days from the date of such notice.
Except for certain transfers to descendants and spouses, the Executive will
not transfer by sale, assignment, hypothecation, donation or otherwise any of
the shares or any interest therein prior to the release of such shares from the
Repurchase Option.
Seagate's Repurchase Option may be assigned in whole or in part to any
stockholder or stockholders of Seagate or other persons or organizations.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Subject to any required action by the stockholders of Seagate, the number of
shares of Seagate Common Stock which have been authorized for issuance under the
Plan shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Seagate Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Seagate Common Stock, or any other increase or decrease in the number of issued
shares of Seagate Common Stock effected without receipt of consideration by
Seagate; provided, however, that the
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conversion of any convertible securities of Seagate shall not be deemed to have
been "effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and
conclusive.
ESTIMATE OF BENEFITS
The grant of Stock Purchase Rights under the Plan is subject to the
discretion of the Seagate Board. As of the date of this Joint Proxy
Statement/Prospectus, other than as indicated below, there has been no
determination with respect to future awards under the Plan. The amounts that
were awarded by the Board on November 20, 1995, subject to the approval of
Seagate's stockholders, are as follows:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION SHARES
- ------------------------------------------------------------------------- ---------
<S> <C>
Alan F. Shugart 150,000
Chairman, President and
Chief Executive Officer
Bernardo D. Carballo 76,500
Executive Vice President, Sales,
Marketing, Product Line Management
and Customer Service
Brendan C. Hegarty 76,500
Executive Vice President and
Chief Operating Officer,
Components Group
Ronald D. Verdoorn 76,500
Executive Vice President and
Chief Operating Officer,
Storage Products Group
Donald L. Waite 75,000
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
All Executive Officers as a Group 531,000
(6 Persons)
All Other Employees 246,500
(7 Persons)
</TABLE>
Non-Employee directors are not eligible to participate in the Plan.
AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT AND TERMINATION. The Seagate Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Executive under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 (or
any other applicable law or regulation), Seagate shall obtain Seagate
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or termination
of the Plan shall not affect shares already subject to the Stock Purchase
Agreements, except as provided in such agreements.
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TAX INFORMATION
The following is only a summary of the effect of the Federal income tax
consequences of transactions under the Plan based on Federal securities and
income tax law in effect on January 1, 1995. This summary is not intended to be
exhaustive, and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or foreign
country in which an Executive may reside.
An executive will not recognize any taxable income at the time he or she is
granted a Stock Purchase Right. However, because the shares purchased pursuant
to a Stock Purchase Right are subject to a substantial risk of forfeiture at the
time of exercise, the Executive will recognize ordinary income for tax purposes
as and when such shares vest, measured at that time by the excess of the then
fair market value of the shares over the purchase price. The date of taxation
(and the date of measurement of taxable ordinary income) and the commencement of
the purchaser's long-term capital gain holding period may be accelerated to the
date the shares are purchased if the Executive files an election under Section
83(b) of the Code. Income recognized by an Executive at the time the shares
vest, or in the case of an Executive who makes a Section 83(b) election, at the
time the shares are purchased, is considered wages subject to regular income and
employment tax withholding. Upon resale of such shares by the Executive, any
difference between the sales price and the purchase price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss. Capital losses are allowed in full against capital gains plus $3,000 of
other income. Subject to the limitation on deductibility imposed under Section
162(m) of the Code, which applies to compensation paid to certain Executives,
Seagate will be entitled to a tax deduction in the same amount and at the same
time that the Executive recognizes ordinary income with respect to shares
purchased under the Plan.
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STOCKHOLDER PROPOSALS
Proposals of stockholders of Seagate which are intended to be presented by
such stockholders at Seagate's 1996 Annual Meeting of Stockholders must be
received by the Secretary of Seagate no later than May 24, 1996 in order that
they may be included in the proxy statement and form of proxy relating to that
meeting.
Proposals of stockholders of Conner to be presented by such stockholders at
Conner's 1996 Annual Meeting of Stockholders (if the Merger is not consummated)
must have been received by the Secretary of Conner no later than November 22,
1995 in order to be included in the proxy statement and form of proxy relating
to that meeting.
ADJOURNMENT OF SPECIAL MEETINGS
ADJOURNMENT OF SEAGATE MEETING
In the event that there are not sufficient votes to approve the issuance of
shares of Seagate Common Stock pursuant to the Merger Agreements at the time of
the Seagate Meeting, such proposal could not be approved unless the Seagate
Meeting were adjourned in order to permit further solicitation of proxies from
holders of Seagate Common Stock. Proxies that are being solicited by the Seagate
Board grant the discretionary authority to vote for any such adjournment, if
necessary. If it is necessary to adjourn the Seagate Meeting and the adjournment
is for a period of less than 30 days, no notice of the time and place of the
adjourned meeting is required to be given to stockholders other than an
announcement of such time and place at the Seagate Meeting. A majority of the
shares represented and voting at the Seagate Meeting is required to approve any
such adjournment, provided that a quorum is present. If a quorum is not present,
then either the chairman of the meeting or the stockholders entitled to vote at
the meeting may adjourn the meeting.
ADJOURNMENT OF CONNER MEETING
In the event that there are not sufficient votes to approve and adopt the
Merger Agreements at the time of the Conner Meeting, such proposal could not be
approved unless the Conner Meeting were adjourned in order to permit further
solicitation of proxies from Conner stockholders. Proxies that are being
solicited by the Conner Board grant the discretionary authority to vote for any
such adjournment, if necessary. If it is necessary to adjourn the Conner Meeting
and the adjournment is for a period of less than 30 days, no notice of the time
and place of the adjourned meeting is required to be given to stockholders other
than an announcement of such time and place at the Conner Meeting. A majority of
the voting power represented and voting at the Conner Meeting is required to
approve any such adjournment, provided that a quorum is present. If a quorum is
not present, then either the chairman of the meeting or the stockholders
entitled to vote at the meeting may adjourn the meeting.
EXPERTS
The consolidated financial statements of Seagate incorporated by reference
in Seagate's Annual Report (Form 10-K) for the year ended June 30, 1995, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K, as amended
by the Form 10-K/A filed on November 15, 1995, of Conner for the year ended
December 31, 1994, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and the federal
income tax consequences in connection with the Merger will be passed upon for
Seagate by Wilson, Sonsini, Goodrich & Rosati, P.C. The federal income tax
consequences in connection with the Merger will be passed upon for Conner by
Wachtell, Lipton, Rosen & Katz.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
SEAGATE TECHNOLOGY, INC.,
ATHENA ACQUISITION CORPORATION
AND
CONNER PERIPHERALS, INC.
OCTOBER 3, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
ARTICLE 1 -- THE MERGER....................................................................................... A-1
1.1 The Merger........................................................................................ A-1
1.2 Effective Time of the Merger...................................................................... A-1
1.3 Closing........................................................................................... A-1
1.4 Effects of the Merger............................................................................. A-2
1.5 Certificate of Incorporation and Bylaws of Surviving Corporation.................................. A-2
1.6 Tax-Free Reorganization; Pooling of Interests..................................................... A-2
ARTICLE 2 -- EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES..................................................................................... A-2
2.1 Effect on Capital Stock........................................................................... A-2
(a) Capital Stock of Sub................................................................... A-2
(b) Cancellation of Certain Shares of Conner Common Stock.................................. A-2
(c) Exchange Ratio for Conner Common Stock................................................. A-2
(d) Adjustment of Exchange Ratio........................................................... A-3
2.2 Exchange of Certificates.......................................................................... A-3
(a) Exchange Agent......................................................................... A-3
(b) Exchange Procedures.................................................................... A-3
(c) Distributions with Respect to Unsurrendered Certificates............................... A-3
(d) No Further Ownership Rights in Conner Common Stock..................................... A-4
(e) No Issuance of Fractional Shares....................................................... A-4
(f) Termination of Exchange Fund........................................................... A-4
(g) No Liability........................................................................... A-4
(h) Lost, Stolen or Destroyed Certificates................................................. A-4
2.3 Taking of Necessary Action; Further Action........................................................ A-5
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF CONNER......................................................... A-5
3.1 Organization and Qualification; Subsidiaries...................................................... A-5
3.2 Certificate of Incorporation and Bylaws........................................................... A-5
3.3 Capitalization.................................................................................... A-6
3.4 Authority Relative to this Agreement.............................................................. A-6
3.5 No Conflict; Required Filings and Consents........................................................ A-7
3.6 Compliance; Permits............................................................................... A-7
3.7 SEC Filings; Financial Statements................................................................. A-8
3.8 Absence of Certain Changes or Events.............................................................. A-8
3.9 No Undisclosed Liabilities........................................................................ A-8
3.10 Absence of Litigation............................................................................. A-9
3.11 Employee Benefit Plans............................................................................ A-9
3.12 Labor Matters..................................................................................... A-10
3.13 Registration Statement; Proxy Statement........................................................... A-10
3.14 Restrictions on Business Activities............................................................... A-10
3.15 Title to Property................................................................................. A-10
3.16 Taxes............................................................................................. A-11
3.17 Environmental Matters............................................................................. A-11
3.18 Brokers........................................................................................... A-12
3.19 Intellectual Property............................................................................. A-12
3.20 Pooling Matters................................................................................... A-12
3.21 Conner Rights Agreement........................................................................... A-12
3.22 Insurance......................................................................................... A-12
3.23 Opinion of Financial Advisor...................................................................... A-13
3.24 Board Approval.................................................................................... A-13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
3.25 Vote Required..................................................................................... A-13
3.26 Section 203 of the Delaware Statute Not Applicable................................................ A-13
3.27 Conner Ownership of Seagate Common Stock; Seagate Not an Acquiring Person......................... A-13
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF SEAGATE AND SUB................................................ A-13
4.1 Organization and Qualification; Subsidiaries...................................................... A-13
4.2 Certificate of Incorporation and Bylaws........................................................... A-14
4.3 Capitalization.................................................................................... A-14
4.4 Authority Relative to this Agreement.............................................................. A-15
4.5 No Conflict; Required Filings and Consents........................................................ A-15
4.6 Compliance; Permits............................................................................... A-16
4.7 SEC Filings; Financial Statements................................................................. A-16
4.8 Absence of Certain Changes or Events.............................................................. A-17
4.9 No Undisclosed Liabilities........................................................................ A-17
4.10 Absence of Litigation............................................................................. A-17
4.11 Employee Benefit Plans............................................................................ A-17
4.12 Labor Matters..................................................................................... A-18
4.13 Registration Statement; Proxy Statement........................................................... A-18
4.14 Restrictions on Business Activities............................................................... A-18
4.15 Title to Property................................................................................. A-19
4.16 Taxes............................................................................................. A-19
4.17 Environmental Matters............................................................................. A-19
4.18 Brokers........................................................................................... A-20
4.19 Intellectual Property............................................................................. A-20
4.20 Pooling Matters................................................................................... A-20
4.21 Insurance......................................................................................... A-20
4.22 Opinion of Financial Advisor...................................................................... A-21
4.23 Board Approval.................................................................................... A-21
4.24 Vote Required..................................................................................... A-21
4.25 Interim Operations of Sub......................................................................... A-21
4.26 Section 203 of the Delaware Statute Not Applicable................................................ A-21
4.27 Seagate Ownership of Conner Common Stock.......................................................... A-21
ARTICLE 5 -- CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS..........................
A-21
5.1 Information and Access............................................................................ A-21
5.2 Conduct of Business of the Companies.............................................................. A-22
5.3 Negotiation With Others........................................................................... A-24
5.4 Preparation of S-4 and the Proxy Statement; Other Filings......................................... A-25
5.5 Advice of Changes; SEC Filings.................................................................... A-26
5.6 Letter of Conner's Independent Auditors........................................................... A-26
5.7 Letter of Seagate's Independent Auditors.......................................................... A-26
5.8 Stockholders Meetings............................................................................. A-26
5.9 Agreements to Take Reasonable Action.............................................................. A-26
5.10 Consents.......................................................................................... A-27
5.11 NYSE Listing...................................................................................... A-27
5.12 Public Announcements.............................................................................. A-27
5.13 Affiliates........................................................................................ A-27
5.14 Conner Options.................................................................................... A-28
5.15 Conner Employee Stock Purchase Plan............................................................... A-28
5.16 Indemnification and Insurance..................................................................... A-29
5.17 Notification of Certain Matters................................................................... A-30
5.18 Pooling Accounting................................................................................ A-30
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
5.19 Conner Debentures................................................................................. A-30
5.20 Benefit Plans Generally........................................................................... A-30
ARTICLE 6 -- CONDITIONS PRECEDENT............................................................................. A-30
6.1 Conditions to Each Party's Obligation to Effect the Merger........................................ A-30
(a) HSR Act................................................................................ A-31
(b) Stockholder Approval................................................................... A-31
(c) Effectiveness of the S-4............................................................... A-31
(d) Governmental Entity Approvals.......................................................... A-31
(e) No Injunctions or Restraints; Illegality............................................... A-31
(f) Tax Opinions........................................................................... A-31
(g) Pooling-of-Interests Accounting Treatment.............................................. A-31
(h) NYSE Listing........................................................................... A-31
6.2 Conditions of Obligations of Seagate and Sub...................................................... A-31
(a) Representations and Warranties......................................................... A-31
(b) Performance of Obligations of Conner................................................... A-32
(c) Consents............................................................................... A-32
6.3 Conditions of Obligation of Conner................................................................ A-32
(a) Representations and Warranties......................................................... A-32
(b) Performance of Obligations of Seagate and Sub.......................................... A-32
(c) Consents............................................................................... A-32
ARTICLE 7 -- TERMINATION...................................................................................... A-32
7.1 Termination....................................................................................... A-32
7.2 Effect of Termination............................................................................. A-34
7.3 Fees and Expenses................................................................................. A-34
ARTICLE 8 -- GENERAL PROVISIONS............................................................................... A-34
8.1 Amendment......................................................................................... A-34
8.2 Extension; Waiver................................................................................. A-35
8.3 Nonsurvival of Representations, Warranties and Agreements......................................... A-35
8.4 Entire Agreement.................................................................................. A-35
8.5 Severability...................................................................................... A-35
8.6 Notices........................................................................................... A-35
8.7 Headings.......................................................................................... A-36
8.8 Counterparts...................................................................................... A-36
8.9 Benefits; Assignment.............................................................................. A-36
8.10 Governing Law..................................................................................... A-36
EXHIBITS
A Conner Stock Option Agreement
B Form of Agreement of Merger
C Form of Conner Affiliate Agreement
D Form of Seagate Affiliate Agreement
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is dated as of
October 3, 1995, among SEAGATE TECHNOLOGY, INC., a Delaware corporation
("Seagate"), ATHENA ACQUISITION CORPORATION, a Delaware corporation and
wholly-owned subsidiary of Seagate ("Sub"), and CONNER PERIPHERALS, INC., a
Delaware corporation ("Conner"). Seagate and Conner are sometimes referred to
individually as a "Company" and collectively as the "Companies."
RECITALS:
A. The Boards of Directors of Conner, Seagate and Sub have each approved
the terms and conditions of the business combination between Seagate and Conner
to be effected by the merger (the "Merger") of Sub with and into Conner,
pursuant to the terms and subject to the conditions of this Agreement and the
General Corporation Law of the State of Delaware (the "Delaware Statute").
B. Concurrently herewith and as a condition and inducement to Seagate's
willingness to enter into this Agreement, Seagate and Conner are entering into a
Conner Stock Option Agreement in the form attached as EXHIBIT A (the "Conner
Option Agreement"), pursuant to which Conner is granting to Seagate an option to
purchase shares of Common Stock of Conner upon the occurrence of certain
conditions.
C. The Boards of Directors of Conner and Seagate have each approved the
Conner Option Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement and the Agreement of Merger in substantially the form attached as
EXHIBIT B (the "Merger Agreement") and in accordance with the Delaware Statute,
Sub shall be merged with and into Conner. The Merger Agreement provides for the
mode of consummating the Merger and the effects thereof. Conner and Sub shall
execute the Merger Agreement immediately prior to the Closing. Following the
Merger, Conner shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Sub shall cease. Sub and
Conner are collectively referred to as the "Constituent Corporations." Unless
the context otherwise requires, the term "Agreement" includes the Merger
Agreement.
1.2 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement and the Merger Agreement, the Merger Agreement, together with any
required certificates, shall be duly filed in accordance with the Delaware
Statute simultaneously with or as soon as practicable following the Closing (as
defined in Section 1.3 below). The Merger shall become effective (the "Effective
Time") upon the filing of the Merger Agreement (together with any required
certificates) with the Secretary of State of the State of Delaware.
1.3 CLOSING. Unless this Agreement shall have been terminated pursuant to
Section 7.1, the closing of the Merger (the "Closing") will take place at 10:00
a.m. on a date (the "Closing Date") to be mutually agreed upon by the parties,
which date shall be no later than the third Business Day (as defined below)
after all of the conditions set forth in Article 6 shall have been satisfied (or
waived in accordance with Section 8.2), unless another date is agreed to in
writing by the parties. The Closing shall take place at the offices of Wilson,
Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California,
94304-1050, unless another place is agreed to in writing by the parties. As used
in this Agreement, "Business Day" shall mean any day, other than a Saturday,
Sunday or legal holiday on which banks are permitted to close in the City and
State of New York.
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1.4 EFFECTS OF THE MERGER. At the Effective Time: (i) the separate
existence of Sub shall cease and Sub shall be merged with and into Conner as the
Surviving Corporation, and (ii) the Merger shall have all of the effects
provided by the Delaware Statute.
1.5 CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION. At
the Effective Time, (i) the Certificate of Incorporation of Conner shall be
amended so that Article Fourth of such Certificate of Incorporation reads in its
entirety as follows: "The total number of shares of all classes of stock which
the corporation shall have authority to issue is 1,000, all of which shall
consist of Common Stock, par value $.001 per share.", and, as so amended, such
Certificate of Incorporation shall be the Certificate of Incorporation of the
Surviving Corporation until altered, amended or repealed as provided in the
Delaware Statute; (ii) the Bylaws of Sub shall become the Bylaws of the
Surviving Corporation until altered, amended or repealed as provided in the
Delaware Statute or in the Certificate of Incorporation or Bylaws of the
Surviving Corporation; (iii) the directors of Sub shall become the initial
directors of the Surviving Corporation and will hold office from the Effective
Time until their respective successors are duly elected or appointed as provided
in the Certificate of Incorporation and Bylaws of the Surviving Corporation; and
(iv) the officers of Sub shall become the initial officers of the Surviving
Corporation.
1.6 TAX-FREE REORGANIZATION; POOLING OF INTERESTS. The parties intend that
the Merger be treated as a tax free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and to be accounted for
as a pooling of interests pursuant to Opinion No. 16 of the Accounting
Principles Board.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, subject and pursuant
to the terms of this Agreement and the Merger Agreement, by virtue of the Merger
and without any action on the part of the Constituent Corporations or the
holders of any shares of capital stock of the Constituent Corporations:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
common stock, $.001 par value, of Sub shall be converted into one share of
common stock, $.001 par value, of the Surviving Corporation. Each stock
certificate of Sub evidencing ownership of any such shares shall continue to
evidence ownership of such shares of common stock of the Surviving
Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF CONNER COMMON STOCK. Each share
of Conner Common Stock (as defined in Section 2.1(c)) that is owned by
Conner as treasury stock and each share of Conner Common Stock that is owned
by Seagate, Sub or any other subsidiary of Seagate or Conner shall be
canceled and no capital stock of Seagate or other consideration shall be
delivered in exchange therefor.
(c) EXCHANGE RATIO FOR CONNER COMMON STOCK. Each share of common
stock, $.001 par value, of Conner ("Conner Common Stock") issued and
outstanding at the Effective Time (other than shares canceled pursuant to
Section 2.1(b)), including the corresponding right (the "Conner Right") to
purchase one one-hundredth of a share of Preferred Stock, $.001 par value
(the "Conner Series A Preferred") of Conner pursuant to the terms of the
Preferred Shares Rights Agreement dated as of November 29, 1994, between
Conner and The First National Bank of Boston as Rights Agent, as it may be
amended from time to time (the "Conner Rights Agreement"), shall be
converted into the right to receive 0.442 shares of common stock, $.01 par
value, of Seagate ("Seagate Common Stock") (the "Exchange Ratio"). Prior to
the Distribution Date (as
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defined in the Conner Rights Agreement) and unless the context otherwise
requires, all references in this Agreement to the Conner Common Stock shall
be deemed to include the Conner Rights.
(d) ADJUSTMENT OF EXCHANGE RATIO. If between the date of this
Agreement and the Effective Time, the outstanding shares of Seagate Common
Stock or Conner Common Stock shall have been changed into a different number
of shares or a different class by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination, exchange of
shares, readjustment or otherwise, then the Exchange Ratio shall be
correspondingly adjusted; PROVIDED, HOWEVER, that any such changes shall be
subject to Section 5.2 below.
2.2 EXCHANGE OF CERTIFICATES.
(A) EXCHANGE AGENT. Prior to the Closing Date, Seagate shall select a
bank or trust company reasonably acceptable to Conner to act as exchange
agent (the "Exchange Agent") in the Merger. Promptly after the Effective
Time, Seagate shall deposit with the Exchange Agent, for the benefit of the
holders of shares of Conner Common Stock, for exchange in accordance with
this Article 2 and the Merger Agreement, certificates representing the
shares of Seagate Common Stock (such shares of Seagate Common Stock,
together with any dividends or distributions with respect thereto, are
referred to as the "Exchange Fund") issuable pursuant to this Article 2 and
the Merger Agreement in exchange for outstanding shares of Conner Common
Stock, and cash in an amount sufficient for payment in lieu of fractional
shares pursuant to Section 2.2(e).
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record (other than
Conner, any subsidiary of Conner, Sub, Seagate and any other subsidiary of
Seagate) (including holders of record pursuant to purchases made under the
Conner Purchase Plan (as defined in Section 5.15) immediately prior to the
Effective Time pursuant to Section 5.15) of a certificate or certificates
which immediately prior to the Effective Time represented issued and
outstanding shares of Conner Common Stock (collectively, the "Certificates")
whose shares are being converted into Seagate Common Stock pursuant to
Section 2.1(c) of this Agreement and the provisions of the Merger Agreement,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Seagate and Conner may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Seagate Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with a duly executed letter of transmittal and such other documents
as may be reasonably required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Seagate Common Stock which such
holder has the right to receive pursuant to the provisions of this Article 2
and the Merger Agreement, and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of shares of Conner
Common Stock which is not registered on the transfer records of Conner, a
certificate representing the proper number of shares of Seagate Common Stock
may be issued to a transferee if the Certificate representing such Conner
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2 and the Merger Agreement, each Certificate
shall be deemed, on and after the Effective Time, to represent only the
right to receive upon such surrender the certificate representing shares of
Seagate Common Stock and cash in lieu of any fractional shares of Seagate
Common Stock as contemplated by this Article 2, the Merger Agreement and the
Delaware Statute.
(c) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No
dividends or other distributions declared or made after the Effective Time
with respect to Seagate Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate
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with respect to the shares of Seagate Common Stock represented thereby and
no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 2.2(e) or the Merger Agreement until the holder
of record of such Certificate shall surrender such Certificate. Subject to
the effect, if any, of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Seagate Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of Seagate Common Stock to
which such holder is entitled pursuant to Section 2.2(e) and the Merger
Agreement and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
shares of Seagate Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Seagate Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN CONNER COMMON STOCK. All shares of
Seagate Common Stock issued upon the surrender for exchange of shares of
Conner Common Stock in accordance with the terms of this Article 2 and the
Merger Agreement (including any cash paid pursuant to Section 2.2(c) or
2.2(e)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Conner Common Stock. There shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Conner Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article 2
and the Merger Agreement.
(e) NO ISSUANCE OF FRACTIONAL SHARES. No certificates or scrip for
fractional shares of Seagate Common Stock shall be issued, but in lieu
thereof each holder of shares of Conner Common Stock who would otherwise be
entitled to receive certificates or scrip for a fraction of a share of
Seagate Common Stock shall receive from Seagate, at such time as such holder
shall receive a certificate representing shares of Seagate Common Stock, an
amount of cash equal to the per share market value of Seagate Common Stock
determined by multiplying (i) the closing price of a share of Seagate Common
Stock as reported on the New York Stock Exchange, Inc. (the "NYSE")
composite tape on the last full trading day prior to the Effective Time by
(ii) the fraction of a share of Seagate Common Stock to which such holder
would otherwise be entitled. The fractional share interests of each
stockholder of Conner shall be aggregated, so that no Conner stockholder
shall receive cash in an amount equal to or greater than the value of one
full share of Seagate Common Stock.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the stockholders of Conner for twelve months
after the Effective Time shall be delivered to Seagate, upon demand, and any
former stockholders of Conner who have not previously complied with this
Article 2 and the Merger Agreement shall thereafter look only to Seagate for
payment of their claim for Seagate Common Stock, any cash in lieu of
fractional shares of Seagate Common Stock and any dividends or distributions
with respect to Seagate Common Stock.
(g) NO LIABILITY. Neither the Exchange Agent, Seagate, Sub nor Conner
shall be liable to any holder of shares of Conner Common Stock or Seagate
Common Stock, as the case may be, for shares (or dividends or distributions
with respect thereto) from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(h) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Conner Common Stock shall have been lost,
stolen or destroyed, the holder of such lost, stolen or destroyed
Certificate(s) shall execute an affidavit of that fact upon request. The
holder of any such lost, stolen or destroyed Certificate(s) shall also
deliver a bond in such sum as Seagate may reasonably require as indemnity
against any claim that may be made against Seagate or the
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Exchange Agent with respect to the Certificate(s) alleged to have been lost,
stolen or destroyed. The affidavit and any bond which may be required
hereunder shall be delivered to the Exchange Agent, who shall be responsible
for making payment for such lost, stolen or destroyed Certificate(s).
2.3 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Conner and Sub, the officers and directors of Conner and Sub
are fully authorized in the name of their respective corporations or otherwise
to take, and will take, all such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CONNER
Conner represents and warrants to Seagate and Sub, except as set forth in
the Conner SEC Reports (as defined in Section 3.7(a)) or the disclosure letter
delivered by Conner to Seagate on or prior to the date of this Agreement (the
"Conner Disclosure Letter"), as follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (i) Each of Conner and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Conner and its subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders ("Approvals") necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below). Each of Conner and its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect. When used in connection with Conner or any of its
subsidiaries, the term "Material Adverse Effect" means any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), liabilities, financial condition or results of operations of Conner and
its subsidiaries taken as a whole; PROVIDED, HOWEVER, that a "Material Adverse
Effect" shall not include any adverse effect on the revenues or gross margins of
Conner (or the direct consequences thereof) following the date of this Agreement
which is attributable to (i) a delay of, reduction in or cancellation or change
in the terms of product orders by customers of Conner or (ii) an increase in the
price of, a delay of, reduction in or cancellation of or change in terms with
respect to products or components supplied by vendors of Conner, which in either
case is attributable to the transactions contemplated by this Agreement. Other
than wholly-owned subsidiaries and except as permitted after the date of this
Agreement under Section 5.2 of this Agreement, Conner does not directly or
indirectly own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business, association or
entity.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Conner has previously
furnished to Seagate a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date. Such Certificate of Incorporation,
Bylaws and equivalent organizational documents of each of its subsidiaries are
in full force and effect. Neither Conner nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents.
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3.3 CAPITALIZATION. The authorized capital stock of Conner consists of
100,000,000 shares of Conner Common Stock and 20,000,000 shares of Preferred
Stock ("Conner Preferred Stock"), each having a par value of $.001 per share, of
Conner. At the close of business on September 2, 1995, (i) 53,436,131 shares of
Conner Common Stock were issued and outstanding all of which are validly issued,
fully paid and nonassessable, (ii) no shares of Conner Common Stock were held in
treasury by Conner or by subsidiaries of Conner, (iii) 2,328,643 shares of
Conner Common Stock were available for future issuance pursuant to Conner's
employee stock purchase plan, (iv) 7,168,859 shares of Conner Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
Conner Common Stock under the Conner 1986 Incentive Stock Plan, as amended (the
"1986 Plan"), the 1981 Archive Incentive Stock Plan and 1981 Archive
Nonqualified Stock Plan (the "Archive Plans"), and the Conner 1995 Director
Stock Plan (the "1995 Plan"), (v) 5,901,585 shares of Conner Common Stock were
available for future grant under the 1986 Plan, the Archive Plans and the 1995
Plan, (vi) 783,000 shares of Conner Common Stock were available for future
issuance under the Conner 1992 Restricted Stock Plan, (vii) 20,116,353 shares of
Conner Common Stock were reserved for future issuance upon conversion of Conner
Debentures (as defined in Section 5.19) and (viii) 8,015,420 shares of Conner
Common Stock were reserved for future issuance pursuant to the Conner Option
Agreement. As of the date hereof, no shares of Conner Preferred Stock were
issued or outstanding and 1,000,000 shares of Conner Series A Preferred were
reserved for issuance upon exercise of the Conner Rights. No change in such
capitalization has occurred between September 2, 1995 and the date hereof except
(A) the issuance of shares of Conner Common Stock pursuant to the exercise of
outstanding options, (B) shares issued under Conner's employee stock purchase
plan, (C) shares issued upon conversion of Conner Debentures and (D) the
issuance of options as permitted under Section 5.2(c) hereof (and exercise of
such options). Except as set forth in this Section 3.3 and except for the
options (the "Arcada Options") to acquire common stock of Arcada ("Arcada Common
Stock") listed on the Conner Disclosure Letter, as of the date of this
Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of Conner or any of its subsidiaries or obligating Conner or any
of its subsidiaries to issue or sell any shares of capital stock of, or other
equity interests in, Conner or any of its subsidiaries. All shares of Conner
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable. Other
than with respect to the Arcada Options and such actions as are permitted under
Section 5.2, there are no obligations, contingent or otherwise, of Conner or any
of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
Conner Common Stock or the capital stock of any subsidiary or to provide funds
to or make any investment (in the form of a loan, capital contribution or
otherwise) in any such subsidiary or any other entity other than guarantees of
obligations of subsidiaries entered into in the ordinary course of business. All
of the outstanding shares of capital stock (other than directors' qualifying
shares) of each of Conner's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and, other than the shares subject to the Arcada
Options, all such shares (other than directors' qualifying shares) are owned by
Conner or another subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Conner's voting rights, charges or
other encumbrances of any nature whatsoever.
3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Conner has all necessary
corporate power and authority to execute and deliver this Agreement and the
Conner Option Agreement and to perform its obligations hereunder and thereunder
and, subject to obtaining the approval of the stockholders of Conner of the
Merger, to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Conner Option Agreement by
Conner and the consummation by Conner of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of Conner and no other corporate proceedings on the part of
Conner are necessary to authorize this Agreement, the Conner Option Agreement or
to consummate the transactions so contemplated (other than, with respect to the
Merger, the approval and adoption of this Agreement by holders of a majority of
the outstanding shares of Conner Common
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Stock in accordance with the Delaware Statute and Conner's Certificate of
Incorporation and Bylaws). This Agreement and the Conner Option Agreement have
been duly and validly executed and delivered by Conner and, assuming the due
authorization, execution and delivery by Seagate and Sub, constitute legal and
binding obligations of Conner, enforceable against Conner in accordance with
their respective terms, subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors rights
generally and (ii) the availability of injunctive relief and other equitable
remedies. The Merger Agreement, when executed and delivered by Conner as
contemplated hereby, will be duly executed and delivered by Conner and when
approved by the stockholders of Conner and assuming the due authorization,
execution and delivery by Sub, will be the valid and binding obligation of
Conner, enforceable against Conner in accordance with its terms, subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors rights generally and (ii) the availability of
injunctive relief and other equitable remedies.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the Conner Option
Agreement by Conner do not, and the performance of this Agreement and the Conner
Option Agreement by Conner shall not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws or equivalent organizational documents of
Conner or any of its subsidiaries, (ii) subject to obtaining the approval of
Conner's stockholders of the Merger and compliance with the requirements set
forth in Section 3.5(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Conner or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Conner's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Conner or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Conner or any of
its subsidiaries is a party or by which Conner or any of its subsidiaries or its
or any of their respective properties are bound or affected, except for any such
breaches, defaults or other occurrences that could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The Conner
Disclosure Letter lists all material consents, waivers and approvals under any
of Conner's or any of its subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby and by the Conner Option Agreement.
(b) The execution and delivery of this Agreement and the Conner Option
Agreement by Conner do not, and the performance of this Agreement by Conner
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign (a "Governmental
Entity"), except (A) for applicable requirements, if any, of the Securities Act
of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), state securities laws ("Blue Sky Laws"), the
pre-merger notification requirements (the "HSR Approval") of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and
of foreign Governmental Entities and the rules and regulations thereunder, the
NYSE rules and regulations and the filing and recordation of the Merger
Agreement as required by the Delaware Statute and (B) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, (i) would not prevent consummation of the Merger or
otherwise prevent Conner from performing its obligations under this Agreement or
(ii) could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
3.6 COMPLIANCE; PERMITS.
(a) Neither Conner nor any of its subsidiaries is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Conner or any of its subsidiaries or by which its or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to
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which Conner or any of its subsidiaries is a party or by which Conner or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except for any conflicts, defaults or violations which could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the best knowledge of Conner, no investigation or review by
any governmental or regulatory body or authority is pending or threatened
against Conner or its subsidiaries, nor has any governmental or regulatory body
or authority indicated an intention to conduct the same, other than, in each
such case, those the outcome of which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Conner and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to operation of the business of Conner and its subsidiaries taken as a
whole (collectively, the "Conner Permits"). Conner and its subsidiaries are in
compliance with the terms of the Conner Permits, except where the failure to so
comply could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
3.7 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Conner has made available to Seagate a correct and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
Conner with the Securities and Exchange Commission ("SEC") on or after January
1, 1992 and prior to the date of this Agreement (the "Conner SEC Reports"),
which are all the forms, reports and documents required to be filed by Conner
with the SEC since January 1, 1992. The Conner SEC Reports (A) were prepared in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (B) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of Conner's subsidiaries is required to file any reports or
other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Conner SEC Reports was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and each fairly presents the consolidated financial position
of Conner and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
adjustments which were not or are not expected to be material in amount.
(c) Conner has previously furnished to Seagate a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Conner with the SEC pursuant to
the Securities Act or the Exchange Act.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1994, Conner
and its subsidiaries have conducted their businesses only in the ordinary course
and in a manner consistent with past practice and, since such date, there has
not been (i) any Material Adverse Effect or (ii) any material change by Conner
in its accounting methods, principles or practices except as required by
concurrent changes in GAAP.
3.9 NO UNDISCLOSED LIABILITIES. Neither Conner nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Conner and its subsidiaries taken as a
whole, except liabilities (i) provided for in Conner's
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balance sheet as of December 31, 1994, or (ii) incurred since December 31, 1994
in the ordinary course of business, none of which are material to the business,
results of operations or financial condition of Conner and its subsidiaries,
taken as a whole.
3.10 ABSENCE OF LITIGATION. There are no claims, actions, suits or
proceedings pending or, to the best knowledge of Conner, threatened (or, to the
best knowledge of Conner, any investigation pending or threatened) against
Conner or any of its subsidiaries, or any properties or rights of Conner or any
of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
3.11 EMPLOYEE BENEFIT PLANS.
(a) Section 3.11 of the Conner Disclosure Letter lists, with respect to
Conner, any trade or business (whether or not incorporated) which is treated as
a single employer with Conner (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code or any subsidiary of Conner (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), (ii) all loans to employees
in excess of $100,000, loans to officers, and any stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
material bonus, material deferred compensation and material incentive plans,
programs or arrangements, (iii) other fringe or employee benefit plans, programs
or arrangements that apply to senior management of Conner and that do not
generally apply to all employees, and (iv) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of Conner of greater than $50,000 remain for the
benefit of, or relating to, any employee, consultant or director of Conner
(together, the plans and arrangements described in (i) through (iv) above are
referred to as the "Conner Employee Plans"), and a copy of each such Conner
Employee Plan and each summary plan description and annual report on the Form
5500 series required to be filed with any government agency for each Conner
Employee Plan for the three most recent Plan years has been made available to
Seagate.
(b) (i) None of the Conner Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Conner Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect;
(iii) all Conner Employee Plans have been administered in compliance with the
requirements prescribed by any and all statutes (including ERISA and the Code,
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, Internal Revenue Service or Secretary of the
Treasury)), except as would not have, in the aggregate, a Material Adverse
Effect and Conner and each of its subsidiaries have performed all obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any material default or
violation by any other party to, any of the Conner Employee Plans; (iv) each
Conner Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code so qualifies;
(v) all material contributions required to be made by Conner or any of its
subsidiaries to any Conner Employee Plan have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each Conner
Employee Plan for the current plan years; (vi) with respect to each Conner
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no
Conner Employee Plan is covered by, and neither Conner nor any subsidiary has
incurred or expects to incur any liability under Title IV of ERISA or Section
412 of the Code.
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(c) With respect to each Conner Employee Plan, Conner has complied with the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 and the proposed regulations
thereunder, except to the extent that a failure to comply would not have a
Material Adverse Effect.
(d) There are no Conner Employee Plans that provide for benefits to vest,
accrue or become payable upon the occurrence of the events described in this
Agreement.
3.12 LABOR MATTERS. (i) There are no controversies pending or, to the best
knowledge of each of Conner and its respective subsidiaries, threatened, between
Conner or any of its subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect; (ii) as of the date of this Agreement, neither Conner nor any of
subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Conner or its subsidiaries nor
does Conner or its subsidiaries know of any activities or proceedings of any
labor union to organize any such employees (A) as of the date of this Agreement
and (B) which, as of the Closing Date, have or could reasonably be expected to
have a Material Adverse Effect on Conner and its subsidiaries; and (iii) as of
the date of this Agreement, neither Conner nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages or lockouts, or threats
thereof, by or with respect to any employees of Conner or any of its
subsidiaries (X) as of the date of this Agreement and (Y) which, as of the
Closing Date, have or could reasonably be expected to have a Material Adverse
Effect on Conner and its subsidiaries.
3.13 REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by Conner for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC by
Seagate in connection with the issuance of the Seagate Common Stock in or as a
result of the Merger (the "S-4") will, at the time the S-4 becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading; and (ii) the Proxy Statement (the "Proxy
Statement") to be filed with the SEC by Seagate and Conner pursuant to Section
5.4 hereof will, at the dates mailed to the stockholders of Seagate and Conner,
at the times of the stockholders meetings of Seagate and Conner (each a
"Stockholders Meeting" and collectively, the "Stockholders Meetings") in
connection with the transactions contemplated hereby and as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
3.14 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than as may be permitted
under Section 5.9, there is no material agreement, judgment, injunction, order
or decree binding upon Conner or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Conner or any of its subsidiaries, any acquisition of
property by Conner or any of its subsidiaries or the conduct of business by
Conner or any of its subsidiaries as currently conducted.
3.15 TITLE TO PROPERTY. Conner owns no material real property. Conner and
each of its subsidiaries have good and defensible title to all of their material
properties and assets, free and clear of all liens, charges and encumbrances
except liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect; and all leases pursuant to which Conner or any of its
subsidiaries lease from others material amounts of real or personal property are
in good standing, valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing material default or
event of default (or any event which with notice or lapse of time, or both,
would constitute a material default and in respect of which Conner or subsidiary
has not
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taken adequate steps to prevent such default from occurring) except where the
lack of such good standing, validity and effectiveness or the existence of such
default or event of default could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All the plants,
structures and equipment of Conner and its subsidiaries, except such as may be
under construction, are in good operating condition and repair, except where the
failure of such plants, structures and equipment to be in such good operating
condition and repair could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.16 TAXES. Conner and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Conner or any of
its subsidiaries is or has been a member has timely filed all Tax Returns
required to be filed by it (other than those that are not, individually or in
the aggregate, material), has paid all Taxes shown thereon to be due and has
provided adequate accruals in all material respects in accordance with GAAP in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any returns. In addition, (i) no material claim for unpaid
Taxes has become a lien against the property of Conner or any of its
subsidiaries or is being asserted against Conner or any of its subsidiaries,
(ii) no audit of any Tax Return of Conner or any of its subsidiaries is being
conducted by a Tax authority (A) as of the date of this Agreement and (B) which,
as of the Closing Date, has not had and could not reasonably be expected to have
a Material Adverse Effect on Conner and its subsidiaries, (iii) no extension of
the statute of limitations on the assessment of any Taxes has been granted by
Conner or any of its subsidiaries and is currently in effect (A) as of the date
of this Agreement and (B) which, as of the Closing Date, has not had and could
not reasonably be expected to have a Material Adverse Effect on Conner and its
subsidiaries and (iv) there is no agreement, contract or arrangement to which
Conner or any of its subsidiaries is a party that may result in the payment of
any amount that would not be deductible pursuant to Sections 280G, 162 or 404 of
the Code. As used herein, "Taxes" shall mean all taxes of any kind, including,
without limitation, those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Tax Return" shall mean any return, report
or statement required to be filed with any governmental authority with respect
to Taxes.
3.17 ENVIRONMENTAL MATTERS. Except in all cases as, in the aggregate, have
not had and could not reasonably be expected to have a Material Adverse Effect,
Conner and each of its subsidiaries to their respective best knowledge (i) have
obtained all applicable permits, licenses and other authorizations which are
required under Federal, state or local laws relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes by Conner or its subsidiaries (or their
respective agents); (ii) are in compliance with all terms and conditions of such
required permits, licenses and authorizations, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder; (iii) as of
the date hereof, are not aware of nor have received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance or which
would give rise to any common law or statutory liability, or otherwise form the
basis of any claim, action, suit or proceeding, based on or resulting from
Conner's or any of its subsidiaries (or any of their respective agents)
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, or release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste; and (iv) have
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taken all actions necessary under applicable requirements of Federal, state or
local laws, rules or regulations to register any products or materials required
to be registered by Conner or its subsidiaries (or any of their respective
agents) thereunder.
3.18 BROKERS. No broker, finder or investment banker (other than Goldman,
Sachs & Co. ("Goldman Sachs")) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Conner.
3.19 INTELLECTUAL PROPERTY.
(a) Conner and its subsidiaries own, or have the right to use, sell or
license all material intellectual property rights necessary or required for the
conduct of their respective businesses as presently conducted (such intellectual
property rights are collectively referred to as the "Conner IP Rights");
(b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any Conner IP Right
(the "Conner IP Rights Agreements"), will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Conner
IP Right or materially impair the right of Conner and its subsidiaries or the
Surviving Corporation to use, sell or license any Conner IP Right or portion
thereof (except where such breaches, forfeitures or terminations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect);
(c) neither the manufacture, marketing, license, sale or intended use of any
product currently licensed or sold by Conner or any of its subsidiaries or
currently under development by Conner or any of its subsidiaries violates any
license or agreement between Conner or any of its subsidiaries and any third
party or infringes any intellectual property right of any other party; and there
is no pending or, to the best knowledge of Conner, threatened claim or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any Conner IP Right nor, to the best knowledge of Conner, is there
any basis for any such claim, nor has Conner received any notice asserting that
any Conner IP Right or the proposed use, sale, license or disposition thereof
conflicts or will conflict with the rights of any other party, nor, to the best
knowledge of Conner, is there any basis for any such assertion, except to the
extent that such violation(s), or notice or basis therefor, have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; and
(d) Conner has taken reasonable and practicable steps designed to safeguard
and maintain the secrecy and confidentiality of, and its proprietary rights in,
all material Conner IP Rights.
3.20 POOLING MATTERS. Neither Conner nor any of its affiliates has, to its
best knowledge and based upon consultation with its independent auditors, taken
or agreed to take any action that (without giving effect to this Agreement, the
transactions contemplated hereby or actions related thereto, or any action taken
or agreed to be taken by Seagate or any of its affiliates) would prevent Seagate
from accounting for the business combination to be effected by the Merger as a
pooling of interests.
3.21 CONNER RIGHTS AGREEMENT. Conner will amend prior to the Effective
Time, the Conner Rights Agreement to the extent necessary to provide that the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby will not (i) cause Seagate or any of its affiliates to
become an Acquiring Person (as defined in the Conner Rights Agreement), or (ii)
otherwise affect the rights of the holders of Conner Rights, including by
causing such Conner Rights to separate from the underlying shares or by giving
such holders the right to acquire securities of any party hereto.
3.22 INSURANCE. Conner maintains insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of Conner and its subsidiaries (collectively, the
"Insurance Policies") which are of the type and in amounts customarily
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carried by persons conducting businesses similar to those of Conner and its
subsidiaries. There is no material claim by Conner or any of its subsidiaries
pending under any of the material Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds.
3.23 OPINION OF FINANCIAL ADVISOR. Conner has been advised in writing by
its financial advisor, Goldman Sachs, that in its opinion, as of the date of
this Agreement, the Exchange Ratio is fair to the stockholders of Conner.
3.24 BOARD APPROVAL. The Board of Directors of Conner has, as of the date
of this Agreement (i) approved this Agreement, the Merger Agreement and the
Conner Option Agreement and the transactions contemplated hereby and thereby,
(ii) determined that the Merger is in the best interests of the stockholders of
Conner and is on terms that are fair to such stockholders and (iii) recommended
that the stockholders of Conner approve this Agreement, the Merger Agreement and
the Merger.
3.25 VOTE REQUIRED. The affirmative vote of a majority of the votes that
holders of the outstanding shares of Conner Common Stock are entitled to vote
thereon is the only vote of the holders of any class or series of Conner's
capital stock necessary to approve this Agreement and the Merger Agreement and
the transactions contemplated hereby and thereby.
3.26 SECTION 203 OF THE DELAWARE STATUTE NOT APPLICABLE. The provisions of
Section 203 of the Delaware Statute will not, prior to the termination of this
Agreement, assuming the accuracy of the representation of Seagate given in
Section 4.27 (without giving effect to the knowledge qualification thereof),
apply to this Agreement or to the transactions contemplated hereby.
3.27 CONNER OWNERSHIP OF SEAGATE COMMON STOCK; SEAGATE NOT AN ACQUIRING
PERSON. Conner and, to the best knowledge of Conner, its "affiliates" and
"associates" (as defined under both Section 203 of the Delaware Statute and Rule
405 under the Securities Act) collectively beneficially own and have
beneficially owned at all times during the three-year period prior to the date
hereof less than 1% of the shares of Seagate Common Stock outstanding. So long
as Seagate's and Sub's representations set forth in the first sentence of
Section 4.27 are accurate (without giving effect to the knowledge qualification
thereof) neither the execution and delivery of this Agreement by the parties
hereto nor the consummation by Seagate and Sub of the transactions contemplated
hereby will cause Seagate or any of its affiliates to be within the definition
of "Acquiring Person" (as such term is defined in the Conner Rights Agreement).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SEAGATE AND SUB
Seagate and Sub jointly and severally represent and warrant to Conner,
except as set forth in the Seagate SEC Reports (as defined in Section 4.7(a)) or
the disclosure letter delivered by Seagate and Sub to Conner on or prior to the
date of this Agreement (the "Seagate Disclosure Letter"), as follows:
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Seagate and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Seagate and its subsidiaries is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such Approvals would not, individually or in the aggregate, have a Material
Adverse Effect (as defined below). Each of Seagate and its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either individually
or in the aggregate, have a Material Adverse Effect. When used in connection
with Seagate or any of its subsidiaries, the term "Material Adverse Effect"
means any
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change, event or effect that is materially adverse to the business, assets
(including intangible assets), liabilities, financial condition or results of
operations of Seagate and its subsidiaries taken as a whole; PROVIDED, HOWEVER,
that a "Material Adverse Effect" shall not include any adverse effect on the
revenues or gross margins of Seagate (or the direct consequences thereof)
following the date of this Agreement which are attributable to (i) a delay of,
reduction in or cancellation or the change in the terms of product orders by
customers of Seagate or (ii) an increase in the price of, a delay of, reduction
in or cancellation of or change in terms with respect to products or components
supplied by vendors of Seagate, which in either case are attributable to the
transactions contemplated by this Agreement. Other than wholly-owned
subsidiaries and except as permitted after the date of this Agreement under
Section 5.2 of this Agreement, Seagate does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business, association or entity.
4.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seagate has previously
furnished to Conner a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date. Such Certificate of Incorporation,
Bylaws and equivalent organizational documents of each of its subsidiaries are
in full force and effect. Neither Seagate nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents.
4.3 CAPITALIZATION. The authorized capital stock of Seagate consists of
(i) 200,000,000 shares of Seagate Common Stock and of (ii) 1,000,000 shares of
Preferred Stock, par value $.01 per share ("Seagate Preferred Stock"), 800,000
of which have been designated as Seagate Series A Preferred. At the close of
business on September 1, 1995, (i) 72,637,095 shares of Seagate Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) 209,410 shares of Seagate Common Stock were held in treasury
by Seagate or by subsidiaries of Seagate, (iii) 2,366,695 shares of Seagate
Common Stock were reserved for future issuance pursuant to Seagate's employee
stock purchase plan, (iv) 8,000,303 shares of Seagate Common Stock were reserved
for issuance upon the exercise of outstanding options ("Seagate Options") to
purchase Seagate Common Stock, 7,135,532 shares of Seagate Common Stock were
reserved for future grant under the 1991 Incentive Stock Option Plan (including
6,000,000 shares subject to stockholder approval at the 1995 Annual Meeting of
Stockholders to be held October 26, 1995), 550,000 shares of Seagate Common
Stock were reserved for future grant under the Directors' Option Plan and no
shares of Seagate Common Stock were reserved for future grant under the 1984
Stock Option Plan, (v) 6,278,071 shares and 10,314,286 shares were reserved for
future issuance upon conversion of Seagate's 6 3/4% Convertible Subordinated
Debentures Due 2012 and 5% Convertible Subordinated Debentures Due 2003,
respectively (collectively the "Seagate Debentures"). No change in such
capitalization has occurred between September 1, 1995 and the date hereof except
issuances of Seagate Common Stock that would be permitted pursuant to Section
5.2(c) hereof. As of the date hereof, no shares of Seagate Preferred Stock were
issued or outstanding. The authorized capital stock of Sub consists of 1,000
shares of common stock, par value $0.001 per share, 100 shares of which, as of
the date hereof, are issued and outstanding. All of the outstanding shares of
Seagate's and Sub's respective capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth in this
Section 4.3, as of the date of this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Seagate or any of its subsidiaries or
obligating Seagate or any of its subsidiaries to issue or sell any shares of
capital stock of, or other equity interests in, Seagate or any of its
subsidiaries. All shares of Seagate Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall, and the shares of
Seagate Common Stock to be issued pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable. Except for such
actions as are permitted under Section 5.2, there are no obligations, contingent
or otherwise, of Seagate or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Seagate Common Stock or the capital stock of any
subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such subsidiary or any other entity
other than guarantees of obligations of subsidiaries entered into in the
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ordinary course of business. All of the outstanding shares of capital stock
(other than directors' qualifying shares) of each of Seagate's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares) are owned by Seagate or another
subsidiary free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Seagate's voting rights, charges or other
encumbrances of any nature whatsoever.
4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Seagate and Sub has all
necessary corporate power and authority to execute and deliver this Agreement
and the Conner Option Agreement, and to perform its obligations hereunder and
thereunder, subject to obtaining the approval of Seagate's stockholders of the
issuance of Seagate Common Stock in the Merger, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Conner Option Agreement by Seagate and Sub and the consummation by
Seagate and Sub of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action on the part of
Seagate and Sub and no other corporate proceedings on the part of Seagate or Sub
are necessary to authorize this Agreement and the Conner Option Agreement, or to
consummate the transactions so contemplated (other than with respect to the
Merger, the approval by the holders of a majority of the outstanding shares of
Seagate Common Stock of the issuance of Seagate Common Stock in the Merger in
accordance with the applicable rules of the NYSE and Seagate's Certificate of
Incorporation and Bylaws). This Agreement and the Conner Option Agreement have
been duly and validly executed and delivered by Seagate and Sub and, assuming
the due authorization, execution and delivery by Conner, constitute legal and
binding obligations of Seagate and Sub, enforceable against Seagate and Sub in
accordance with their respective terms, subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors rights generally and (ii) the availability of injunctive relief and
other equitable remedies. The Merger Agreement, when executed and delivered by
Sub as contemplated hereby, will be duly executed and delivered by Sub and when
approved by the stockholders of Seagate and assuming the due authorization,
execution and delivery by Sub, will be the valid and binding obligation of Sub
enforceable against Sub in accordance with its terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors rights generally and (ii) the availability of injunctive
relief and other equitable remedies.
4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seagate and Sub and the
Conner Option Agreement by Seagate do not, and the performance of this Agreement
by Seagate and Sub and the Conner Option Agreement by Seagate shall not, (i)
conflict with or violate the Certificate of Incorporation, Bylaws or equivalent
organizational documents of Seagate or any of its subsidiaries, (ii) subject to
obtaining Seagate's stockholders approval of the issuance of the shares of
Seagate Common Stock in the Merger and compliance with the requirements set
forth in Section 4.5(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Seagate or any of its
subsidiaries or by which it or their respective properties are bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Seagate's or any such subsidiary's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Seagate
or any of its subsidiaries pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Seagate or any of its subsidiaries is a party
or by which Seagate or any of its subsidiaries or its or any of their respective
properties are bound or affected, except for any such breaches, defaults or
other occurrences that could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. The Seagate Disclosure Letter lists
all material consents, waivers and approvals under any of Seagate's or any of
its subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated by
this Agreement and the Conner Option Agreement.
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(b) The execution and delivery of this Agreement by Seagate and Sub and the
Conner Option Agreement by Seagate do not, and the performance of this Agreement
by Seagate and Sub shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity except (i)
for applicable requirements, if any, of the Securities Act, the Exchange Act,
Blue Sky Laws, the pre-merger notification requirements of the HSR Act and of
foreign governmental entities and the rules and regulations thereunder, the NYSE
rules and regulations, and the filing and recordation of the Merger Agreement as
required by the Delaware Statute and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, (i) would not prevent consummation of the Merger or otherwise
prevent Seagate or Sub from performing their respective obligations under this
Agreement or (ii) could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.6 COMPLIANCE; PERMITS.
(a) Neither Seagate nor any of its subsidiaries is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Seagate or any of its subsidiaries or by which its or any
of their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Seagate or any of its subsidiaries is a
party or by which Seagate or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. To the best
knowledge of Seagate, no investigation or review by any governmental or
regulatory body or authority is pending or threatened against Seagate or any of
its subsidiaries, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same, other than, in each such case, those
the outcome of which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) Seagate and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of Seagate and its subsidiaries taken
as a whole (collectively, the "Seagate Permits"). Seagate and its subsidiaries
are in compliance with the terms of the Seagate Permits, except where the
failure to so comply could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.7 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Seagate has made available to Conner a correct and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
Seagate with the SEC on or after January 1, 1992 and prior to the date of this
Agreement (the "Seagate SEC Reports"), which are all the forms, reports and
documents required to be filed by Seagate with the SEC since January 1, 1992.
The Seagate SEC Reports (A) were prepared in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (B) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of Seagate's
subsidiaries is required to file any reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Seagate SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of Seagate and its subsidiaries as
at the respective dates thereof and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to adjustments which were not or are
not expected to be material in amount.
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(c) Seagate has previously furnished to Conner a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Seagate with the SEC pursuant to
the Securities Act or the Exchange Act.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1995, Seagate and
its subsidiaries have conducted their businesses only in the ordinary course and
in a manner consistent with past practice and, since such date, there has not
been (i) any Material Adverse Effect or (ii) any material change by Seagate in
its accounting methods, principles or practices except as required by concurrent
changes in GAAP.
4.9 NO UNDISCLOSED LIABILITIES. Neither Seagate nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of Seagate and its subsidiaries taken as a
whole, except liabilities (i) provided for in Seagate's balance sheet as of June
30, 1995 or (ii) incurred since June 30, 1995 in the ordinary course of
business, none of which are material to the business, results of operations or
financial condition of Seagate and its subsidiaries, taken as a whole.
4.10 ABSENCE OF LITIGATION. There are no claims, actions, suits or
proceedings pending or, to the best knowledge of Seagate, threatened (or to the
best knowledge of Seagate, any investigation pending or threatened) against
Seagate or any of its subsidiaries, or any properties or rights of Seagate or
any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
4.11 EMPLOYEE BENEFIT PLANS.
(a) Section 4.11 of the Seagate Disclosure Letter lists, with respect to
Seagate, any trade or business (whether or not incorporated) which is treated as
a single employer with Seagate (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code, or any subsidiary of Seagate (i)
all employee benefit plans (as defined in Section 3(3) of ERISA), (ii) all loans
to employees in excess of $100,000, loans to officers, and any stock option,
stock purchase, phantom stock, stock appreciation right, deferred compensation,
supplemental retirement, severance, material bonus, material incentive and
material deferred compensation plans, programs or arrangements, and (iii) other
fringe or employee benefit plans, programs or arrangements that apply to senior
management of Seagate and that do not generally apply to all employees, for the
benefit of, or relating to, any employee, consultant or director of Seagate,
(together, the plans and arrangements described in (i) through (iii) above are
referred to as the "Seagate Employee Plans"), and a copy of each such Seagate
Employee Plan and each summary plan description, and annual report on the Form
5500 series required to be filed with any government agency for each Seagate
Employee Plan for the three most recent Plan years, and the most recent
actuarial report, plan committee meeting minutes and trustee's reports has been
made available to Conner.
(b) (i) None of the Seagate Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Seagate Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect;
(iii) all Seagate Employee Plans have been administered in compliance with the
requirements prescribed by any and all statutes (including ERISA and the Code,
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, Internal Revenue Service or Secretary of the
Treasury)), except as would not have, in the aggregate, a Material Adverse
Effect and Seagate and each of its subsidiaries have performed all obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any material default or
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violation by any other party to, any of the Seagate Employee Plans; (iv) each
Seagate Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code so qualifies;
(v) all material contributions required to be made by Seagate or any of its
Seagate subsidiaries to any Seagate Employee Plan have been made on or before
their due dates and a reasonable amount has been accrued for contributions to
each Seagate Employee Plan for the current plan years; (vi) with respect to each
Seagate Employee Plan, no "reportable event" within the meaning of Section 4043
of ERISA (excluding any such event for which the thirty (30) day notice
requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063 or 4041 of ERISA has occurred; and
(vii) no Seagate Employee Plan is covered by, and neither Seagate nor any
subsidiary has incurred or expects to incur any liability under Title IV of
ERISA or Section 412 of the Code.
(c) With respect to each Seagate Employee Plan, Seagate has complied with
the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 and the proposed
regulations thereunder, except to the extent that a failure to comply would not
have a Material Adverse Effect.
(d) There are no Seagate Employee Plans that provide for benefits to vest,
accrue or become payable upon the occurrence of the events described in this
Agreement.
4.12 LABOR MATTERS. (i) There are no controversies pending or, to the best
knowledge of each of Seagate and its respective subsidiaries, threatened,
between Seagate or any of its subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to have a
Material Adverse Effect; (ii) as of the date of this Agreement, neither Seagate
nor any of its subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by Seagate or its
subsidiaries nor does Seagate or its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees (A) as of the date
of this Agreement and (B) which, as of the Closing Date, have or could
reasonably be expected to have a Material Adverse Effect on Seagate and its
subsidiaries; and (iii) as of the date of this Agreement, neither Seagate nor
any of its subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages or lockouts, or threats thereof, by or with respect to any employees
of Seagate or any of its subsidiaries (X) as of the date of this Agreement and
(Y) which, as of the Closing Date, have or could reasonably be expected to have
a Material Adverse Effect on Seagate and its subsidiaries.
4.13 REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by Seagate for inclusion or incorporation by
reference (i) in the S-4 will, at the time the S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading; and (ii) the Proxy Statement will, at the dates mailed to the
stockholders of Seagate and Conner, at the times of the Stockholders Meetings
and as of the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, and the S-4 will comply as to
form in all material respects with the provisions of the Securities Act and the
rules and regulations promulgated by the SEC thereunder.
4.14 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than as may be permitted
under Section 5.9, there is no material agreement, judgment, injunction, order
or decree binding upon Seagate or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Seagate or any of its subsidiaries, any acquisition of
property by Seagate or any of its subsidiaries or the conduct of business by
Seagate or any of its subsidiaries as currently conducted.
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4.15 TITLE TO PROPERTY. Seagate owns no material real property. Seagate
and each of its subsidiaries have good and defensible title to all of their
material properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect; and all leases pursuant to which Seagate or any
of its subsidiaries lease from others material amounts of real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of default (or any event which with notice or lapse of
time, or both, would constitute a material default and in respect of which
Seagate or its subsidiary has not taken adequate steps to prevent such default
from occurring) except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. All the plants, structures and equipment of Seagate and its
subsidiaries, except such as may be under construction, are in good operating
condition and repair, except where the failure of such plants, structures and
equipment to be in such good operating condition and repair could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.16 TAXES. Seagate and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Seagate or any of
its subsidiaries is or has been a member has timely filed all Tax Returns
required to be filed by it (other than those that are not, individually or in
the aggregate, material), has paid all Taxes shown thereon to be due and has
provided adequate accruals in all material respects in accordance with GAAP in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any returns. In addition, (i) no material claim for unpaid
Taxes has become a lien against the property of Seagate or any of its
subsidiaries or is being asserted against Seagate or any of its subsidiaries,
(ii) no audit of any Tax Return of Seagate or any of its subsidiaries is being
conducted by a Tax authority (A) as of the date of this Agreement and (B) which,
as of the Closing Date, has not had and could not reasonably be expected to
have, a Material Adverse Effect on Seagate and its subsidiaries, (iii) no
extension of the statute of limitations on the assessment of any Taxes has been
granted by Seagate or any of its subsidiaries and is currently in effect (A) as
of the date of this Agreement and (B) which, as of the Closing Date, has not had
and could not reasonably be expected to have a Material Adverse Effect on
Seagate and its subsidiaries and (iv) there is no agreement, contract or
arrangement to which Seagate or any of its subsidiaries is a party that may
result in the payment of any amount that would not be deductible pursuant to
Sections 280G, 162 or 404 of the Code.
4.17 ENVIRONMENTAL MATTERS. Except in all cases as, in the aggregate, have
not had and could not reasonably be expected to have a Material Adverse Effect,
Seagate and each of its subsidiaries to their respective best knowledge (i) have
obtained all applicable permits, licenses and other authorizations which are
required under Federal, state or local laws relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes by Seagate or its subsidiaries (or their
respective agents); (ii) are in compliance with all terms and conditions of such
required permits, licenses and authorizations, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder; (iii) as of
the date hereof, are not aware of and have not received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance or which
would give rise to any common law or statutory liability, or otherwise form the
basis of any claim, action, suit or proceeding, based on or resulting from
Seagate's or any of its subsidiaries (or any of their respective agents)
manufacture,
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processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, or release into the environment, of any
pollutant, contaminant, or hazardous or toxic material or waste; and (iv) have
taken all actions necessary under applicable requirements of Federal, state or
local laws, rules or regulations to register any products or materials required
to be registered by Seagate or its subsidiaries (or any of their respective
agents) thereunder.
4.18 BROKERS. No broker, finder or investment banker (other than Morgan
Stanley & Co., Incorporated ("Morgan Stanley")) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Seagate or Sub.
4.19 INTELLECTUAL PROPERTY.
(a) Seagate and its subsidiaries own, or have the right to use, sell or
license all material intellectual property rights necessary or required for the
conduct of their respective businesses as presently conducted (such intellectual
property rights are collectively referred to as the "Seagate IP Rights");
(b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any Seagate IP Right
(the "Seagate IP Rights Agreements"), will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Seagate
IP Right or materially impair the right of Seagate and its subsidiaries or the
Surviving Corporation to use, sell or license any Seagate IP Right or portion
thereof (except where such breaches, forfeitures or terminations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect);
(c) neither the manufacture, marketing, license, sale or intended use of any
product currently licensed or sold by Seagate or any of its subsidiaries or
currently under development by Seagate or any of its subsidiaries violates any
license or agreement between Seagate or any of its subsidiaries and any third
party or infringes any intellectual property right of any other party; and there
is no pending or, to the best knowledge of Seagate, threatened claim or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any Seagate IP Right nor, to the best knowledge of Seagate, is there
any basis for any such claim, nor has Seagate received any notice asserting that
any Seagate IP Right or the proposed use, sale, license or disposition thereof
conflicts or will conflict with the rights of any other party, nor, to the best
knowledge of Seagate, is there any basis for any such assertion, except to the
extent that such violation(s), or notice or basis therefor, have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; and
(d) Seagate has taken reasonable and practicable steps designed to safeguard
and maintain the secrecy and confidentiality of, and its proprietary rights in,
all material Seagate IP Rights.
4.20 POOLING MATTERS. Neither Seagate nor any of its affiliates has, to
its best knowledge and based upon consultation with its independent auditors,
taken or agreed to take any action that (without giving effect to this
Agreement, the transactions contemplated hereby or actions related thereto, or
any action taken or agreed to be taken by Conner or any of its affiliates) would
prevent Seagate from accounting for the business combination to be effected by
the Merger as a pooling of interests.
4.21 INSURANCE. Seagate maintains insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of Seagate and its subsidiaries ("Seagate Insurance
Policies") which are of the type and in amounts customarily carried by persons
conducting businesses similar to those of Seagate and its subsidiaries. There is
no material claim by Seagate or any of its subsidiaries pending under any of the
material Seagate Insurance Policies.
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4.22 OPINION OF FINANCIAL ADVISOR. Seagate has been advised in writing by
its financial advisor, Morgan Stanley, that in its opinion as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to Seagate.
4.23 BOARD APPROVAL. The Board of Directors of Seagate has, as of the date
hereof, (i) approved this Agreement, the Merger Agreement, the Conner Option
Agreement and the transactions contemplated hereby and thereby, (ii) determined
that the Merger is in the best interests of the stockholders of Seagate and is
on terms that are fair to such stockholders and (iii) recommended that the
stockholders of Seagate approve the issuance of Seagate Common Stock in
connection with the Merger.
4.24 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Seagate Common Stock present in person or represented by proxy at
the meeting of Seagate's stockholders contemplated by Section 5.8 (provided that
the shares so present or represented constitute a majority of the shares of
Seagate Common Stock) is the only vote of the holders of any class or series of
Seagate's capital stock necessary to approve the Merger and the issuance of
Seagate Common Stock in connection with the Merger.
4.25 INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
4.26 SECTION 203 OF THE DELAWARE STATUTE NOT APPLICABLE. The provisions of
Section 203 of the Delaware Statute will not, prior to the termination of this
Agreement, assuming the accuracy of the representation of Conner in Section 3.27
(without giving effect to the knowledge qualification thereof), apply to this
Agreement or to the transactions contemplated hereby.
4.27 SEAGATE OWNERSHIP OF CONNER COMMON STOCK. Seagate and, to the best
knowledge of Seagate, its "affiliates" and "associates" (as defined under both
Section 203 of the Delaware Statute and Rule 405 under the Securities Act),
collectively beneficially own and have beneficially owned at all times during
the three-year period prior to the date hereof less than 1% of the shares of
Conner Common Stock outstanding (other than shares of Conner Common Stock
issuable pursuant to the Conner Option Agreement to be entered into concurrently
herewith).
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
5.1 INFORMATION AND ACCESS. Subject to and in accordance with the terms
and conditions of that certain letter agreement dated July 17, 1995, between
Seagate and Conner (the "Confidentiality Agreement"), from the date of this
Agreement and continuing until the Effective Time, each Company shall afford
and, with respect to clause (b) below, such Company shall cause its independent
auditors to afford, (a) to the officers, independent auditors, counsel and other
representatives of the other Company reasonable access to the properties, books,
records (including Tax Returns filed and those in preparation) and personnel of
such Company and its subsidiaries in order that the other Company may have a
full opportunity to make such investigation as it reasonably desires to make of
such Company and its subsidiaries and (b) to the independent auditors of the
other Company, reasonable access to the audit work papers and other records of
the independent auditors of such Company and its subsidiaries. Additionally,
subject to and in accordance with the Confidentiality Agreement, each Company
and its subsidiaries will permit the other Company to make such reasonable
inspections of such Company and its subsidiaries and their respective operations
during normal business hours as the other Company may reasonably require and
each Company and its subsidiaries will cause its officers and the officers of
its subsidiaries to furnish the other Company with such financial and operating
data and other information with respect to the business and properties of such
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Company and its subsidiaries as the other Company may from time to time
reasonably request. No investigation pursuant to this Section 5.1 shall affect
or otherwise obviate or diminish any representations and warranties of any party
or conditions to the obligations of any party.
5.2 CONDUCT OF BUSINESS OF THE COMPANIES. Except as contemplated by this
Agreement, during the period from the date of this Agreement and continuing
until the Effective Time or until the termination of this Agreement pursuant to
Section 7.1, (i) each Company shall use reasonable efforts promptly to report to
the other on the status of operational matters and changes of materiality
(subject to the terms of the Confidentiality Agreement) and (ii) each Company
and its subsidiaries shall conduct their respective businesses in the ordinary
and usual course consistent with past practice and each Company and its
subsidiaries shall use reasonable efforts to maintain and preserve intact its
business organization, to keep available the services of its officers and
employees and to maintain satisfactory relations with licensors, franchisees,
licensees, suppliers, contractors, distributors, customers and others having
business relationships with it. Without limiting the generality of the foregoing
and except as provided in this Agreement, and except as disclosed in Section 5.2
of the Conner Disclosure Letter, prior to the Effective Time, neither Company
nor any of its subsidiaries shall, unless this Agreement is terminated pursuant
to Section 7.1, without the prior written consent of the other Company (which
consent shall not be unreasonably withheld):
(a) declare, set aside or pay any dividends on or make any other
distribution in respect of any of its capital stock except (i) as permitted
by subsection (c) below and (ii) dividends or distributions by subsidiaries
of Seagate to Seagate or any subsidiary of Seagate;
(b) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance or authorization of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock
or repurchase, redeem (except in compliance with Section 5.2(n) below) or
otherwise acquire any shares of its capital stock;
(c) issue, deliver, pledge, encumber or sell, or authorize or propose
the issuance, delivery, pledge, encumbrance or sale of, or purchase or
propose the purchase of, any shares of its capital stock or securities
convertible into, or rights, warrants or options to acquire, any such shares
of capital stock or other convertible securities (other than (i) the
issuance of such capital stock upon the exercise or conversion of Seagate
Options, Seagate Debentures, Conner Options (as defined in Section 5.14),
Conner Debentures or Arcada Options, as the case may be, outstanding on the
date of this Agreement in accordance with their present terms or pursuant to
the Seagate Employee Stock Purchase Plan or the Conner Employee Stock
Purchase Plan, as the case may be, in accordance with their present terms,
(ii) the granting of Seagate Options in the ordinary course of business
consistent with past practice, pursuant to Seagate Employee Plans in effect
on the date of this Agreement, and the issuance of Seagate Common Stock upon
exercise thereof, (iii) the granting of Conner Options to purchase up to an
aggregate of 500,000 shares of Conner Common Stock in the ordinary course of
business consistent with past practice, pursuant to Conner Employee Plans in
effect on the date of this Agreement, the issuance of Conner Common Stock
upon the exercise of Conner Options, the granting of Arcada Options to
purchase up to an aggregate of 200,000 shares of Arcada Common Stock (plus
shares of Arcada Common Stock returned to the Arcada 1994 Stock Option Plan
or Conner Peripherals, Inc./Arcada Stock Option Plan (the "Conner Arcada
Plan") (other than 75,000 shares subject to an option awarded to James
Steger on August 8, 1995) after the date of this Agreement upon termination
of the employment of optionees in the ordinary course of business consistent
with past practice (PROVIDED that (A) such Arcada options shall be granted
only to employees of Arcada (B) such Arcada Options shall only be granted at
an exercise price per share equal to 100% of the fair market value per share
of Arcada Common Stock on the date of grant as determined by the Board of
Directors of the company granting such option, (C) options granted under the
Conner Arcada Plan shall only be granted to employees of Arcada hired after
June 19, 1995 and (D) any persons to whom such options are granted shall
acknowledge and agree in writing, as a condition to the granting of such
option, that such option may be converted into the right to receive 0.1545
shares of Seagate
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Common Stock), and the issuance of Arcada Common Stock upon the exercise of
Arcada Options outstanding as of the date of this Agreement and (iv) in the
case of Seagate only, the issuance of Seagate Common Stock or other equity
instruments in connection with a Permitted Seagate Acquisition (as defined
in clause (e) below)) or authorize or propose any change in its equity
capitalization;
(d) except as otherwise provided in this Agreement, amend its
Certificate of Incorporation or Bylaws or the Conner Rights Agreement in any
manner adverse to the other Company;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing any material portion of the capital stock or assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, PROVIDED that Seagate shall
be permitted to acquire (i) any rigid disc drive component business (but not
a rigid disc drive business) for consideration having a fair market value of
$50 million or less or (ii) any software business for consideration having a
fair market value of $150 million or less (any such transaction is referred
to as a "Permitted Seagate Acquisition"); and, PROVIDED FURTHER, that Conner
shall be permitted to acquire two substrate businesses pursuant to the terms
described in the Conner Disclosure Letter (any such transaction is referred
to as a "Permitted Conner Acquisition").
(f) sell, lease, pledge or otherwise dispose of or encumber any of its
assets, except in the ordinary course of business (including, without
limitation, any indebtedness owed to it or any claims held by it);
(g) with respect to Conner only, transfer the stock of any subsidiary to
any other subsidiary or any assets or liabilities to any new or, except in
the ordinary course of business consistent with past practice, existing
subsidiary, and except as set forth in Section 5.2 of the Conner Disclosure
Letter;
(h) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any of its debt securities or guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of others, or make loans or advances, other than (i) in the
ordinary course of business consistent with past practice, (ii) with respect
to a business or other entity acquired pursuant to a Permitted Seagate
Acquisition or a Permitted Conner Acquisition, and (iii) as set forth in
Section 5.2 of the Conner Disclosure Letter;
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise), other than
(i) the payment, discharge or satisfaction of liabilities in the ordinary
course of business, (ii) the payment of the fees and expenses of counsel and
financial advisors relating to this Agreement and the transactions
contemplated hereby, (iii) with respect to Seagate only, any payment with
respect to a settlement of any of the outstanding litigation described in
the Seagate SEC Reports and (iv) any payment, discharge or satisfaction of
any liabilities of any business or other entity acquired pursuant to a
Permitted Seagate Acquisition or a Permitted Conner Acquisition;
(j) with respect to Conner only, adopt or amend in any material respect
any collective bargaining agreement or Conner Employee Plan, other than in
the ordinary course of business consistent with past practice; or with
respect to Conner only enter into or amend any employment, severance,
special pay arrangement with respect to termination of employment or other
similar arrangements or agreements with any directors, officers or key
employees of Conner (other than, with respect to key employees, employment
terms consistent with Conner's past practice), or enter into or amend any
severance or termination arrangement that provides for payments to any
person different from those contained in the Conner Disclosure Letter;
(k) change in any material respect the accounting methods or practices
followed by such Company, including any material change in any assumption
underlying, or method of calculating,
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any bad debt, contingency or other reserve, except as may be required by
changes in GAAP; make any material Tax election or settle or compromise any
material federal, state, local or foreign income tax liability or agree to
an extension of a statute of limitations;
(l) enter into any material contract or agreement, except in the
ordinary course of business, other than as expressly permitted in this
Section 5.2 and other than renewals or replacements of leases scheduled to
expire in the near-term in the ordinary course of business;
(m) with respect to Conner only, redeem any rights under the Conner
Rights Agreement or take any action which would permit an event (other than
the Merger or the transactions contemplated by the Conner Option Agreement)
which would otherwise be a "Triggering Event" under the Conner Rights
Agreement to be excluded from the definition of a "Triggering Event," other
than in connection with a Superior Proposal (as defined in Section 5.3)
which the Board of Directors of Conner shall approve or recommend in
accordance with Section 5.3 or pursuant to Section 1(a)(ii) of the Conner
Rights Agreement; or
(n) authorize or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Notwithstanding the foregoing, the parties understand that Seagate shall
have the right to enter into agreements with respect to and to consummate
Permitted Seagate Acquisitions, and Conner shall have the right to enter into
agreements with respect to and to consummate Permitted Conner Acquisitions.
Nothing contained in Section 5.2(a) to (n) above shall limit, prohibit or
restrict (i) Seagate's and its affiliates' ability to enter into agreements with
respect to and to consummate Permitted Seagate Acquisitions or to operate in the
ordinary course of business any business or other entity acquired pursuant to a
Permitted Seagate Acquisition or (ii) Conner's and its affiliates' ability to
enter into agreements with respect to and to consummate Permitted Conner
Acquisitions or to operate in the ordinary course of business any business or
other entity acquired pursuant to a Permitted Conner Acquisition.
5.3 NEGOTIATION WITH OTHERS.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, Conner shall not, directly or indirectly, through any officer, director,
employee, representative or agent of Conner or any of its subsidiaries, solicit
or encourage (including by way of furnishing nonpublic information) or take
other action, either directly or indirectly, to facilitate any inquiries or the
making of any proposal that constitutes or may reasonably be expected to lead to
an Acquisition Proposal (as defined below) from any person, or engage in any
discussions or negotiations relating thereto or in furtherance thereof or accept
any Acquisition Proposal. For purposes of this Agreement, "Acquisition Proposal"
means any inquiries or proposals regarding (i) any merger, consolidation, sale
of substantial assets or similar transactions involving Conner or any
subsidiaries of Conner (other than sales of assets or inventory in the ordinary
course of business), (ii) sale of 20% or more of the outstanding shares of
capital stock of Conner (including without limitation by way of a tender offer
or an exchange offer) or similar transactions involving Conner or any
subsidiaries of Conner, (iii) the acquisition by any person of beneficial
ownership or a right to acquire beneficial ownership of, or the formation of any
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) which beneficially owns, or has the right to acquire
beneficial ownership of 20% or more of the then outstanding shares of capital
stock of Conner; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(b) Notwithstanding Section 5.3(a), the restrictions set forth in this
Agreement shall not prevent the Board of Directors of Conner, in the exercise of
and as required by its fiduciary duties as determined by the Board of Directors
of Conner after consultation with its outside legal counsel, engaging in
discussions or negotiations with, and furnishing information concerning Conner
and its business, properties and assets (but not directly or indirectly
soliciting or initiating such discussions
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or negotiations or directly or indirectly encouraging inquiries or the making of
any Acquisition Proposal), to a third party who makes a written, unsolicited,
bona fide Acquisition Proposal that is reasonably capable of being consummated
and is reasonably likely to be financially superior to the Merger, as determined
in each case in good faith by Conner's Board of Directors after consultation
with Conner's financial advisors (a "Superior Proposal"), provided that Seagate
shall have been notified in writing of such Acquisition Proposal, including the
principal financial terms and conditions thereof.
Upon compliance with the foregoing, Conner shall be entitled to (1)
withdraw, modify or refrain from making its recommendation referred to in
Section 5.4 following receipt of a Superior Proposal, and approve and recommend
to the stockholders of Conner a Superior Proposal and (2) enter into an
agreement with such third party concerning a Superior Proposal provided that
Conner shall immediately make payment in full to Seagate of the Breakup Fee as
defined in Section 7.3 below.
(c) If Conner or any of its subsidiaries receives any unsolicited offer or
proposal to enter negotiations relating to an Acquisition Proposal, Conner shall
immediately notify Seagate thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the principal
financial terms and conditions of such offer or proposal, as the case may be.
(d) Notwithstanding the foregoing, Conner shall not provide any non-public
information to a third party unless Conner provides such non-public information
pursuant to a nondisclosure agreement with terms regarding the protection of
confidential information at least as restrictive as such terms in the
nondisclosure agreement previously entered into between Seagate and Conner.
Conner shall be entitled to provide copies of this Section 5.3 to third parties
who, on an unsolicited basis after the date of this Agreement, contact Conner
regarding an Acquisition Proposal, provided that Seagate shall concurrently be
notified of such contact and delivery of such copy.
(e) Conner shall immediately cease and cause to be terminated any existing
discussions or negotiations with any parties (other than Seagate and Sub)
conducted prior to the date of this Agreement with respect to any of the
foregoing.
5.4 PREPARATION OF S-4 AND THE PROXY STATEMENT; OTHER FILINGS. As promptly
as practicable after the date of this Agreement, Seagate and Conner shall
prepare and file with the SEC a preliminary Proxy Statement in form and
substance satisfactory to each of Seagate and Conner and Seagate shall prepare
and file with the SEC the S-4, in which the Proxy Statement will be included as
a prospectus. Each of Seagate and Conner shall use its reasonable efforts to
respond to any comments of the SEC, to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing and to cause the
Proxy Statement to be mailed to such Company's stockholders at the earliest
practicable time. As promptly as practicable after the date of this Agreement,
Seagate and Conner shall prepare and file any other filings required under the
Exchange Act, the Securities Act or any other Federal or Blue Sky Laws relating
to the Merger and the transactions contemplated by this Agreement and the Merger
Agreement, including, without limitation, under the HSR Act and state takeover
laws (the "Other Filings"). Each Company will notify the other Company promptly
of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff or any other government officials for amendments or
supplements to the S-4, the Proxy Statement or any Other Filing or for
additional information and will supply the other Company with copies of all
correspondence between such Company or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the S-4, the Proxy Statement, the Merger or any Other
Filing. The Proxy Statement, the S-4 and the Other Filings shall comply in all
material respects with all applicable requirements of law. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Proxy Statement, the S-4 or any Other Filing, Seagate or Conner, as the case may
be, shall promptly inform the other Company of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of Seagate and Conner, such amendment or supplement. The
Proxy Statement shall include the recommendations of the Board of Directors of
Seagate in favor of the
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issuance of Seagate Common Stock in connection with the Merger and of the Board
of Directors of Conner in favor of the Merger, provided that the recommendation
of the Board of Directors of Conner may not be included or may be withdrawn if
previously included if the Board of Directors of Conner has accepted a Superior
Proposal in accordance with the terms of Section 5.3.
5.5 ADVICE OF CHANGES; SEC FILINGS. Each Company shall promptly provide
the other Company (or its counsel) copies of all filings made by such Company
with any Governmental Entity in connection with this Agreement, the Merger
Agreement and the transactions contemplated hereby and thereby.
5.6 LETTER OF CONNER'S INDEPENDENT AUDITORS. Conner shall use all
reasonable efforts to cause to be delivered to Seagate a letter of Price
Waterhouse, LLP, Conner's independent auditors, dated a date within two Business
Days before the date on which the S-4 shall become effective and addressed to
Seagate, in form and substance reasonably satisfactory to Seagate and customary
in scope and substance for letters delivered by independent auditors in
connection with registration statements similar to the S-4.
5.7 LETTER OF SEAGATE'S INDEPENDENT AUDITORS. Seagate shall use all
reasonable efforts to cause to be delivered to Conner a letter of Ernst & Young,
LLP, Seagate's independent auditors, dated a date within two Business Days
before the date on which the S-4 shall become effective and addressed to Conner,
in form and substance reasonably satisfactory to Conner and customary in scope
and substance for letters delivered by independent auditors in connection with
registration statements similar to the S-4.
5.8 STOCKHOLDERS MEETINGS. Seagate and Conner each shall call a meeting of
its respective stockholders to be held as promptly as practicable for the
purpose of voting upon, in the case of Seagate, the issuance of Seagate Common
Stock in connection with the Merger and, in the case of Conner, this Agreement
and the Merger Agreement. Seagate and Conner shall coordinate and cooperate with
respect to the timing of the Stockholders Meetings and shall use their
respective reasonable efforts to hold the Stockholders Meetings on the same day
as soon as practicable after the date of this Agreement.
5.9 AGREEMENTS TO TAKE REASONABLE ACTION.
(a) Conner shall take, and shall cause its subsidiaries to take, all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on Conner or its subsidiaries with respect to the Merger
(including furnishing the information required under the HSR Act) and shall take
all reasonable actions necessary to cooperate promptly with and furnish
information to Seagate in connection with any such requirements imposed upon
Seagate or Sub or any subsidiary of Seagate or Sub in connection with the
Merger. Conner shall take, and shall cause its subsidiaries to take, all
reasonable actions necessary (i) to obtain (and will take all reasonable actions
necessary to promptly cooperate with Seagate or Sub and their subsidiaries in
obtaining) any clearance, consent, authorization, order or approval of, or any
exemption by, any Governmental Entity, or other third party, required to be
obtained or made by Conner or any of its subsidiaries (or by Seagate or any of
its subsidiaries) in connection with the Merger or the taking of any action
contemplated by this Agreement; (ii) to lift, rescind or mitigate the effect of
any injunction or restraining order or other order adversely affecting the
ability of Conner to consummate the transactions contemplated hereby; (iii) to
fulfill all conditions applicable to Conner or Seagate pursuant to this
Agreement; and (iv) to prevent, with respect to a threatened or pending
temporary, preliminary or permanent injunction or other order, decree or ruling
or statute, rule, regulation or executive order, the entry, enactment or
promulgation thereof, as the case may be; PROVIDED, HOWEVER, that with respect
to clauses (i) through (iv) above, Conner and its subsidiaries will take only
such curative measures (such as licensing and divestiture) as Seagate
determines, in good faith, to be reasonable.
(b) Seagate and Sub shall take, and shall cause their subsidiaries to take,
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them or their
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subsidiaries with respect to the Merger (including furnishing the information
required under the HSR Act) and shall take all reasonable actions necessary to
cooperate promptly with and furnish information to Conner in connection with any
such requirements imposed upon Conner or any subsidiary of Conner in connection
with the Merger. Seagate and Sub shall take, and shall cause their subsidiaries
to take, all reasonable actions necessary (i) to obtain (and will take all
reasonable actions necessary to promptly cooperate with Conner and its
subsidiaries in obtaining) any clearance, consent, authorization, order or
approval of, or any exemption by, any Governmental Entity, or other third party,
required to be obtained or made by Seagate or any of its subsidiaries (or by
Conner or any of its subsidiaries) in connection with the Merger or the taking
of any action contemplated by this Agreement; (ii) to lift, rescind or mitigate
the effect of any injunction or restraining order or other order adversely
affecting the ability of Seagate or Sub to consummate the transactions
contemplated hereby; (iii) to fulfill all conditions applicable to Seagate or
Sub or Conner pursuant to this Agreement; and (iv) to prevent, with respect to a
threatened or pending temporary, preliminary or permanent injunction or other
order, decree or ruling or statute, rule, regulation or executive order, the
entry, enactment or promulgation thereof, as the case may be; PROVIDED, HOWEVER,
that with respect to clauses (i) through (iv) above Seagate and its subsidiaries
will take only such curative measures (such as licensing and divestiture) as
Seagate determines, in good faith, to be reasonable.
(c) Subject to the terms and conditions of this Agreement, each of the
parties shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
subject to the appropriate approval of the stockholders of Seagate and Conner.
Seagate and Conner will use their reasonable best efforts to resolve any
competitive issues relating to or arising under the HSR Act or any other federal
or state antitrust or fair trade law raised by any Governmental Entity including
making offers of curative divestitures and/or licensing of technology which
Seagate determines, in good faith, to be reasonable. If such offers are not
accepted by such Governmental Entity, Seagate (with Conner's cooperation) shall
pursue all litigation resulting from such issues. The parties hereto will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
the HSR Act or any other federal or state antitrust or fair trade law.
5.10 CONSENTS. Seagate, Sub and Conner shall each use all reasonable
efforts to obtain the consent and approval of, or effect the notification of or
filing with, each person or authority whose consent or approval is required in
order to permit the consummation of the Merger and the transactions contemplated
by this Agreement and to enable the Surviving Corporation to conduct and operate
the business of Conner and its subsidiaries substantially as presently conducted
and as contemplated to be conducted.
5.11 NYSE LISTING. Seagate shall use its reasonable best efforts to cause
the shares of Seagate Common Stock issuable to the stockholders of Conner in the
Merger to be listed for trading on the NYSE.
5.12 PUBLIC ANNOUNCEMENTS. Seagate, Sub and Conner shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the Merger and shall not issue any such press release or make
any such public statement prior to such consultation except as may be required
by law.
5.13 AFFILIATES.
(a) Each Company shall use all reasonable efforts to obtain as soon as
practicable and in any event thirty (30) days prior to the expected Effective
Time, executed agreements with respect to the sale of capital stock with each
person who is an "affiliate" within the meaning of Rule 145 (for
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purposes of this Section, each such person, an "Affiliate") of such Company
regarding compliance with pooling restrictions, which agreements shall be in
substantially the form of EXHIBIT C (with respect to Conner) and EXHIBIT D (with
respect to Seagate), respectively, attached to this Agreement.
(b) At least ten Business Days prior to the date of the Stockholders
Meetings, Conner shall deliver to Seagate a list of names and addresses of those
persons who were, in Conner's reasonable judgment after consultation with legal
counsel, at the record date for the Conner Stockholders Meeting, Affiliates of
Conner. Conner shall provide Seagate such information and documents as Seagate
shall reasonably request for purposes of reviewing such list. Conner shall use
its reasonable efforts to deliver or cause to be delivered to Seagate, prior to
the Effective Time, from each of the Affiliates of Conner identified in the
foregoing list (other than those that have delivered agreements previously
pursuant to Section 5.13(a) above), agreements (collectively, the "Conner
Affiliate Agreements") substantially in the form attached to this Agreement as
EXHIBIT C. Seagate and Sub shall be entitled to place legends on the
certificates evidencing any Seagate Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement and the Merger Agreement, and
to issue appropriate stop transfer instructions to the transfer agent for
Seagate Common Stock, consistent with the terms of such Conner Affiliate
Agreements, whether or not such Conner Affiliate Agreements are actually
delivered to Seagate.
5.14 CONNER OPTIONS.
(a) At the Effective Time, each outstanding option (each, a "Conner Option")
to purchase shares of Conner Common Stock issued pursuant to the Conner stock
option plans (including without limitation the Archive Plans, and collectively,
the "Conner Option Plans"), whether vested or unvested, shall be assumed by
Seagate. Accordingly, each Conner Option shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
Conner Option, the number, rounded down to the nearest whole integer, of full
shares of Seagate Common Stock the holder of such Conner Option would have been
entitled to receive pursuant to the Merger had such holder exercised such Conner
Option in full, including as to unvested shares, immediately prior to the
Effective Time, at a price per share equal to (y) the exercise price per share
for the shares of Conner Common Stock otherwise purchasable pursuant to such
Conner Option divided by (z) the Exchange Ratio, with such exercise price per
share rounded up to the nearest whole cent.
(b) As soon as practicable after the Effective Time, Seagate shall deliver
to each holder of a Conner Option a document evidencing the foregoing assumption
of such Conner Option by Seagate.
(c) As soon as practicable after the Effective Time, Seagate shall file a
registration statement on Form S-8 (or any successor or other appropriate form),
or another appropriate form with respect to the shares of Seagate Common Stock
subject to such Conner Options and shall use its reasonable efforts to maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Conner Options remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Exchange Act, where applicable, Seagate shall administer
the Conner Option Plans assumed pursuant to this Section 5.14 in a manner that
complies with Rule 16b-3 promulgated by the SEC under the Exchange Act to the
extent the applicable Conner Option Plan complied with such rule prior to the
Merger.
5.15 CONNER EMPLOYEE STOCK PURCHASE PLAN. Conner agrees that it shall
terminate the Conner Employee Stock Purchase Plan (the "Conner Purchase Plan")
by having its Board of Directors amend the Conner Purchase Plan as necessary (i)
to provide that the shares of Conner Common Stock to be purchased under the
Conner Purchase Plan shall be purchased under the Conner Purchase Plan on a new
"Exercise Date" (as such term is defined in the Conner Purchase Plan) set by the
Board of Directors, which Exercise Date shall be on the last trading day
immediately prior to the Effective Time, or such earlier time as the Board shall
specify, (ii) to provide that any such shares purchased under the Conner
Purchase Plan shall be automatically converted on the same basis as all other
shares of Conner Common Stock (other than shares canceled pursuant to Section
2.1(b)), except that
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such shares shall be converted automatically into shares of Seagate Common Stock
without issuance of certificates representing issued and outstanding shares of
Conner Common Stock to Conner Purchase Plan participants, and (iii) to provide
that immediately following such purchase of shares of Conner Common Stock the
Conner Purchase Plan shall terminate. Seagate agrees that from and after the
Effective Time employees of Conner may participate in the Seagate Employee Stock
Purchase Plan, subject to the terms and conditions of such plan.
5.16 INDEMNIFICATION AND INSURANCE.
(a) Upon the Effective Time, Seagate shall assume all of the obligations of
Conner under Conner's existing indemnification agreements with each of the
directors and officers of Conner, as such agreements relate to the
indemnification of such persons for expenses and liabilities arising from facts
or events which occurred on or before the Effective Time or relating to the
Merger or transactions contemplated by this Agreement.
(b) The Bylaws of the Surviving Corporation shall contain provisions
identical with respect to indemnification to those set forth in Article VI of
the Bylaws of Conner as in effect on December 31, 1994, which provisions and
Article Tenth of the Certificate of Incorporation of Conner as in effect as of
December 31, 1994 shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the Effective Time were
directors, officers, agents or employees of Conner.
(c) The Surviving Corporation or, at Seagate's discretion, Seagate shall
maintain in effect for three years from the Effective Time policies of
directors' and officers' liability insurance for the benefit of the individuals
who at the Effective Time were directors or officers of Conner containing terms
and conditions which are not less advantageous than those policies maintained by
Conner at the date hereof, with respect to matters occurring prior to the
Effective Time, to the extent available, and having the maximum available
coverage under the current policies of directors' and officers' liability
insurance provided that the Surviving Corporation or Seagate, as the case may
be, shall not be required to spend in excess of a $1.6 million annual premium
therefor; provided further that if the Surviving Corporation or Seagate, as the
case may be, would be required to spend in excess of a $1.6 million premium per
annum to obtain insurance having the maximum available coverage under the
current policies, the Surviving Corporation or Seagate, as the case may be, will
be required to spend $1.6 million to maintain or procure insurance coverage
pursuant hereto, subject to availability of such (or similar) coverage; provided
that, in lieu of the purchase of such insurance by Seagate or the Surviving
Corporation, Conner may purchase a three-year extended reporting period
endorsement ("reporting tail coverage") under its existing Directors' and
Officers' liability insurance coverage at a cost of up to $4.8 million.
(d) In furtherance of and not in limitation of the preceding paragraph,
Seagate agrees that subsequent to the Effective Time the officers and directors
of Conner that are defendants in all litigation commenced prior to the Effective
Time by stockholders of Conner with respect to (x) the performance of their
duties as such officers and/or directors under federal or state law (including
litigation under federal and state securities laws) and (y) Seagate's offer or
proposal to acquire Conner (the "Subject Litigation") shall be entitled to be
represented at the reasonable expense of Seagate (subject to the terms of the
indemnification provisions referred to in Section 5.16(a) and (b) above) in the
Subject Litigation by one counsel (and one local counsel in each jurisdiction in
which a case is or shall be pending) each of which such counsel shall be
selected by a plurality of such director defendants; provided that neither
Seagate nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and that a condition to any indemnification payments
provided in this Section 5.16 shall be that such officer/ director defendant not
have settled any Subject Litigation without the consent of Seagate or the
Surviving Corporation; and provided further that the Surviving Corporation and
Seagate shall have
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no obligation hereunder to any officer/director defendant to the extent a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and non-appealable, that indemnification of such
officer/director defendant in the manner contemplated hereby is prohibited by
applicable law.
5.17 NOTIFICATION OF CERTAIN MATTERS. Conner shall give prompt notice to
Seagate, and Seagate and Sub shall give prompt notice to Conner, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause (a) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Effective Time, or (b) any material
failure of Conner or Seagate and Sub, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.18 POOLING ACCOUNTING. Each of Seagate and Conner agrees not to take any
action that would adversely affect the ability of Seagate to treat the Merger as
a pooling of interests, and each of Seagate and Conner agrees to take such
action as may be reasonably required to negate the impact of any past actions
which would adversely impact the ability of Seagate to treat the Merger as a
pooling of interests.
5.19 CONNER DEBENTURES. Conner shall comply with all notice requirements
arising as a consequence of this Agreement and the transactions contemplated
hereby under those certain Indentures, dated as of March 1, 1991 and March 1,
1992 (the "Indentures"), between Conner and The First National Bank of Boston as
trustee thereunder (the "Trustee"), pursuant to which Conner's 6 3/4%
Convertible Subordinated Debentures due 2001 and Conner's 6 1/2% Convertible
Subordinated Debentures due 2002, respectively (the "Conner Debentures"), are
issued and outstanding. At the Effective Time, Conner and, if required, Seagate
shall execute and deliver to the Trustee supplemental indentures pursuant to,
and satisfying the requirements of, Sections 12.01 and 15.06 of each Indenture,
which supplemental indentures shall be in form and substance reasonably
satisfactory to Seagate and the Trustee.
5.20 BENEFIT PLANS GENERALLY. Seagate agrees to honor in accordance with
their terms all employment, severance and similar agreements to which Conner is
a party and which are listed on the Conner Disclosure Letter and all accrued
benefits that are vested as of the Effective Time under any Conner Employee
Plan. Seagate agrees to provide employees of Conner with credit for all service
with Conner or its affiliates for purposes of vesting and eligibility under any
employee benefit plan, program or arrangement of Seagate or its affiliates. To
the extent not otherwise specified in this Agreement, Seagate agrees that Conner
employees who continue to be employed by Conner after the Effective Time may
continue to participate in their current Conner sponsored employee benefit
programs through six months following the Effective Time. Subsequent to such
date, Conner employees shall participate in Seagate employee benefit programs or
comparable programs under substantially the same terms and conditions as all
other Seagate employees. To the extent not otherwise specified in this
Agreement, all Conner employee benefit programs will cease no earlier than six
months following the Effective Time, at a time to be determined by Seagate in
its discretion.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction prior to the Closing Date of the following conditions:
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(a) HSR ACT. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no
action shall have been instituted by the Department of Justice or Federal
Trade Commission challenging or seeking to enjoin the consummation of the
Merger, which action shall not have been withdrawn or terminated.
(b) STOCKHOLDER APPROVAL. The issuance of Seagate Common Stock in
connection with the Merger shall have been approved by the requisite vote of
the stockholders of Seagate (as described in Section 4.24) and this
Agreement and the Merger Agreement shall have been approved and adopted by
the requisite vote of the stockholders of Conner (as described in Section
3.25), in each case in accordance with applicable law and the rules and,
with respect to Seagate, in accordance with the regulations of the NYSE.
(c) EFFECTIVENESS OF THE S-4. The S-4 shall have been declared
effective by the SEC under the Securities Act and shall not be the subject
of any stop order or proceeding by the SEC seeking a stop order.
(d) GOVERNMENTAL ENTITY APPROVALS. All material authorizations,
consents, orders or approvals of, or declarations or filings with, or
expiration of waiting periods imposed by, any Governmental Entity necessary
for the consummation of the transactions contemplated by this Agreement and
the Merger Agreement shall have been filed, expired or been obtained, other
than those that, individually or in the aggregate, the failure to be filed,
expired or obtained would not, in the reasonable opinion of Seagate, have a
Material Adverse Effect on Conner or Seagate.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect,
nor shall any proceeding brought by an administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; and there shall not be any action
taken, or any statute, rule, regulation or order (whether temporary,
preliminary or permanent) enacted, entered or enforced which makes the
consummation of the Merger illegal or prevents or prohibits the Merger.
(f) TAX OPINIONS. Seagate and Conner shall each have received written
opinions from their respective counsel Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation and Wachtell, Lipton, Rosen & Katz in form and
substance reasonably satisfactory to them to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code
with respect to the Seagate Common Stock to be received by holders of Conner
Common Stock in the Merger. In rendering such opinions, counsel may rely
upon representations and certificates of Seagate, Sub and Conner.
(g) POOLING-OF-INTERESTS ACCOUNTING TREATMENT. Conner, Seagate and Sub
shall have received a letter dated as of the Effective Time from the
independent accountants of Seagate and Conner in form and substance
satisfactory to Conner, Seagate and Sub regarding the appropriateness of the
pooling of interests accounting for the Merger under the Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance with
the terms of this Agreement.
(h) NYSE LISTING. The shares of Seagate Common Stock issuable to the
holders of Conner Stock pursuant to the Merger shall have been authorized
for listing on the NYSE, upon official notice of issuance.
6.2 CONDITIONS OF OBLIGATIONS OF SEAGATE AND SUB. The obligations of
Seagate and Sub to effect the Merger are subject to the satisfaction of the
following additional conditions, unless waived in writing by Seagate:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Conner set forth in this Agreement shall be true and correct (determined
without regard to any materiality qualifiers, including without limitation
"Material Adverse Effect") (i) as of the date hereof and
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(ii) as of the Closing Date, as though made on and as of the Closing Date
(provided that in the cases of clauses (i) and (ii) any such representation
and warranty made as of a specific date shall be true and correct as of such
specific date), except for such inaccuracies as individually or in the
aggregate which would not have a Material Adverse Effect on Conner and
subsidiaries taken as a whole and Seagate shall have received a certificate
signed by the chief executive officer and the chief financial officer of
Conner to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF CONNER. Conner shall have performed
in all material respects all obligations and covenants required to be
performed by it under this Agreement and the Merger Agreement prior to or as
of the Closing Date, and Seagate shall have received a certificate signed by
the chief executive officer and the chief financial officer of Conner to
such effect.
(c) CONSENTS. Seagate and Sub shall have received duly executed copies
of all material third-party consents and approvals contemplated by this
Agreement or the Conner Disclosure Letter in form and substance reasonably
satisfactory to Seagate and Sub, except those consents that the failure to
so receive would not, individually or in the aggregate, have a Material
Adverse Effect on Conner.
6.3 CONDITIONS OF OBLIGATION OF CONNER. The obligation of Conner to effect
the Merger is subject to the satisfaction of the following conditions, unless
waived in writing by Conner:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seagate and Sub set forth in this Agreement shall be true and correct
(determined without regard to any materiality qualifiers, including without
limitation "Material Adverse Effect") (i) as of the date hereof and (ii) as
of the Closing Date, as though made on and as of the Closing Date (provided
that in the cases of clauses (i) and (ii) any such representation and
warranty made as of a specific date shall be true and correct as of such
specific date), except for such inaccuracies as individually or in the
aggregate which would not have a Material Adverse Effect on Seagate and its
subsidiaries taken as a whole, and Conner shall have received a certificate
signed by the chief executive officer and the chief financial officer of
Seagate and the president of Sub to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF SEAGATE AND SUB. Each of Seagate and
Sub shall have performed in all material respects all obligations and
covenants required to be performed by it under this Agreement and the Merger
Agreement prior to or as of the Closing Date, and Conner shall have received
a certificate signed by the chief executive officer and the chief financial
officer of Seagate and the president of Sub to such effect.
(c) CONSENTS. Conner shall have received duly executed copies of all
material third-party consents and approvals contemplated by this Agreement and
the Seagate Disclosure Letter in form and substance satisfactory to Conner,
except those consents that the failure to so receive, would not, individually or
in the aggregate, have a Material Adverse Effect on Seagate.
ARTICLE 7
TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of Seagate and Conner:
(a) by mutual written consent duly authorized by the Boards of Directors
of Seagate and Conner;
(b) by either Seagate or Conner if the Merger shall not have been
consummated by April 3, 1996 (PROVIDED that if the Merger shall not have
been consummated due to the waiting period (or any extension thereof) under
the HSR Act not having expired or been terminated, or due to an action
having been instituted by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of the Merger,
then such date shall be extended to
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June 3, 1996, and PROVIDED FURTHER that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been the cause of or resulted in the
failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement);
(c) by either Seagate or Conner if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall (i)
have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable or (ii) seek to enjoin the Merger and the terminating party
reasonably believes that the time period required to resolve such
governmental action and the related uncertainty is reasonably likely to have
a Material Adverse Effect on either Seagate or Conner PROVIDED, that, solely
for purposes of this Section 7.1(c), the definition of "Material Adverse
Effect" shall not include the exclusion contained under the proviso in the
penultimate sentences of Section 3.1 and 4.1, respectively; or
(d) by either Seagate or Conner if the required approvals of the
stockholders of Seagate or Conner contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote upon
a vote taken at a meeting of stockholders duly convened therefor or at any
adjournment thereof (PROVIDED that the right to terminate this Agreement
under this Section 7.1(d) shall not be available to any party where the
failure to obtain stockholder approval of such party shall have been caused
by the action or failure to act of such party in breach of this Agreement);
or
(e) by either Seagate or Conner, if Conner (A) shall have accepted or
recommended to the stockholders of Conner a Superior Proposal, and (B) in
the case of the termination of this Agreement by Conner, Conner shall have
paid to Seagate all amounts owing by Conner to Seagate under Section 7.3(b);
or
(f) by Seagate, if the Board of Directors of Conner shall have
withdrawn, modified or refrained from making its recommendation concerning
the Merger referred to in Section 5.4 or if a third party (including a
person or a group as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) acquires beneficial ownership of, or the
right to acquire beneficial ownership of, at least twenty percent (20%) of
Conner's outstanding voting equity securities; or
(g) by Conner, upon a breach of any representation, warranty, covenant
or agreement on the part of Seagate set forth in this Agreement, or if any
representation or warranty of Seagate shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, PROVIDED that if such
inaccuracy in Seagate's representations and warranties or breach by Seagate
is curable by Seagate through the exercise of its reasonable efforts and for
so long as Seagate continues to exercise such reasonable efforts, Conner may
not terminate this Agreement under this Section 7.1(g); or
(h) by Seagate, upon a breach of any representation, warranty, covenant
or agreement on the part of Conner set forth in this Agreement, or if any
representation or warranty of Conner shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, PROVIDED, that if such
inaccuracy in Conner's representations and warranties or breach by Conner is
curable by Conner through the exercise of its reasonable efforts and for so
long as Conner continues to exercise such reasonable efforts, Seagate may
not terminate this Agreement under this Section 7.1(h); or
(i) by Seagate, at any time if, as a result of any structural damage to
the main manufacturing building at the Conner Penang facility (the "Penang
Facility"), there is, or there is reasonably expected to be, (i) a cost to
Conner (after insurance) in excess of $20 million; or (ii) a substantial
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cessation of operations at the Penang Facility for at least fifteen (15)
days (excluding Sundays, holidays and any days not considered normal work
days in accordance with prior practice). The foregoing sentence in this
Section 7.1(i) shall in no way limit or expand the definition of "Material
Adverse Effect" or the rights of Seagate or Conner relating thereto set
forth in other provisions of this Agreement.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 7.1, this Agreement shall be of no further
force or effect, except (i) as set forth in this Section 7.2, Section 7.3 and
Article 8 (miscellaneous), each of which shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any breach of this Agreement.
7.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not the Merger is
consummated; PROVIDED, HOWEVER, that Seagate and Conner shall share equally all
fees and expenses, other than attorneys' fees, incurred in relation to the
printing and filing of the Proxy Statement (including any preliminary materials
related thereto) and the S-4 (including financial statements and exhibits) and
any amendments or supplements thereto.
(b) Upon the occurrence of any of the following events, Conner shall
immediately make payment to Seagate (by wire transfer or cashiers check) of a
breakup fee in the amount of $35 million (the "Breakup Fee"): (i) Conner shall
have accepted a Superior Proposal; (ii) the Board of Directors of Conner shall
have withdrawn, modified or refrained from making its recommendation concerning
the Merger referred to in Section 5.4, or shall have disclosed its intention to
change such recommendation; or (iii) a third party (including a person or a
group as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) acquires beneficial ownership of, or the right to
acquire beneficial ownership of, at least twenty percent (20%) of Conner's
outstanding voting equity securities. Payment of the Breakup Fee shall be
subject to offset as described in the Conner Option Agreement, and shall be
reduced by any amount paid by Conner pursuant to the first sentence of Section
7.3(c).
(c) Conner shall immediately make payment to Seagate (by wire transfer or
cashiers check) of a fee in the amount of $15 million in the event that the
Merger shall have been submitted to a vote of the Conner stockholders as
required hereunder, and the stockholders of Conner shall have failed for any
reason (other than as a result of Seagate's breach of this Agreement) to approve
the Merger by the requisite vote, provided, however, that if the Breakup Fee has
been paid in full by Conner pursuant to Section 7.3(b), then no amount shall be
payable by Conner hereunder. Seagate shall immediately make payment to Conner
(by wire transfer or cashiers check) of a fee in the amount of $15 million in
the event that the Merger shall have been submitted to a vote of the Seagate
stockholders as required hereunder, and the stockholders of Seagate shall have
failed for any reason (other than as a result of Conner's breach of this
Agreement) to approve the Merger by the requisite vote.
(d) Payment of the fees described in Section 7.3(b) and (c) above shall not
be in lieu of damages incurred in the event of breach of this Agreement.
ARTICLE 8
GENERAL PROVISIONS
8.1 AMENDMENT. This Agreement may be amended prior to the Effective Time
by the parties, by action taken by their respective Boards of Directors, at any
time before or after approval of the Merger by the stockholders of Seagate and
Conner but, after any such approval, no amendment shall be made which by law
requires further approval by such stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
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8.2 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties, by action taken by their respective Boards of Directors, may (i) extend
the time for the performance of any of the obligations or other acts of the
other parties, (ii) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (iii) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
8.3 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to the Merger and shall not survive the Merger, except for the agreements
contained in Sections 2.3 (further assurances) 5.14 (options), 5.15 (employee
stock purchase plan), 5.16 (indemnification), 5.19 (Conner Debentures), 7.3
(fees and expenses) and the Conner Option Agreement, each of which shall survive
the Merger.
8.4 ENTIRE AGREEMENT. This Agreement, the Conner Option Agreement, the
Merger Agreement (and the other exhibits hereto), the Confidentiality Agreement
and the other documents referenced herein contain the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
arrangements and understandings, both written and oral, with respect thereto.
8.5 SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, in the event that any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
8.6 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed to be sufficient if contained
in a written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Seagate or Sub, to:
Seagate Technology, Inc.
920 Disc Drive
P. O. Box 66360
Scotts Valley, CA 96067-0360
Attention: Donald L. Waite
Telecopier: (408) 438-2957;
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Telecopier: (415) 493-6811.
(b) if to Conner, to:
Conner Peripherals, Inc.
3081 Zanker Road
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San Jose, CA 95134
Attention: P. Jackson Bell and Thomas F. Mulvaney, Esq.
Telecopier: (408) 456-3841;
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-5150
Attention: Andrew R. Brownstein, Esq.
Telecopier: (212) 403-2000
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such telecopy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized, overnight courier, on the Business Day following dispatch
and (d) in the case of mailing, on the third Business Day following such
mailing.
8.7 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.9 BENEFITS; ASSIGNMENT. This Agreement is not intended to confer upon
any person other than the parties any rights or remedies hereunder and shall not
be assigned by operation of law or otherwise; PROVIDED, HOWEVER, that (i) the
holders of Conner Options and the participants under the Conner Purchase Plan
are intended beneficiaries of the covenants and agreements contained in Sections
5.14 and 5.15; (ii) the officers and directors of Conner are intended
beneficiaries of the covenants and agreements contained in Section 5.16 and
(iii) Sub may assign all or any portion of its rights hereunder to any other
newly-formed, wholly-owned subsidiary of Seagate, and Conner shall execute any
amendment to this Agreement necessary to provide the benefits of this Agreement
to any such assignee.
8.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed therein.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized, as of the date first
written above.
SEAGATE TECHNOLOGY, INC.
By: ________/s/_DONALD L. WAITE_______
Name: Donald L. Waite
Title: Executive Vice President, Chief
Administrative Officer and Chief
Financial Officer
ATHENA ACQUISITION CORPORATION
By: ________/s/_DONALD L. WAITE_______
Name: Donald L. Waite
Title: Vice President
CONNER PERIPHERALS, INC.
By: ________/s/_FINIS F. CONNER_______
Name: Finis F. Conner
Title: Chairman and Chief Executive
Officer
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AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (the "Amendment") to the Agreement and Plan of
Reorganization dated as of October 3, 1995 (the "Reorganization Agreement")
among Seagate Technology, Inc., a Delaware corporation ("Seagate"), Athena
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of
Seagate ("Sub"), and Conner Peripherals, Inc., a Delaware corporation ("Conner")
is effective as of December 18, 1995 by and among Seagate, Sub and Conner.
RECITALS
A. Seagate, Sub and Conner entered into the Reorganization Agreement
providing for the merger of Sub with and into Conner.
B. Seagate, Sub and Conner desire to make certain amendments to the
Reorganization Agreement as set forth in this Amendment.
NOW, THEREFORE, the parties hereby agree to amend the Reorganization
Agreement as follows:
1. The third, fourth and fifth sentences of Section 5.20 of the
Reorganization Agreement are amended and restated to read as follows:
"To the extent not otherwise specified in this Agreement, Seagate
agrees that Conner employees who continue to be employed by Conner
after the Effective Time may continue to participate in their
current Conner sponsored employee benefit programs through June 30,
1996. Subsequent to such date, Conner employees shall participate in
Seagate employee benefit programs or comparable programs under
substantially the same terms and conditions as all other Seagate
employees. To the extent not otherwise specified in this Agreement,
all Conner employee benefit programs will cease at a time to be
determined by Seagate in its discretion, which time will be no
earlier than June 30, 1996."
2. This Agreement shall be governed by Delaware law and may be executed
in counterparts each of which shall be deemed an original and all of which
shall constitute one instrument.
3. Except as expressly amended by this Amendment, all provisions of the
Reorganization Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties execute this Amendment as of the date
referred to above.
Seagate Technology, Inc.,
a Delaware corporation
By: ________/s/_DONALD L. WAITE_______
Title: ____Executive Vice President___
Conner Peripherals, Inc.,
a Delaware corporation
By: ______/s/_THOMAS F. MULVANEY______
Title: _________Vice President________
Athena Acquisition Corporation,
a Delaware corporation
By: ________/s/_DONALD L. WAITE_______
Title: _________Vice President________
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APPENDIX B
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Merger Agreement") is made and entered into
as of December 22, 1995, by and between Athena Acquisition Corporation, a
Delaware corporation ("Sub") and Conner Peripherals, Inc., a Delaware
corporation ("Conner" or the "Surviving Corporation"; Sub and Conner are
sometimes referred to as the "Constituent Corporations"). Capitalized terms used
herein and not defined in this Merger Agreement shall have their defined
meanings as set forth in the Agreement and Plan of Reorganization, dated as of
October 3, 1995 (the "Reorganization Agreement"), entered into by and among
Seagate Technology, Inc., a Delaware corporation ("Seagate") and Conner.
NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, Sub and Conner agree as follows:
ARTICLE I
THE MERGER
1.1 MERGER OF SUB WITH AND INTO CONNER.
(a) AGREEMENT TO ACQUIRE CONNER. Subject to the terms of this Merger
Agreement and the Reorganization Agreement, Conner shall be acquired by Seagate
through a merger (the "Merger") of Sub with and into Conner.
(b) EFFECTIVE TIME OF THE MERGER. The Merger shall become effective upon
the filing of this Merger Agreement, together with any required officers'
certificates of each Constituent Corporation with the Secretary of State of the
State of Delaware pursuant to Section 251 of the Delaware General Corporation
Law. The time of such filing is referred to as the "Effective Time."
(c) SURVIVING CORPORATION. At the Effective Time, Sub shall be merged with
and into Conner and the separate corporate existence of Sub shall thereupon
cease. Conner shall be the surviving corporation in the Merger and shall
succeed, without other transfer, to all the rights and property of Sub and shall
be subject to all the debts and liabilities of Sub in the same manner as if the
Surviving Corporation had itself incurred them.
1.2 EFFECT OF THE MERGER; ADDITIONAL ACTIONS.
(a) EFFECTS. The Merger shall have the effects set forth in Section 259 of
the Delaware General Corporation Law.
(b) ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable (i) to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either Constituent Corporation acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or (ii) to otherwise carry out the purposes of this Merger Agreement,
each Constituent Corporation and its officers and directors shall be deemed to
have granted to the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such deeds, bills of sale, assignments and assurances
and to take and do all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the purposes of this Merger Agreement; and the officers
and directors of the Surviving Corporation are fully authorized in the name of
each Constituent Corporation or otherwise to take any and all such actions.
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ARTICLE II
THE CONSTITUENT CORPORATIONS
2.1 ORGANIZATION OF CONNER. Conner was incorporated under the laws of the
State of Delaware on June 24, 1992. Conner is authorized to issue an aggregate
of 100,000,000 shares of Common Stock, $0.001 par value per share ("Conner
Common Stock"), and 20,000,000 shares of preferred stock, par value $0.001 per
share ("Conner Preferred Stock"). As of September 2, 1995, 53,436,131 shares of
Conner Common Stock are outstanding.
2.2 ORGANIZATION OF SUB. Sub was incorporated under the laws of the State
of Delaware on September 25, 1995. Sub is authorized to issue an aggregate of
1,000 shares of Common Stock, $0.01 par value per share ("Sub Stock"), of which
100 shares are outstanding as of September 30, 1995.
ARTICLE III
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
3.1 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION.
(a) AMENDMENT OF CONNER'S CERTIFICATE OF INCORPORATION. At the Effective
Time, Article Fourth of the Certificate of Incorporation of Conner shall be
amended in its entirety to read as follows:
"The total number of shares of all classes of stock which the
corporation shall have authority to issue is 1,000, all of which
shall consist of Common Stock, par value $0.001 per share."
(b) CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION. The Certificate
of Incorporation of Conner, as amended and in effect immediately prior to the
Effective Time, as amended as provided in Section 3.1(a) above, shall be the
Certificate of Incorporation of the Surviving Corporation unless and until
amended as provided by law and such Certificate of Incorporation.
3.2 BYLAWS OF SURVIVING CORPORATION. The Bylaws of Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation unless and until altered, amended or repealed as provided by
applicable law, the Certificate of Incorporation of the Surviving Corporation
and such Bylaws.
3.3 DIRECTORS OF SURVIVING CORPORATION. The directors of Sub shall be the
initial directors of the Surviving Corporation, and shall hold office from the
Effective Time until their respective successors shall have been duly elected,
appointed or until otherwise provided by law.
3.4 OFFICERS OF SURVIVING CORPORATION. The officers of Sub shall be the
initial officers of the Surviving Corporation.
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
4.1 EFFECT ON CAPITAL STOCK. At the Effective Time, subject and pursuant to
the terms of this Agreement and the Reorganization Agreement, by virtue of the
Merger and without any action on the part of Constituent Corporations or the
holders of any shares of capital stock of the Constituent Corporations:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of Common
Stock, $0.01 par value, of Sub be converted into one (1) validly issued,
fully paid and non-assessable share of Common Stock, $0.001 par value, of
the Surviving Corporation. Each stock certificate of Sub evidencing
ownership of any such shares shall continue to evidence ownership of such
shares of Common Stock of the Surviving Corporation.
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(b) CANCELLATION OF CERTAIN SHARES OF CONNER COMMON STOCK. Each share
of Conner Common Stock that is owned by Conner as treasury stock and each
share of Conner Common Stock that is owned by Seagate, Sub or any other
subsidiary of Seagate or Conner shall be canceled and no capital stock of
Seagate or other consideration shall be delivered in exchange therefor.
(c) CONVERSION OF CAPITAL STOCK OF CONNER. Subject to Section 4.1(d)
below, each share of Conner Common Stock issued and outstanding at the
Effective Time (other than shares to be canceled pursuant to Section 4.1(b)
hereof and Section 2.1(b) of the Reorganization Agreement), including the
corresponding right (a "Conner Right") to purchase one one-hundredth of a
share of Preferred Stock, $0.001 par value, of Conner pursuant to the terms
of the Preferred Shares Rights Agreement dated as of November 29, 1994,
between Conner and The First National Bank of Boston as Rights Agent, as it
may be amended from time to time (the "Conner Rights Agreement"), that is
issued and outstanding immediately prior to the Effective Time shall
automatically be canceled and extinguished and converted, without any action
on the part of the holders thereof, into the right to receive 0.442 shares
of Common Stock, $0.01 par value, of Seagate ("Seagate Common Stock")(the
"Exchange Ratio"). Prior to the Distribution Date (as defined in the Conner
Rights Agreement) and unless the context otherwise requires, all references
in this Merger Agreement to Conner Common Stock shall be deemed to include
Conner Rights.
(d) ADJUSTMENT OF EXCHANGE RATIO. If between the date of this Merger
Agreement and the Effective Time, the outstanding shares of Seagate Common
Stock or Conner Common Stock shall have been changed into a different number
of shares or a different class by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination, exchange of
shares, readjustment or otherwise, then the Exchange Ratio shall be
correspondingly adjusted.
(e) DISSENTERS' RIGHTS. Holders of shares of Conner Common Stock who
dissent from the Merger are not entitled to rights of appraisal under
Section 262 of the Delaware Law by virtue of Section 262(b) (1) and (2) of
Delaware General Corporation Law.
(f) FRACTIONAL SHARES. No certificates or scrip for fractional shares
of Seagate Common Stock shall be issued, but in lieu thereof each holder of
shares of Conner Common Stock who would otherwise be entitled to receive
certificates or scrip for a fraction of a share of Seagate Common Stock
shall receive from Seagate, at such time as such holder shall receive a
certificate representing shares of Seagate Common Stock, an amount of cash
equal to the per share market value of Seagate Common Stock determined by
multiplying (i) the closing price of a share of Seagate Common Stock as
reported on the New York Stock Exchange, Inc. (the "NYSE") composite tape on
the last full trading day prior to the Effective Time by (ii) the fraction
of a share of Seagate Common Stock to which such holder would otherwise be
entitled. The fractional share interests of each stockholder of Conner shall
be aggregated, so that no Conner stockholder shall receive cash in an amount
equal to or greater than the value of one full share of Seagate Common
Stock.
(g) STOCK OPTIONS. At the Effective Time, all options to purchase
Conner Common Stock then outstanding shall be converted into options to
purchase Seagate Common Stock and assumed by Seagate in accordance with
Section 5.14 of the Reorganization Agreement.
4.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Closing Date, Seagate shall designate a
bank or trust company, reasonably acceptable to Conner, to act as exchange agent
(the "Exchange Agent") in the Merger.
(b) SEAGATE TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Seagate shall deposit with the Exchange Agent, for the benefit of the holders of
shares of Conner Common Stock, for exchange in accordance with Article IV hereof
and the Reorganization Agreement, certificates representing the shares of
Seagate Common Stock (such shares of Seagate Common Stock, together with
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any dividends or distributions with respect thereto, are referred to as the
"Exchange Fund") issuable pursuant to Section 4.1 hereof and the Reorganization
Agreement in exchange for outstanding shares of capital stock of Conner, and
cash in an amount sufficient for payment in lieu of fractional shares pursuant
to Section 4.1(f) above.
(c) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record (other than Conner, any
subsidiary of Conner, Sub, Seagate and any other subsidiary of Seagate)
(including holders of record pursuant to purchases made under the Conner
Purchase Plan immediately prior to the Effective Time pursuant to the terms of
the Reorganization Agreement) of a certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Conner
Common Stock (collectively, the "Certificates") whose shares are being converted
into Seagate Common Stock pursuant to Section 4.1 hereof and the Reorganization
Agreement, (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Seagate and Conner may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for Seagate Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal, and such other documents as may be reasonably
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Seagate Common Stock to which such holder has the right to receive
pursuant to Section 4.1 hereof and the Reorganization Agreement, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Conner Common Stock which is not registered
on the transfer records of Conner, a certificate representing the proper number
of shares of Seagate Common Stock may be issued to a transferee if the
Certificate representing such Conner Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by Section 4.2 hereof and the
Reorganization Agreement, each Certificate shall be deemed, on and after the
Effective Time, to represent only the right to receive upon such surrender the
certificate representing shares of Seagate Common Stock and cash in lieu of any
fractional shares of Seagate Common Stock as contemplated by this Article IV,
the Reorganization Agreement and the provisions of the Delaware General
Corporation Law.
(d) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No dividends
or other distributions declared or made after the Effective Time with respect to
Seagate Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Seagate Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 4.1(f)
hereof or the Reorganization Agreement until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect, if any, of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Seagate Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Seagate Common Stock to which such holder is entitled pursuant to
Section 4.1(f) hereof and the Reorganization Agreement and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Seagate Common Stock and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of Seagate Common Stock.
(e) NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF CONNER. All Seagate
Common Stock delivered upon the surrender for exchange of shares of Conner
Common Stock in accordance with the terms hereof and the Reorganization
Agreement including any cash paid pursuant to Sections 4.1(c) or 4.1(f) hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of Conner Common Stock. There shall be no further
registration of transfers on the
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stock transfer books of the Surviving Corporation of the shares of Conner Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article IV
and the Reorganization Agreement.
(f) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any certificates
evidencing shares of Conner Common Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall make payment in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, of such shares of Seagate Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 4.1(f) hereof
and the Reorganization Agreement; provided, however, that Seagate may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Seagate or the Exchange Agent with respect to the certificates alleged
to have been lost, stolen or destroyed.
(g) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the stockholders of Conner for twelve (12) months after
the Effective Time shall be delivered to Seagate, upon demand, and any former
stockholders of Conner who have not previously complied with this Article IV and
the Reorganization Agreement shall thereafter look only to Seagate for payment
of their claim for Seagate Common Stock, any cash in lieu of fractional shares
of Seagate Common Stock and any dividends or distributions with respect to
Seagate Common Stock.
(h) NO LIABILITY. Notwithstanding anything to the contrary in this Section
4.2, neither the Exchange Agent, Seagate, Sub nor Conner shall be liable to a
holder of shares of Conner Common Stock or Seagate Common Stock, as the case may
be, for shares (or dividends or distributions with respect thereto) from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE V
TERMINATION
5.1 TERMINATION BY MUTUAL AGREEMENT. Notwithstanding the approval of this
Merger Agreement by the stockholders of Conner and Sub, this Merger Agreement
may be terminated at any time prior to the Effective Time by mutual agreement of
the Boards of Directors of Conner and Sub.
5.2 TERMINATION OF REORGANIZATION AGREEMENT. Notwithstanding the approval
of this Merger Agreement by the stockholders of Conner and Sub, this Merger
Agreement shall terminate forthwith in the event that the Reorganization
Agreement shall be terminated as therein provided.
5.3 EFFECTS OF TERMINATION. In the event of the termination of this Merger
Agreement, this Merger Agreement shall forthwith become void and there shall be
no liability on the part of Seagate, Sub or Conner or their respective officers
or directors, except to the extent otherwise provided in the Reorganization
Agreement.
ARTICLE VI
GENERAL PROVISIONS
6.1 AMENDMENT. This Merger Agreement may be amended prior to the Effective
Time by the parties hereto, by any action taken by their respective Boards of
Directors, at any time before or after approval of the Merger by the
stockholders of Conner and Sub but, after any such approval, no amendment shall
be made which by law requires the further approval of the stockholders of Conner
or Sub without obtaining such further approval. This Merger Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
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6.2 COUNTERPARTS. This Merger Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
6.3 GOVERNING LAW. This Merger Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties have duly executed this Merger Agreement as
of the date first written above.
ATHENA ACQUISITION CORPORATION
By: /s/_DONALD L. WAITE_______________
Name: Donald L. Waite_________________
Title: Vice President_________________
CONNER PERIPHERALS, INC.
By: /s/_THOMAS F. MULVANEY____________
Name: Thomas F. Mulvaney______________
Title:Vice President, General Counsel
and Secretary___________________
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APPENDIX C
STOCK OPTION AGREEMENT
THE OPTION EVIDENCED BY THIS OPTION AGREEMENT MAY NOT BE TRANSFERRED EXCEPT
TO A WHOLLY-OWNED SUBSIDIARY OF SEAGATE.
THIS STOCK OPTION AGREEMENT (the "Option Agreement") is dated as of October
3, 1995, between Conner Peripherals, Inc., a Delaware corporation ("Conner"),
and Seagate Technology, Inc., a Delaware corporation ("Seagate").
RECITALS
A. Seagate, Athena Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Seagate ("Sub"), and Conner are simultaneously
herewith entering into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") which provides, among other things, that, upon the
terms and subject to the conditions thereof, Sub will be merged with and into
Conner (the "Merger"), pursuant to which each issued and outstanding share of
common stock, par value $0.001 per share, of Conner (the "Conner Common Stock")
(including the associated Rights, as defined in Section 1 below) outstanding
immediately prior to the Merger will be converted into 0.442 shares (the
"Exchange Ratio") of common stock of Seagate, par value $.01 per share.
B. As a condition to their willingness to enter into the Reorganization
Agreement, Seagate and Sub have required that Conner agree, and Conner has
agreed, to enter into this Option Agreement, which provides, among other things,
that Conner grant Seagate an option to purchase shares of Conner Common Stock
upon the terms and subject to the conditions provided for herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained in this Option Agreement and the Reorganization Agreement,
the parties agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions of this Option
Agreement, Conner hereby grants to Seagate an irrevocable option (the "Option")
to purchase 8,015,420 shares of Conner Common Stock (the "Option Shares"),
including the associated rights (the "Rights") to purchase shares of Conner
Preferred Stock pursuant to the Preferred Shares Rights Agreement, dated as of
November 29, 1994, between Conner and The First National Bank of Boston, as the
same may be modified, terminated or amended from time to time (the "Rights
Agreement") in the manner set forth below, at an exercise price of $17.90 per
share of Conner Common Stock, subject to adjustment as provided below (the
"Option Price"). All references in this Option Agreement to shares of Conner
Common Stock issued to Seagate hereunder shall be deemed to include the Rights
(subject to the terms of the Rights Agreement). Capitalized terms used herein
but not defined herein shall have the meanings set forth in the Reorganization
Agreement.
2. EXERCISE OF OPTION.
(a) Subject to the satisfaction or waiver of the conditions set forth in
Section 9 of this Option Agreement, prior to the termination of this Option
Agreement in accordance with its terms, Seagate or its designee (which shall be
a wholly-owned subsidiary of Seagate) may exercise the Option, in whole or in
part, at any time or from time to time on or after the public disclosure of, or
Seagate shall have learned of, the earliest event to occur of the following:
(i) any person or group other than Seagate or its affiliates shall have
acquired or become the beneficial owners (within the meaning of Section
13(d)(3) of the Exchange Act) of more than twenty percent (20%) of the
outstanding shares of Conner Common Stock, or shall have been granted any
option or right, conditional or otherwise, to acquire more than twenty
percent (20%) of the outstanding shares of Conner Common Stock (provided
that in the event that such option or right expires unexercised, then to the
extent the Option has not already been exercised, it shall no longer be
exercisable except as otherwise provided in this Option Agreement);
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(ii) any person other than Seagate and its affiliates shall have made a
tender offer or exchange offer (or entered into an agreement to make such a
tender offer or exchange offer) for at least twenty percent (20%) of the
then outstanding shares of Conner Common Stock (provided that in the event
that such tender offer or exchange offer or other proposal is withdrawn or
terminates prior to consummation of such offer or proposal, then to the
extent the Option has not already been exercised, it shall no longer be
exercisable except as otherwise provided in this Section 2(a)); or
(iii) Conner shall have entered into a written definitive agreement or
written agreement in principle in connection with a liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or
purchase of all or a material portion of the assets of Conner and its
subsidiaries, taken as a whole or all or a material portion of the equity
interest in Conner and its subsidiaries, taken as a whole, or other similar
transaction or business combination.
(b) In the event Seagate wishes to exercise the Option at such time as the
Option is exercisable, Seagate shall deliver written notice (the "Exercise
Notice") to Conner specifying its intention to exercise the Option, the total
number of Option Shares it wishes to purchase and a date and time for the
closing of such purchase (a "Closing") not later than thirty (30) business days
from the later of (i) the date such Exercise Notice is given and (ii) the
expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). If prior to the Expiration Date (as defined in Section 11 below) any
person or group (other than Seagate or its affiliates) shall have made a bona
fide proposal that becomes publicly disclosed, with respect to a tender offer or
exchange offer for fifty percent (50%) or more of the then outstanding shares of
Conner Common Stock (a "Share Proposal"), a merger, consolidation or other
business combination (a "Merger Proposal") or any acquisition of a material
portion of the assets of Conner (an "Asset Proposal"), or shall have acquired
fifty percent (50%) or more of the then outstanding shares of Conner Common
Stock (a "Share Acquisition"), and this Option is then exercisable then Seagate,
in lieu of exercising the Option, shall have the right at any time thereafter
(for so long as the Option is exercisable under Section 2(a)) to request in
writing that Conner pay, and promptly (but in any event not more than five (5)
business days) after the giving by Seagate of such request, Conner shall,
subject to Section 2(c) below, pay to Seagate, in cancellation of the Option, an
amount in cash (the "Cancellation Amount") equal to (i) the excess over the
Option Price of the greater of (A) the last sale price of a share of Conner
Common Stock as reported on the New York Stock Exchange on the last trading day
prior to the date of the Exercise Notice, or (B)(1) the highest price per share
of Conner Common Stock offered to be paid or paid by any such person or group
pursuant to or in connection with a Share Proposal, a Share Acquisition or a
Merger Proposal or (2) the aggregate consideration offered to be paid or paid in
any transaction or proposed transaction in connection with an Asset Proposal,
divided by the number of shares of Conner Common Stock then outstanding,
multiplied by (ii) the number of Option Shares then covered by the Option. If
all or a portion of the price per share of Conner Common Stock offered paid or
payable or the aggregate consideration offered paid or payable for the assets of
Conner, each as contemplated by the preceding sentence, consists of noncash
consideration, such price or aggregate consideration shall be the cash
consideration, if any, plus the fair market value of the non-cash consideration
as determined by the investment bankers of Conner and the investment bankers of
Seagate.
(c) Following exercise of the Option by Seagate, in the event that Seagate
sells, pledges or otherwise disposes (including, without limitation, by merger
or exchange) any of the Option Shares (a "Sale") then (i) any Breakup Fee due
and payable by Conner following such time shall be offset by the amount received
(whether in cash, loan proceeds, securities or otherwise) by Seagate in such
Sale less the exercise price of such Option Shares sold in the Sale (the "Offset
Amount"), and (ii) if Conner has paid to Seagate the Breakup Fee prior to the
Sale, then Seagate shall immediately remit to Conner the Offset Amount. Further,
notwithstanding Section 2(b) above, in the event that Seagate receives the
Cancellation Amount in lieu of exercising the Option, then (A) any Breakup Fee
due and payable by Conner following such time shall be reduced by the
Cancellation Amount (the "Cancellation Offset
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Amount"), and (B) if Conner has paid to Seagate the Breakup Fee prior to
Seagate's receipt of such Cancellation Amount, then Seagate shall only be
entitled to receive that portion of the Cancellation Offset Amount that exceeds
the Breakup Fee. Notwithstanding the above, in no event shall the Offset Amount
or the Cancellation Offset Amount be greater than the Breakup Fee.
3. PAYMENT OF OPTION PRICE AND DELIVERY OF CERTIFICATE. Any Closings under
Section 2 of this Option Agreement shall be held at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California 94304, or at such other place as Conner and Seagate may agree.
At any Closing hereunder, (a) Seagate or its designee will make payment to
Conner of the aggregate price for the Option Shares being so purchased by
delivery of a certified check, official bank check or wire transfer of funds
pursuant to Conner's instructions payable to Conner in an amount equal to the
product obtained by multiplying the Option Price by the number of Option Shares
to be purchased, and (b) upon receipt of such payment Conner will deliver to
Seagate or its designee (which shall be a wholly-owned subsidiary of Seagate) a
certificate or certificates representing the number of validly issued, fully
paid and non-assessable Option Shares so purchased, in the denominations and
registered in such names (which shall be Seagate or a wholly-owned subsidiary of
Seagate) designated to Conner in writing by Seagate.
4. REGISTRATION AND LISTING OF OPTION SHARES.
(a) Conner agrees to use its reasonable best efforts to (i) effect as
promptly as possible upon the request of Seagate and (ii) cause to become and
remain effective for a period of not less than six (6) months (or such shorter
period as may be necessary to effect the distribution of such shares), the
registration under the Securities Act of 1933, as amended (the "Securities Act")
and any applicable state securities laws, of all or any part of the Option
Shares as may be specified in such request, PROVIDED, HOWEVER, that (i) Seagate
shall have the right to select the managing underwriter for any such offering
after consultation with Conner, which managing underwriter shall be reasonably
acceptable to Conner and (ii) Seagate shall not be entitled to more than two (2)
effective registration statements hereunder.
(b) In addition to such demand registrations, if Conner proposes to effect a
registration of Conner Common Stock for its own account or for the account of
any other stockholder of Conner, Conner will give prompt written notice to all
holders of Options or Option Shares of its intention to do so and shall use its
reasonable best efforts to include therein all Option Shares requested by
Seagate to be so included. No registration effected under this Section 4(b)
shall relieve Conner of its obligations to effect demand registrations under
Section 4(a) hereof.
(c) Registrations effected under this Section 4 shall be effected at
Conner's expense, including the fees and expenses of counsel to the holder of
Options or Option Shares but excluding underwriting discounts and commissions to
brokers or dealers. In connection with each registration under this Section 4,
Conner shall indemnify and hold each holder of Options or Option Shares
participating in such offering (a "Holder"), its underwriters and each of their
respective affiliates harmless against any and all losses, claims, damages,
liabilities and expenses (including, without limitation, investigation expenses
and fees and disbursements of counsel and accountants), joint or several, to
which such Holder, its underwriters and each of their respective affiliates may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any registration statement (including any prospectus
therein), or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
other than such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) which arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in written information
furnished by a Holder to Conner expressly for use in such registration
statement.
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(d) In connection with any registration statement pursuant to this Section
4, each Holder agrees to furnish Conner with such information concerning itself
and the proposed sale or distribution as shall reasonably be required in order
to ensure compliance with the requirements of the Securities Act. In addition,
Seagate shall indemnify and hold Conner, its underwriters and each of their
respective affiliates harmless against any and all losses, claims, damages,
liabilities and expenses (including without limitation investigation expenses
and fees and disbursements of counsel and accountants), joint or several, to
which Conner, its underwriters and each of their respective affiliates may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in written information furnished by any Holder to Conner
expressly for use in such registration statement.
(e) Upon the issuance of Option Shares hereunder, Conner will use its
reasonable best efforts promptly to list such Option Shares with the New York
Stock Exchange or on such national or other exchange on which the shares of
Conner Common Stock are at the time listed.
5. REPRESENTATIONS AND WARRANTIES OF CONNER. Conner hereby represents and
warrants to Seagate as follows:
(a) Conner is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has requisite power and
authority to enter into and perform this Option Agreement.
(b) The execution and delivery of this Option Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Conner and no other
corporate proceedings on the part of Conner are necessary to authorize this
Option Agreement or to consummate the transactions contemplated hereby. The
Board of Directors of Conner has duly approved the issuance and sale of the
Option Shares, upon the terms and subject to the conditions contained in
this Option Agreement, and the consummation of the transactions contemplated
hereby. This Option Agreement has been duly and validly executed and
delivered by Conner and, assuming this Option Agreement has been duly and
validly authorized, executed and delivered by Seagate, constitutes a valid
and binding obligation of Conner enforceable against Conner in accordance
with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors' rights
generally; the availability of injunctive relief and other equitable
remedies; and limitations imposed by law on indemnification for liability
under federal securities laws.
(c) Conner has taken all necessary action to authorize and reserve for
issuance and to permit it to issue, and at all times from the date of this
Option Agreement through the date of expiration of the Option will have
reserved for issuance upon exercise of the Option, 8,015,420 authorized
shares of Conner Common Stock (or such other amount as may be required
pursuant to Section 10 hereof), each of which, upon issuance pursuant to
this Option Agreement and when paid for as provided herein, will be validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all claims, liens, charges, encumbrances and security interests and not
subject to any preemptive rights.
(d) The execution, delivery and performance of this Option Agreement by
Conner and the consummation by it of the transactions contemplated hereby
except as required by the HSR Act (if applicable), and, with respect to
Section 4, compliance with the provisions of the Securities Act and any
applicable state securities laws, do not require the consent, waiver,
approval, license or authorization of or result in the acceleration of any
obligation under, or constitute a default under, any term, condition or
provision of any charter or bylaw, or any indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, ordinance, regulation or
decree or any restriction to which Conner or any property of Conner or its
subsidiaries is bound, except where failure
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to obtain such consents, waivers, approvals, licenses or authorizations or
where such acceleration or defaults could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6. REPRESENTATIONS AND WARRANTIES OF SEAGATE. Seagate hereby represents
and warrants to Conner that:
(a) Seagate is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has requisite
power and authority to enter into and perform this Option Agreement.
(b) The execution and delivery of this Option Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Seagate and no other
corporate proceedings on the part of Seagate are necessary to authorize this
Option Agreement or to consummate the transactions contemplated hereby. This
Option Agreement has been duly and validly executed and delivered by Seagate
and, assuming this Option Agreement has been duly executed and delivered by
Conner, constitutes a valid and binding obligation of Seagate enforceable
against Seagate in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally; the availability of injunctive
relief and other equitable remedies; and limitations imposed by law on
indemnification for liability under federal securities laws.
(c) Seagate or its designee is acquiring the Option and it will acquire
the Option Shares issuable upon the exercise thereof for its own account and
not with a view to the distribution or resale thereof in any manner not in
accordance with applicable law.
7. COVENANTS OF SEAGATE. Seagate agrees not to transfer or otherwise
dispose of the Option or the Option Shares, or any interest therein, except in
compliance with the Securities Act and any applicable state securities law.
Seagate further agrees to the placement of the following legend on the
certificate(s) representing the Option Shares (in addition to any legend
required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER EITHER (i) THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
(ii) ANY APPLICABLE STATE LAW GOVERNING THE OFFER AND SALE OF
SECURITIES. NO TRANSFER OR OTHER DISPOSITION OF THESE SHARES, OR OF ANY
INTEREST THEREIN, MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH OTHER STATE LAWS OR
PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH OTHER STATE
LAWS, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
8. REASONABLE BEST EFFORTS. Seagate and Conner shall take, or cause to be
taken, all reasonable action to consummate and make effective the transactions
contemplated by this Option Agreement, including, without limitation reasonable
best efforts to obtain any necessary consents of third parties and governmental
agencies and the filing by Seagate and Conner promptly after the date hereof of
any required HSR Act notification forms and the documents required to comply
with the HSR Act, subject to the provisions of Section 5.9 of the Reorganization
Agreement.
9. CERTAIN CONDITIONS. The obligation of Conner to issue Option Shares
under this Option Agreement upon exercise of the Option shall be subject to the
satisfaction or waiver of the following conditions:
(a) any waiting periods applicable to the acquisition of the Option
Shares by Seagate pursuant to this Option Agreement under the HSR Act shall
have expired or been terminated;
C-5
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(b) the representations and warranties of Seagate made in Section 6 of
this Option Agreement shall be true and correct in all material respects as
of the date of the Closing for the issuance of such Option Shares; and
(c) no order, decree or injunction entered by any court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission in the United States shall be in effect which prohibits the
exercise of the Option or acquisition of Option Shares pursuant to this
Option Agreement.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any change
in the number of issued and outstanding shares of Conner Common Stock by reason
of any stock dividend, stock split, recapitalization, merger, rights offering,
share exchange or other change in the corporate or capital structure of Conner,
Seagate shall receive, upon exercise of the Option, the stock or other
securities, cash or property to which Seagate would have been entitled if
Seagate had exercised the Option and had been a holder of record of shares of
Conner Common Stock on the record date fixed for determination of holders of
shares of Conner Common Stock entitled to receive such stock or other
securities, cash or property at the same aggregate price as the aggregate Option
Price of the Option Shares. In the event that any additional shares of Common
Stock are issued after September 2, 1995 (other than pursuant to an event
described in the preceding sentence of this Option Agreement), the number of
shares of Common Stock subject to the Option shall be adjusted so that, after
such issuance, the number of shares of Common Stock subject to the Option
(ignoring any exercise of this Option) equals at least fifteen percent (15%) of
the number of shares of Conner Common Stock then issued and outstanding (other
than shares of Conner Common Stock issued pursuant to the Option); PROVIDED,
HOWEVER, that nothing contained in this Section 10 shall be deemed to authorize
Conner to issue any shares of Conner Common Stock in violation of the provisions
of the Reorganization Agreement.
11. EXPIRATION. The Option shall expire at the earlier of (y) the
Effective Time (as defined in the Reorganization Agreement) or (z) 200 days
after termination of the Reorganization Agreement in accordance with the terms
thereof (such expiration date is referred to as the "Expiration Date").
12. GENERAL PROVISIONS.
(a) SURVIVAL. All of the representations, warranties and covenants
contained herein shall survive a Closing and shall be deemed to have been
made as of the date hereof and as of the date of each Closing, except for
the representations and warranties in Section 5(d) hereof which shall be
deemed to have been made only as of the date hereof.
(b) FURTHER ASSURANCES. If Seagate exercises the Option, or any
portion thereof, in accordance with the terms of this Option Agreement,
Conner and Seagate will execute and deliver all such further documents and
instruments and use their reasonable best efforts to take all such further
action as may be necessary in order to consummate the transactions
contemplated thereby.
(c) SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Option Agreement be enforced to the fullest extent
permissible under the law and public policies applied in each jurisdiction
in which enforcement is sought. Accordingly, in the event that any provision
of this Option Agreement would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Option Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding
the foregoing, if such provision could be more narrowly drawn so as not be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to
such jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Option Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
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(d) ASSIGNMENT. This Option Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective successors and
assigns; PROVIDED that Conner shall not be entitled to assign or otherwise
transfer any of its rights or obligations hereunder.
(e) SPECIFIC PERFORMANCE. The parties agree and acknowledge that in
the event of a breach of any provision of this Option Agreement, the
aggrieved party would be without an adequate remedy at law. The parties
therefore agree that in the event of a breach of any provision of this
Option Agreement, the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as well as
to obtain damages for breach of this Option Agreement. By seeking or
obtaining any such relief, the aggrieved party will not be precluded from
seeking or obtaining any other relief to which it may be entitled.
(f) AMENDMENTS. This Option Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by Seagate and Conner.
(g) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be deemed given if
delivered personally, telecopied, sent by nationally-recognized, overnight
courier or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the other party at the following addresses
(or such other address for a party as shall be specified by like notice):
If to Seagate:
Seagate Technology, Inc.
920 Disc Drive
P.O. Box 66360
Scotts Valley, CA 96067-0360
Attention: Donald L. Waite
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Larry W. Sonsini, Esq.
Telecopier: (415) 493-6811
If to Conner:
Conner Peripherals, Inc.
3081 Zanker Road
San Jose, CA 95134
Attention: P. Jackson Bell and Thomas F. Mulvaney, Esq.
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Telecopier: (212) 403-2000
(h) HEADINGS. The headings contained in this Option Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Option Agreement.
C-7
<PAGE>
(i) COUNTERPARTS. This Option Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(j) GOVERNING LAW. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein.
(k) JURISDICTION AND VENUE. Each of Conner and Seagate hereby agrees
that any proceeding relating to this Option Agreement shall be brought in a
state court of Delaware. Each of Conner and Seagate hereby consents to
personal jurisdiction in any such action brought in any such Delaware court,
consents to service of process by registered mail made upon such party and
such party's agent and waives any objection to venue in any such Delaware
court or to any claim that any such Delaware court is an inconvenient forum.
(l) ENTIRE AGREEMENT. This Option Agreement, the Confidentiality
Agreements and the Reorganization Agreement and any documents and
instruments referred to herein and therein constitute the entire agreement
between the parties hereto and thereto with respect to the subject matter
hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and thereof. This Option Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the successors
and permitted assigns of the parties hereto. Nothing in this Option
Agreement shall be construed to give any person other than the parties to
this Option Agreement or their respective successors or permitted assigns
any legal or equitable right, remedy or claim under or in respect of this
Option Agreement or any provision contained herein.
(m) EXPENSES. Except as otherwise provided in this Option Agreement,
each party shall pay its own expenses incurred in connection with this
Option Agreement.
IN WITNESS WHEREOF, the parties have caused this Option Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
SEAGATE TECHNOLOGY, INC.
By: ________/s/_DONALD L. WAITE_______
Name: Donald L. Waite
Title: Executive Vice President, Chief
Administrative Officer and Chief
Financial officer
CONNER PERIPHERALS, INC.
By: ________/s/_FINIS F. CONNER_______
Name: Finis F. Conner
Title: Chairman and Chief Executive
Officer
C-8
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APPENDIX D
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
October 3, 1995
Board of Directors
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
Members of the Board:
We understand that Conner Peripherals, Inc. ("Conner"), Seagate Technology,
Inc. ("Seagate") and Athena Acquisition Corporation, a wholly owned subsidiary
of Seagate ("Merger Sub"), have entered into an Agreement and Plan of
Reorganization and an Agreement of Merger, each dated as of the date hereof
(collectively, the "Merger Agreement"), which provides, among other things, for
the merger (the "Merger") of Merger Sub with and into Conner. Pursuant to the
Merger, Conner will become a wholly owned subsidiary of Seagate and each issued
and outstanding share of common stock, par value $0.001 per share, of Conner,
other than shares held in treasury or held by Seagate or any affiliate of
Seagate (the "Conner Common Stock"), shall be converted into the right to
receive 0.442 of a share (the "Exchange Ratio") of common stock, par value $0.01
per share, of Seagate (the "Seagate Common Stock"). The terms and conditions of
the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to Seagate.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of Conner and Seagate, respectively;
(ii) analyzed certain internal financial statements and other financial and
operating data concerning Conner prepared by the management of Conner;
(iii) analyzed certain financial projections relating to Conner prepared by
the managements of Conner and Seagate;
(iv) discussed the past and current operations and financial condition and
the prospects of Conner with senior executives of Conner and Seagate;
(v) discussed the past and current operations and financial condition and
the prospects of Seagate with senior executives of Seagate, and analyzed
the pro forma impact of the Merger on Seagate's earnings per share and
consolidated capitalization;
(vi) analyzed certain internal financial statements and other financial and
operating data concerning Seagate prepared by the management of Seagate;
(vii) analyzed certain financial projections relating to Seagate prepared by
the management of Seagate;
(viii) reviewed the reported prices and trading activity for the Conner Common
Stock;
D-1
<PAGE>
(ix) compared the financial performance of Conner and the prices and trading
activity of the Conner Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(x) reviewed the reported prices and trading activity for the Seagate Common
Stock;
(xi) compared the financial performance of Seagate and the prices and trading
activity of the Seagate Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(xii) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(xiii) reviewed and discussed with the senior management of Seagate the
strategic rationale of the Merger and certain benefits of the Merger to
Seagate;
(xiv) participated in discussions and negotiations among representatives of
Conner and Seagate and their financial and legal advisors;
(xv) reviewed the Merger Agreement and certain related agreements; and
(xvi) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance on Conner
and Seagate, respectively. We have also relied upon, without independent
verification, Seagate management's estimate of the cost savings and other
synergies that will be achieved if the Merger is consummated. We have also
relied upon, without independent verification, Seagate management's assessment
of the validity of, and the risks associated with, Conner's products and
technology. We have not made any independent valuation or appraisal of the
assets or liabilities of Seagate or Conner, respectively, nor have we been
furnished with any such appraisals. We have assumed that the Merger will be
accounted for as a "pooling-of-interests" business combination in accordance
with U.S. Generally Accepted Accounting Principles and will be consummated in
accordance with the terms set forth in the Merger Agreement. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Seagate in
connection with this transaction and will receive a fee for our services.
It is understood that this letter is for the information of the Board of
Directors of Seagate and may not be used for any other purpose without our prior
written consent.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to Seagate.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/_GEORGE F. BOUTROS_____________
George F. Boutros
Managing Director
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<PAGE>
APPENDIX E
[Goldman, Sachs & Co. letterhead]
PERSONAL AND CONFIDENTIAL
October 3, 1995
Board of Directors
Conner Peripherals, Inc.
3081 Zanker Road
San Jose, CA 95134
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, $.001 par value (the "Shares"), of
Conner Peripherals, Inc. (the "Company") of the exchange ratio of .442
shares of Common Stock, par value $.01 per share, of Seagate Technology,
Inc. (the "Seagate Shares") to be received for each Share (the "Exchange
Ratio") pursuant to the Agreement and Plan of Reorganization dated as of
October 3, 1995 among Seagate Technology, Inc. ("Seagate"), Athena
Acquisition Corporation, a wholly-owned subsidiary of Seagate, and the
Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with the Company having provided certain
investment banking services to the Company from time to time and having
acted as its financial advisor in connection with, and having participated
in certain of the negotiations leading to, the Agreement. We also have
provided certain investment banking services to Seagate from time to time
and may provide investment banking services to Seagate in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1994; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; certain
internal financial analyses and forecasts for the Company prepared by its
management; Annual Reports to Shareholders and Annual Reports on Form 10-K
of Seagate for the five fiscal years ended June 30, 1995; certain interim
reports to shareholders and Quarterly Reports on Form 10-Q of Seagate;
certain other communications from Seagate to its shareholders; and certain
internal financial analyses and forecasts for Seagate prepared by its
management. We also have held discussions with members of the senior
management of the Company and Seagate regarding the past and current
business operations, financial condition and future prospects of their
respective companies as well as prospective cost savings available to the
combined company. In addition, we have reviewed the reported price and
trading activity for the Shares and the Seagate Shares, compared certain
financial and stock market information for the Company and Seagate with
similar information for certain other companies
E-1
<PAGE>
Conner Peripherals, Inc.
October 3, 1995
Page Two
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations and performed such other studies and
analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or
Seagate or any of their subsidiaries and we have not been furnished with any
such evaluation or appraisal.
Based upon the foregoing and such other matters as we consider relevant, it
is our opinion that as of the date hereof the Exchange Ratio pursuant to the
Agreement is fair to the holders of Shares.
Very truly yours,
/s/_GOLDMAN, SACHS & CO.
GOLDMAN, SACHS & CO.
E-2
<PAGE>
PROXY [FORM OF PROXY]
SEAGATE TECHNOLOGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS
The undersigned Stockholder of SEAGATE TECHNOLOGY, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Joint Proxy Statement/Prospectus, each dated January 3, 1996,
and hereby appoints Alan F. Shugart, Gary B. Filler and Robert A. Kleist, and
each of them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Special Meeting of Stockholders of SEAGATE TECHNOLOGY,
INC., to be held on Friday, February 2, 1996, at 10:00 a.m., at Seagate's
corporate headquarters at 920 Disc Drive, Scotts Valley, California 95066
and at any adjournments thereof, and to vote all shares of Common Stock which
the undersigned would be entitled to vote if then and there personally
present, on the matters set forth on the reverse side hereof:
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
IN THE ENCLOSED ENVELOPE PROVIDED.
(See reverse side)
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY //
THE SEAGATE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND PROPOSAL 2
1. PROPOSAL TO APPROVE THE ISSUANCE OF SHARES OF SEAGATE TECHNOLOGY, INC.
COMMON STOCK PURSUANT TO THE AGREEMENT AND PLAN OF REORGANIZATION DATED AS
OF OCTOBER 3, 1995 BY AND AMONG SEAGATE TECHNOLOGY, INC., A NEWLY-FORMED,
WHOLLY-OWNED SUBSIDIARY OF SEAGATE ("SUB") AND CONNER PERIPHERALS, INC., A
DELAWARE CORPORATION, AND A RELATED AGREEMENT OF MERGER (COLLECTIVELY, THE
"MERGER AGREEMENTS"), PROVIDING FOR SUB TO BE MERGED WITH AND INTO CONNER
PERIPHERALS, INC., WITH CONNER PERIPHERALS, INC. BEING THE SURVIVING
CORPORATION AND BECOMING A WHOLLY-OWNED SUBSIDIARY OF SEAGATE TECHNOLOGY,
INC.:
For Against Abstain
/ / / / / /
2. PROPOSAL TO RATIFY AND APPROVE AMENDMENTS TO SEAGATE'S EXECUTIVE STOCK
PLAN.
For Against Abstain
/ / / / / /
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS LISTED, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING, INCLUDING, AMONG OTHER THINGS,
CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT OF THE MEETING (INCLUDING,
WITHOUT LIMITATION, FOR PURPOSES OF SOLICITING ADDITIONAL VOTES TO APPROVE THE
ISSUANCE OF SEAGATE COMMON STOCK PURSUANT TO THE MERGER AGREEMENTS).
Please sign exactly as name appears on Proxy
Dated: ______________________________________________________________________
________________________________________________________________________________
Signature
________________________________________________________________________________
(Signatures if held jointly)
________________________________________________________________________________
(Title)
Note: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, guardian or corporate officer or
partner, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
<PAGE>
PROXY [FORM OF PROXY]
CONNER PERIPHERALS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of CONNER PERIPHERALS, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Joint Proxy Statement/Prospectus, each dated January 3,
1996, and hereby appoints P. Jackson Bell and Thomas F. Mulvaney, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at
the Special Meeting of Stockholders of CONNER PERIPHERALS, INC. to be held on
Friday, February 2, 1996, at 9:00 a.m., at The Inn at Spanish Bay,
2700 17 Mile Drive, Pebble Beach, California 93953, and at any adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set
forth on the reverse side hereof:
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE PROVIDED.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE>
/X/ PLEASE MARK
VOTE AS IN THIS
EXAMPLE.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED "FOR" THE PROPOSAL LISTED, AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING, INCLUDING, AMONG OTHER
THINGS, CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT OF THE MEETING
(INCLUDING, WITHOUT LIMITATION, FOR PURPOSES OF SOLICITING ADDITIONAL VOTES
TO APPROVE THE MERGER AGREEMENTS).
FOR AGAINST ABSTAIN
1. PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF / / / / / /
REORGANIZATION DATED AS OF OCTOBER 3, 1995, AS
AMENDED, BY AND AMONG CONNER PERIPHERALS, INC.,
SEAGATE TECHNOLOGY, INC., A DELAWARE CORPORATION,
AND A NEWLY-FORMED, WHOLLY-OWNED SUBSIDIARY OF
SEAGATE TECHNOLOGY, INC. ("SUB"), AND A RELATED
AGREEMENT OF MERGER (COLLECTIVELY, THE "MERGER
AGREEMENTS"), PROVIDING FOR SUB TO BE MERGED
WITH AND INTO CONNER PERIPHERALS, INC. WITH
CONNER PERIPHERALS, INC. BEING THE SURVIVING
CORPORATION AND BECOMING A WHOLLY-OWNED SUBSIDIARY
OF SEAGATE TECHNOLOGY, INC.
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears on Proxy
Note: When shares are held by joint tenants,
both should sign. When signing as attorney,
executor, administrator, trustee, guardian
or corporate officer or partner, please give
full title as such. If a corporation, please
sign in corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized person.
Signature: Date
--------------------- -------------
Signature: Date
--------------------- -------------
The Conner Board of Directors Recommends a Vote FOR Proposal 1.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. The Registrant's
Bylaws provide that the directors, officers and certain other persons will be
indemnified with respect to third-party actions or suits, provided such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Registrant. The Registrant's Bylaws
further provide that directors, officers and certain other persons will be
indemnified with respect to actions or suits by or in the right of the
Registrant, provided that such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Registrant; except that no indemnification shall be made in the event that such
person shall be adjudged to be liable to the Registrant, unless a court
determines that indemnification is fair and reasonable in view of all the
circumstances. The Registrant's Bylaws require the Registrant to pay all
expenses incurred by a director, officer, employee or agent in defending any
proceeding within the scope of the indemnification provisions as such expenses
are incurred in advance of its final disposition, subject to repayment if it is
ultimately determined that such party was not entitled to indemnity by the
Registrant. The Registrant has entered into indemnification agreements with its
officers and directors containing provisions which are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements require the Registrant, among
other things to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance, if available on reasonable terms. The Registrant believes
that these agreements are necessary to attract and retain qualified persons as
directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer or agent
of the corporation or was serving at the request of the corporation against
expenses actually and reasonably incurred by him or her in connection with such
action if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and
with respect to any criminal action, had no reasonable cause to believe his or
her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- --------- ---------------------------------------------------------------------------------------------
<C> <S>
2.01 Agreement and Plan of Reorganization by and between the Registrant and Conner Peripherals,
Inc. dated as of October 3, 1995, as amended and the related Agreement of Merger and Stock
Option Agreement (attached as Appendix A, Appendix B and Appendix C respectively, to the
Joint Proxy Statement/Prospectus contained in the Registration Statement).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- --------- ---------------------------------------------------------------------------------------------
<C> <S>
3.01 The Registrant's Certificate of Incorporation (incorporated by reference to exhibits filed in
response to Item 16 of the Registration Statement on Form S-3, File No. 33-13430, filed on
April 14, 1987).
3.02 The Registrant's Bylaws (incorporated by reference to exhibits filed in response to Item
14(a) of the Company's Form 10-K, as amended, for the year ended June 30, 1990).
4.01 Form of Specimen Certificate for the Registrant's Common Stock.
5.01 Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, regarding the
legality of the securities being issued.
8.01 Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, regarding certain
tax issues.
8.02 Opinion of Wachtell, Lipton, Rosen & Katz.
23.01 Consent of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation (included in Exhibit
5.01 and Exhibit 8.01).
23.02 Consent of Ernst & Young LLP.
23.03 Consent of Price Waterhouse LLP.
23.04 Consent of Morgan Stanley & Co.
23.05 Consent of Goldman, Sachs & Co.
23.06 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.02).
24.01 Power of Attorney (see page II-5).
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to the Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement; (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) that, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(5) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of the Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
II-2
<PAGE>
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form;
(6) that every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 19(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(7) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of responding
to the request; and
(8) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities 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 director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, 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
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Scotts Valley, State of
California, on the 2nd day of January, 1996.
By ________/s/_ALAN F. SHUGART________
Alan F. Shugart
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alan F. Shugart and Donald L. Waite, jointly and
severally, his or her attorneys-in-fact, each with the power of substitution,
for him or her in any and all capacities, to sign any amendments to this
Registration Statement on Form S-4 and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ ------------------------------------------ -------------------
<C> <S> <C>
/s/ALAN F. SHUGART President, Chief Executive Officer and January 2, 1996
Alan F. Shugart Chairman of the Board of Directors
(Principal Executive Officer)
/s/DONALD L. WAITE Executive Vice President, Chief January 2, 1996
Donald L. Waite Administrative Officer and Chief
Financial Officer (Principal Financial
and Accounting Officer)
/s/GARY B. FILLER Director January 2, 1996
Gary B. Filler
/s/ROBERT A. KLEIST Director January 2, 1996
Robert A. Kleist
/s/KENNETH E. HAUGHTON Director January 2, 1996
Kenneth E. Haughton
/s/LAWRENCE PERLMAN Director January 2, 1996
Lawrence Perlman
/s/THOMAS P. STAFFORD Director January 2, 1996
Thomas P. Stafford
/s/LAUREL L. WILKENING Director January 2, 1996
Laurel L. Wilkening
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE PAGE
- --------- -------------------------------------------------------------------------------------- -----
<C> <S> <C>
2.01 Agreement and Plan of Reorganization by and between the Registrant and Conner
Peripherals, Inc. dated as of October 3, 1995, as amended and the related Agreement
of Merger and Stock Option Agreement (attached as Appendix A, Appendix B and Appendix
C respectively, to the Joint Proxy Statement/Prospectus contained in the Registration
Statement).
3.01 The Registrant's Certificate of Incorporation (incorporated by reference to exhibits
filed in response to Item 16 of the Registration Statement on Form S-3, File No.
33-13430, filed on April 14, 1987).
3.02 The Registrant's Bylaws (incorporated by reference to exhibits filed in response to
Item 14(a) of the Company's Form 10-K, as amended, for the year ended June 30, 1990).
4.01 Form of Specimen Certificate for the Registrant's Common Stock.
5.01 Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, regarding the
legality of the securities being issued.
8.01 Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, regarding
certain tax issues.
8.02 Opinion of Wachtell, Lipton, Rosen & Katz.
23.01 Consent of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation (included in
Exhibit 5.01 and Exhibit 8.01).
23.02 Consent of Ernst & Young LLP.
23.03 Consent of Price Waterhouse LLP.
23.04 Consent of Morgan Stanley & Co.
23.05 Consent of Goldman, Sachs & Co.
23.06 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.02).
24.01 Power of Attorney (see page II-5).
</TABLE>
<PAGE>
EXHIBIT 4.01
<TABLE>
<S> <C> <C>
[LOGO] SEAGATE TECHNOLOGY COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE
STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN SAN FRANCISCO, CAL. CUSIP 811804 10 3
OR NEW YORK, N.Y. SEE REVERSE FOR
CERTAIN DEFINITIONS
AND A STATEMENT AS
TO THE RIGHTS,
PREFERENCES,
PRIVILEGES AND
RESTRICTIONS OF
SHARES
</TABLE>
This Certifies That
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, WITH PAR VALUE OF $.01
PER SHARE, OF
SEAGATE TECHNOLOGY
transferable on the books of the Corporation by the holder hereof, in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed.
This certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
<TABLE>
<S> <C> <C>
/s/ Donald L. Waite /s/ Alan F. Shugart
Secretary President, Chief Executive Officer,
Chief Operating Officer and Chairman
of the Board
SEAGATE TECHNOLOGY, INC.
CORPORATE SEAL
SEPT. 23, 1986
DELAWARE
</TABLE>
COUNTERSIGNED AND REGISTERED
CHEMICAL TRUST COMPANY OF CALIFORNIA
TRANSFER AGENT AND REGISTRAR
By
AUTHORIZED SIGNATURE
<PAGE>
SEAGATE TECHNOLOGY
The Company is authorized to issue Common Stock and Preferred Stock. The
Board of Directors of the Company has authority to fix the number of shares and
the designation of any series of Preferred Stock and to determine or alter the
rights, preferences, privileges, and restrictions granted to or imposed upon any
unissued shares of Preferred Stock.
A statement of the rights, preferences, privileges, and restrictions granted
to or imposed upon the respective classes or series of shares and upon the
holders thereof as established, from time to time, by the Articles of
Incorporation of the Company and by any certificate of determination, the number
of shares constituting each class and series, and the designations thereof, may
be obtained by the holder hereof upon request and without charge from the
Transfer Agent of the Company at its offices in San Francisco or New York.
--------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
TEN ENT -- as tenants by the (Cust) (Minor)
entireties
JT TEN -- as joint tenants with under Uniform Gifts to
right of survivorship and Minors Act
not as tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
----------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
SHARES OF THE COMMON STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO
HEREBY IRREVOCABLY CONSTITUTE AND APPOINT _____________________ ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED _____________________
-------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 415-493-9300 FACSIMILE 415-493-6811
January 2, 1996
EXHIBIT 5.01
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, CA 95066
RE: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4, Commission File
Number 33- , filed by you with the Securities Exchange Commission (the
"Commission") on January 2, 1996 (the "Registration Statement"), in connection
with the registration under the Securities Act of 1933, as amended, of
24,202,875 shares of your Common Stock (the "Shares"). As your counsel in
connection with this transaction, we have examined the proceedings taken and are
familiar with the proceedings proposed to be taken by you in connection with the
sales and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares, when issued and sold in the
manner described in the Registration Statement, will be legally and validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the joint proxy statement/prospectus
constitution a part thereof, and any amendment thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
--------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 415-493-9300 FACSIMILE 415-493-6811
December 28, 1995
EXHIBIT 8.01
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, CA 95066-4544
Ladies and Gentlemen:
We have acted as counsel for Seagate Technology, Inc., a Delaware
corporation ("Seagate") in connection with the preparation and execution of the
Agreement and Plan of Merger and Reorganization dated as of October 3, 1995 (the
"Merger Agreement") among Seagate, Athena Acquisition Corporation, a Delaware
corporation which is a newly formed and wholly-owned subsidiary of Seagate
("Merger Sub"), and Conner Peripherals, Inc., a Delaware corporation ("Conner").
Pursuant to the Merger Agreement, Merger Sub will merge with and into Conner
(the "Merger"), and Conner will become a wholly-owned subsidiary of Seagate.
Unless otherwise defined, capitalized terms referred to herein have the meanings
set forth in the Merger Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
You have requested our opinion regarding certain United States federal
income tax consequences of the Merger. In delivering this opinion, we have
reviewed and relied upon the facts, statements, descriptions and representations
set forth in the Registration Statement on Form S-4 filed by Seagate and Conner
with the Securities and Exchange Commission (which contains a joint proxy
statement/ prospectus) (the "Registration Statement"), the Merger Agreement
(including Exhibits) and such other documents pertaining to the Merger as we
have deemed necessary or appropriate. We have also relied upon certificates of
officers of Seagate and Conner respectively (the "Officers' Certificates").
In connection with rendering this opinion, we have also assumed (without any
independent investigation) that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time) due execution and delivery of all documents
where due execution and delivery are prerequisites to effectiveness thereof;
2. Any statement made in any of the documents referred to herein," to the
best of the knowledge" of any person or party is correct without such
qualification;
3. All statements, descriptions and representations contained in any of the
documents referred to herein or otherwise made to us are true and correct in all
material respects and no actions have been (or will be) taken which are
inconsistent with such representations; and
4. The Merger will be reported by Seagate and Conner on their respective
federal income tax returns in a manner consistent with the opinion set forth
below.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, if the Merger is consummated in accordance with the Merger
Agreement (and without any waiver, breach or amendment of
<PAGE>
Seagate Technology, Inc.
December 28, 1995
Page 2
any of the provisions thereof) and the statements set forth in the Officers'
Certificates are true and correct as of the date hereof, on the Effective Date
of the Registration Statement and at the Effective Time, then:
(a) For federal income tax purposes, the Merger will qualify as a
"reorganization" as defined in Section 368(a) of the Code; and
(b) The discussion entitled "Certain Federal Income Tax Consequences" in
the Prospectus constituting a part of the Registration Statement insofar as
it relates to the statements of law or legal conclusions is correct in all
material respects.
This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws arising under the Code, existing judicial
decisions, administrative regulations and published rulings and procedures. Our
opinion is not binding upon the Internal Revenue Service or the courts, and
there is no assurance that the Internal Revenue Service will not successfully
assert a contrary position. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, would not adversely affect the accuracy of the conclusions
stated herein. Nevertheless, we undertake no responsibility to advise you of any
new developments in the application or interpretation of the federal income tax
laws.
This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). Furthermore, this opinion relates only to the
holders of Conner stock who hold such stock as a capital asset. No opinion is
expressed as to the Federal income tax treatment that may be relevant to a
particular investor in light of personal circumstances or to certain types of
investors subject to special treatment under the Federal income tax laws (for
example, life insurance companies, dealers in securities, taxpayers subject to
the alternative minimum tax banks, tax-exempt organizations, non-United States
persons, and stockholders who acquired their shares of Conner stock pursuant to
the exercise of options or otherwise as compensation).
No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement or to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreement are not
consummated in accordance with the terms of such Merger Agreement and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
This opinion has been delivered to you for the purposes of being included as
an exhibit to the Registration Statement and satisfying the requirements of
Section 6.1(f) of the Merger Agreement. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to any
other person or entity without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the use of our name under the heading "Certain Federal Income Tax Matters" in
the Registration Statement.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
--------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT 8.02
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
December 28, 1995
Conner Peripherals, Inc.
3081 Zanker Road
San Jose, California 95134
Ladies/Gentlemen:
We have acted as special counsel to Conner Peripherals, Inc., a Delaware
corporation ("Conner"), in connection with the proposed merger (the "Merger") of
Athena Acquisition Corporation, a Delaware corporation ("Merger Sub"), and a
wholly-owned direct subsidiary of Seagate Technology, Inc., a Delaware
corporation ("Seagate"), upon the terms and conditions set forth in the
Agreement and Plan of Reorganization (the "Agreement") dated as of October 3,
1995 by and among Seagate, Conner and Merger Sub. At your request, and pursuant
to the Agreement, we are rendering our opinion concerning the material federal
income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of Seagate and Merger Sub and the consent of Conner, upon the accuracy
and completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of Seagate and Merger Sub and
of Conner (copies of which are attached hereto and which are incorporated herein
by reference), and we have assumed that such certificates will be complete and
accurate as of the Effective Time. Any capitalized term used and not defined
herein has the meaning given to it in the Joint Proxy Statement-Prospectus of
Seagate and Conner, as amended through the date hereof (the "Joint Proxy
Statement-Prospectus").
<PAGE>
Conner Peripherals, Inc.
December 28, 1995
Page 2
We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance with the Agreement and as described in the
Joint Proxy Statement-Prospectus and that the Merger will qualify as a statutory
merger under the applicable laws of the State of Delaware.
Based upon and subject to the foregoing, it is our opinion that, under
presently applicable law, the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and
that accordingly the following will be all the material federal income tax
consequences of the Merger:
(i) No gain or loss will be recognized by the stockholders of Conner
upon the conversion of their shares of Conner Common Stock into shares of
Seagate Common Stock pursuant to the terms of the Merger to the extent of
such conversion.
(ii) The tax basis of the shares of Seagate Common Stock into which
shares of Conner Stock are converted pursuant to the Merger, including any
fractional interest, will be the same as the basis of the shares of Conner
Common Stock exchanged therefor.
(iii) The holding period for shares of Seagate Common Stock, including
any fractional interest, into which shares of Conner Common Stock are
converted will include the period that such shares of Conner Common Stock
were held by the holder, provided such shares were a capital asset of the
holder.
(iv) The receipt of cash in lieu of a fractional share of Seagate Common
Stock will be treated as if a Conner shareholder were issued such stock and
then had such stock redeemed, and will generally result in recognition of
gain or loss equal to the difference between the amount of cash received and
the holder's basis in the fractional share, as determined above. The gain or
loss will be capital gain or loss if the Conner Common Stock were held as
capital assets, and will be long-term capital gain or loss if the holding
period for the fractional shares, as determined above, was more than one
year.
(v) No gain or loss will be recognized by Seagate, Sub or Conner solely
as a result of the Merger.
<PAGE>
Conner Peripherals, Inc.
December 28, 1995
Page 3
This opinion may not be applicable to Conner stockholders who received their
Conner Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation or who are not citizens or residents of the United
States.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an Exhibit to the Registration Statement on Form S-4 in
respect of the shares of Seagate Common Stock to be issued in connection with
the Merger, and to the reference to this opinion under the caption "Certain
Federal Income Tax Consequences" and elsewhere in the Joint Proxy Statement-
Prospectus included therein. In giving such consent, we do not hereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended.
Very truly yours,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
<PAGE>
EXHIBIT 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of Seagate Technology for the registration of its common stock and to the
incorporation by reference therein of our reports dated July 11, 1995, except
for the last paragraph of the patent litigation note as to which the date is
July 31, 1995, with respect to the consolidated financial statements of Seagate
Technology and subsidiaries incorporated by reference in its Annual Report (Form
10-K) for the year ended June 30, 1995 and the related financial statement
schedule included therein, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
- ------------------------
San Jose, California
December 27, 1995
<PAGE>
EXHIBIT 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Seagate Technology, Inc. of our report dated January 11, 1995, except as
to Note 15 which is dated as of July 25, 1995, appearing on page 21 of Conner
Peripherals, Inc.'s Annual Report on Form 10-K/A for the year ended December 31,
1994. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page S-2 of such Annual Report on
Form 10-K/A. We also consent to the reference to us under the heading "Experts"
in such Joint Proxy Statement/Prospectus.
/s/ PRICE WATERHOUSE LLP
- ---------------------------
Price Waterhouse LLP
San Jose, California
December 27, 1995
<PAGE>
EXHIBIT 23.04
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, CA 95066
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement on Form
S-4, relating to the proposed merger of a wholly-owned subsidiary of Seagate and
Conner, of our opinion letter appearing in Appendix D to the Joint Proxy
Statement/Prospectus which is a part of the Registration Statement, and to the
references to our firm name therein. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations
adopted by the Securities and Exchange Commission thereunder nor do we admit
that we are experts with respect to any part of such Registration Statement
within the meaning of the term "experts" as used in the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ GEORGE F. BOUTROS
-----------------------------------
George F. Boutros
Managing Director
San Francisco, California
December 27, 1995
<PAGE>
EXHIBIT 23.05
[Goldman, Sachs & Co. letterhead]
Board of Directors
Conner Peripherals, Inc.
3081 Zanker Road
San Jose, CA 95134
RE: REGISTRATION STATEMENT OF
SEAGATE TECHNOLOGY, INC.
Gentlemen and Madame:
Reference is made to our opinion letter dated October 3, 1995, with
respect to the fairness to the holders of the outstanding shares of Common
Stock, $.001 par value (the "Shares"), of Conner Peripherals, Inc. (the
"Company") of the exchange ratio of .442 shares of Common Stock, par value
$.01 per share, of Seagate Technology, Inc. to be received for each Share
pursuant to the Agreement and Plan of Reorganization dated as of October 3,
1995 among Seagate Technology, Inc. ("Seagate"), Athena Acquisition
Corporation, a wholly-owned subsidiary of Seagate, and the Company.
The foregoing opinion letter is for the information and assistance of
the Board of Directors of the Company in connection with its consideration
of the transaction contemplated therein and is not to be used, circulated,
quoted or otherwise referred to for any other purpose, nor is it to be filed
with, included in or referred to in whole or in part in any registration
statement, proxy statement or any other document, except in accordance with
our prior written consent.
In that regard, we hereby consent to the reference to the opinion of our
Firm under the captions "The Merger and Related Transactions--Background of
the Merger", "The Merger and Related Transactions--Reasons for the
Merger--Reasons of Conner for the Merger", "The Merger and Related
Transactions--Opinions of Financial Advisors--Opinion of Goldman, Sachs &
Co." and "Summary--Opinions of Financial Advisors" and to the inclusion of
the foregoing opinion in the Joint Proxy Statement included in the
above-mentioned Registration Statement. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
