<PAGE>
As filed with the Securities and Exchange Commission on February 1, 1999
Registration No. 333-67585
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
SEAGATE TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
----------------
Delaware 3573 94-2612933
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
920 Disc Drive
Scotts Valley, California 95066
(831) 438-6550
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
Donald L. Waite
Executive Vice President
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
(831) 438-6550
(Name, address and telephone number of Agent for Service)
----------------
Copies to:
Larry W. Sonsini, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
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.
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<PAGE>
---------------
Offering circular/prospectus
[LOGO OF SEAGATE APPEARS HERE]
Offer to exchange shares of Seagate Technology, Inc. for your shares of Seagate
Software, Inc.
---------------
Our offer will expire at 12:00 midnight, New York City time, on , 1999
unless extended
As of October 2, 1998, Seagate Technology, Inc., a Delaware corporation and one
of its subsidiaries (referred to in this Prospectus as "we," "us," "our" or
"Seagate Technology"), held approximately 99.6% of all outstanding shares of
Seagate Software, Inc., a Delaware corporation ("Seagate Software"). The
remaining shares of Seagate Software are held by current and former employees,
directors and consultants of Seagate Software and Seagate Technology and their
respective subsidiaries. In addition, options to purchase 11,161,077 shares of
Seagate Software common stock were outstanding as of October 2, 1998.
Seagate Technology is offering to exchange shares you hold of Seagate Software
common stock for shares of Seagate Technology common stock. As you know, no
public market for shares of Seagate Software common stock currently exists and
there is no assurance that such a market will ever exist.
If you accept the exchange offer, you will receive that number of shares of
Seagate Technology common stock calculated by multiplying the number of shares
of Seagate Software common stock that you tender by the exchange rate, as
described elsewhere in this document.
For an example of our exchange offer using the exchange rate, see the
frequently asked questions section of this document beginning on page 1.
Neither the Seagate Technology Board of Directors nor the Seagate Software
Board of Directors is making any recommendation to any Seagate Software
stockholder as to whether to tender any or all Seagate Software shares. Each
Seagate Software stockholder must make his or her own decision as to whether to
tender any or all Seagate Software shares.
Seagate Technology common stock is traded on the New York Stock Exchange under
the symbol "SEG." On , 1999, the closing price of Seagate Technology
common stock was $ . The Seagate Software common stock has no public market.
You have until 12:00 midnight, New York City time, on , 1999 to accept our
exchange offer (unless we extend this time). At that time our exchange offer
will expire. This document and the enclosed letter of transmittal describe how
to accept our exchange offer. Once you accept our exchange offer, you cannot
withdraw your shares, except that you may withdraw your shares prior to the
expiration date of our exchange offer if we have not accepted such shares.
This document provides you with detailed information about our exchange offer,
including conditions to our exchange offer, and information about Seagate
Software. In addition, you may obtain information about Seagate Technology from
information contained in this document and from documents that we have filed
with the Securities and Exchange Commission (the "SEC"). Please read this
entire document and the enclosed letter of transmittal carefully.
In connection with your evaluation of this exchange offer, you should consider
the information under the sections entitled "Seagate Technology Risk Factors"
beginning on page 21, and "Factors Affecting Seagate Software's Future
Operating Results" contained in Seagate Software's Quarterly Report on Form 10-
Q for the quarter ended October 2, 1998 which is incorporated in this document
by reference. See pages 30 and 31 about how to receive a copy of this or other
reports filed by Seagate Software and Seagate Technology with the Securities
and Exchange Commission.
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
document is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------
The date of this document is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FREQUENTLY ASKED QUESTIONS................................................ 1
SUMMARY................................................................... 9
The Companies............................................................. 9
Our Exchange Offer........................................................ 10
The Exchange Agent........................................................ 11
Income Tax Consequences of Exchange of Shares............................. 11
Trademarks................................................................ 11
Seagate Technology and Seagate Software Risk Factors...................... 11
SUMMARY SELECTED CONDENSED FINANCIAL DATA................................. 12
Seagate Technology--Summary Unaudited Pro Forma Condensed Financial Data.. 13
Seagate Technology--Comparative Per Share Data............................ 16
Seagate Software--Summary Unaudited Pro Forma Condensed Financial Data.... 18
Seagate Software--Comparative Per Share Data.............................. 19
SEAGATE TECHNOLOGY RISK FACTORS........................................... 21
Slowdown in Demand for Computer Systems May Cause a Decline in Demand for
Seagate Technology's Products............................................ 21
Seagate Technology's Financial Results Will Vary.......................... 21
Seagate Technology Faces Intense Competition and May Not Be Able to Com-
pete Effectively......................................................... 22
Seagate Technology May Not Develop Products in Time to Meet Changing Tech-
nologies................................................................. 22
Seagate Technology's Vertical Integration Strategy Entails a High Level of
Fixed Costs.............................................................. 23
If Seagate Technology's Customers Delay or Cancel Orders, Seagate
Technology's Revenues will be Adversely Affected......................... 24
Seagate Technology Faces Risks from Its International Operations.......... 24
Seagate Technology Faces Risks from the Spin-off of Seagate Software's
Network & Storage Management Group business.............................. 25
Acquisition Related Accounting Charges Will Delay and Reduce Seagate
Technology's Profits..................................................... 26
Systems Failures Could Adversely Affect Seagate Technology's Business..... 26
Seagate Technology May Experience Year 2000 Computer Problems That Harm
Its Business............................................................. 26
Seagate Technology's Stock Price Will Fluctuate........................... 29
Seagate Technology Faces Risks from the Conversion to a Single European
Currency................................................................. 30
WHERE YOU CAN FIND MORE INFORMATION....................................... 30
THE EXCHANGE OFFER........................................................ 32
The Exchange Offer and the Exchange Rate.................................. 32
Background and Reasons for the Exchange Offer............................. 32
The Expiration Date....................................................... 32
Conditions to the Exchange Offer.......................................... 33
Termination of the Exchange Offer......................................... 33
Exchange of Shares and Certificates....................................... 33
Exchange Agent for Shares and Certificates................................ 35
Shares Subject to Repurchase..............................................
Fractional Shares......................................................... 35
Fees and Expenses......................................................... 35
Transfer Taxes............................................................ 35
Appraisal Rights.......................................................... 36
Proxies................................................................... 36
Withdrawal Rights......................................................... 36
Regulatory Approvals Required............................................. 36
Material Income Tax Considerations of Exchange of Shares.................. 37
Material U.S. Income Tax Consequences of Exchange of Shares............... 37
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Material Canadian Income Tax Consequences of Exchange of Shares........... 38
Material U.K. Income Tax Consequences of Exchange of Shares............... 39
Material Tax Consequences to Optionees.................................... 40
Accounting Treatment...................................................... 42
DESCRIPTION OF SEAGATE TECHNOLOGY CAPITAL STOCK........................... 44
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 45
Stockholder Meetings...................................................... 45
Director Nominations...................................................... 45
Indemnification........................................................... 45
INFORMATION ABOUT SEAGATE TECHNOLOGY...................................... 47
General................................................................... 47
Stock and Dividend Information............................................ 48
INFORMATION ABOUT SEAGATE SOFTWARE AND THE INFORMATION MANAGEMENT GROUP... 49
General................................................................... 49
Products.................................................................. 49
Sales and Marketing....................................................... 50
Technical Support and Maintenance......................................... 51
Competition............................................................... 51
Patents and Intellectual Property Rights.................................. 52
Employees................................................................. 52
Facilities................................................................ 53
Legal Proceedings......................................................... 53
Market for and Dividends Paid on Seagate Software Common Stock............ 54
Security Ownership of Certain Beneficial Owners and Management of Seagate
Software................................................................. 54
SEAGATE TECHNOLOGY UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS..... 57
NOTES TO SEAGATE TECHNOLOGY UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS............................................................... 62
SEAGATE SOFTWARE UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS....... 69
NOTES TO SEAGATE SOFTWARE UNAUDITED PRO FORMA CONDENSED FINANCIAL
STATEMENTS............................................................... 74
LEGAL MATTERS............................................................. 80
EXPERTS................................................................... 80
</TABLE>
ii
<PAGE>
FREQUENTLY ASKED QUESTIONS
Introduction
This document contains a great deal of important information. Your individual
circumstances will determine what information applies to you and the decisions
you will make in connection with this document. This series of frequently asked
questions will not answer all of the questions you have. Rather, they are
designed to give you a more clear understanding of your choices.
We will be covering:
. questions about our exchange offer;
. questions about the choices you have;
. questions about your Seagate Software stock options;
. questions about the exchange rate; and
. questions about tax consequences
Additional questions can be directed to Nancy Hamm in our Investor Relations
Department at telephone number (831) 439-2371, or by email at
nancy e [email protected].
Questions About Our Exchange Offer
Q: What is being offered? How will I benefit?
A: You are being offered the opportunity to exchange all or a portion of your
outstanding shares of Seagate Software common stock for shares of Seagate
Technology common stock.
If you accept our exchange offer, you will become a stockholder of Seagate
Technology and your shares of Seagate Technology stock will be publicly
tradeable on the New York Stock Exchange.
Q: What is the Veritas transaction?
A: Seagate Software and Seagate Technology have agreed to contribute the
Seagate Software Network & Storage Management Group business to a newly
formed entity we call New Veritas in exchange for approximately 40%
ownership of New Veritas shares. New Veritas will own the Network & Storage
Management Group business and what is now Veritas Software Corporation. We
call this the "Veritas transaction." New Veritas common stock will be
publicly traded on the Nasdaq National Market.
As a result of the Veritas transaction, option holders of Seagate Software
who will become New Veritas employees may exchange their Seagate Software
options for options to purchase shares of New Veritas common stock.
Additional information about the New Veritas exchange offer has been mailed
in a separate document to eligible persons.
1
<PAGE>
Q: Why is Seagate Technology making the exchange offer described herein?
A: Seagate Software shares are not publicly traded and Seagate Technology
shares are. The Network & Storage Management Group business employees who
will become employees of New Veritas will have the opportunity to sell New
Veritas shares in a public market. The Information Management Group business
employees of Seagate Software will not become employees of New Veritas and
will not have this opportunity. Accordingly, Seagate Software and Seagate
Technology wish to provide all Seagate Software stockholders and holders of
vested options an opportunity to receive the benefits of owning a security
that is tradeable in a public market.
Q: Who is Seagate Technology?
A: Seagate Technology is the majority stockholder of Seagate Software. Seagate
Technology designs, manufactures and markets a broad line of rigid magnetic
disc drives and tape drives. These products are used in computer systems
ranging from desktop personal computers to workstations and supercomputers
as well as in multimedia applications such as digital video and video-on-
demand.
Q: Does Seagate Technology pay dividends?
A: Like Seagate Software, Seagate Technology has not historically paid
dividends on common stock. We do not expect that Seagate Technology will pay
any dividends in the future.
Questions About the Choices You Have
Q: What choices do I have for my shares of Seagate Software stock?
You can:
----------------------------------------------
<TABLE>
<CAPTION>
Exchange for Retain Exchange for
Seagate Seagate Software New Veritas
Technology stock options
stock
(i.e.,
participate in
If you will be an employee the exchange
of: offer)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
New Veritas Yes Yes No
- ---------------------------------------------------------------------------
Seagate Software or Seagate Yes Yes No
Technology
- ---------------------------------------------------------------------------
Neither Seagate Software, Yes Yes No
Seagate Technology nor New
Veritas
- ---------------------------------------------------------------------------
</TABLE>
2
<PAGE>
Q: What choices do I have for the vested portion of my Seagate Software
options?
You can:
----------------------------------------------
<TABLE>
<CAPTION>
Exercise Options Retain Exchange for
and Seagate Software New Veritas
Exchange shares options options
for
Seagate
Technology
stock
(i.e.,
participate in
If you will be an the exchange
employee of: offer)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
New Veritas No
Yes* You will have 30 days Yes*
after the Veritas
transaction closes to
exercise your options
and receive Seagate
Software stock
or your options
will terminate
- ---------------------------------------------------------------------------
Seagate Software or
Seagate Technology Yes Yes No
- ---------------------------------------------------------------------------
Neither Seagate No,
Software, Seagate Yes You will have 30 days No
Technology after leaving
nor New Veritas your employment
to exercise your
options and receive
Seagate Software stock
or your options
will terminate
- ---------------------------------------------------------------------------
</TABLE>
*If you do not elect one of these, your vested Seagate Software options will
terminate.
Q: What choices do I have for the unvested portion of my Seagate Software
options?
A: Our exchange offer is not available to you with respect to your unvested
options. However, if you are a Network & Storage Management Group business
employee, you may be eligible for the New Veritas exchange offer. If you are
eligible for the New Veritas exchange offer, details of that offer will be
mailed to you in a separate document.
Q: Will I be perceived as uncommitted to the future of Seagate Software if I
plan to take advantage of the exchange offer?
A: Your decision about whether to participate in the exchange offer will not be
viewed negatively in any way by Seagate Technology or Seagate Software. We
are voluntarily providing you with our exchange offer because we believe the
employees of Seagate Software will appreciate the opportunity to receive
stock tradeable on a public market.
Q: If I do not accept this exchange offer and continue to hold Seagate Software
shares or options, will there be another opportunity to sell/exchange them
and realize a gain?
A: Following the exchange offer, Seagate Software may, from time to time,
evaluate various alternative means for you to obtain cash for your shares.
However, there is no guarantee that such a situation will occur. In the
event of any such transaction, the value of your shares of Seagate Software
may be greater or less than the value of such shares in our exchange offer.
3
<PAGE>
Q: How long will the exchange offer remain open?
A: The exchange offer expires at 12:00 midnight, New York City time, on ,
1999, five days following the closing of the Veritas transaction.
Q: What is the letter of transmittal?
A: The letter of transmittal is included in the materials you received with
this document. It contains important details about what your choices are and
how to inform the exchange agent and other appropriate parties of the action
you wish to take with your Seagate Software stock and/or options.
Questions About Your Seagate Software Stock Options
Q: If I have not already exercised my stock options, but wish to participate in
the exchange offer, will I have to pay cash to do so?
A: While you may elect to pay cash, you may also elect to exercise your vested
options by canceling a portion of your options in lieu of paying cash. For
example, if you have vested options for 200 shares of stock that you would
like to exercise and the exercise price is $6 per share, it would cost you
$1200 to exercise. Rather than paying $1200 cash to exercise the options,
you may elect to cancel a portion of your options worth $1200.
In order to calculate how many options are equivalent to $1200 we need to
determine the fair market value of a share of Seagate Software common stock
(see pages 6 and 7 for discussion of how this value of Seagate Software will
be determined). For purposes of this example, we will assume that the fair
market value of a share of Seagate Software is $53.
To calculate the number of options to be cancelled, divide the amount you
owe by the fair market value of Seagate Software. In our example: $1200/$53
= options for 23 shares. The number of shares needed will be rounded up. As
a result, you would receive 177 shares of Seagate Software common stock
(200 shares - 23 shares) that would then be eligible to participate in the
exchange offer. Additional details regarding how your options can be
exercised in this manner are set forth in the letter of transmittal being
delivered to you with this document.
Q: How many options do I have vested?
A: Contingent upon the closing of the Veritas transaction, the Seagate Software
board of directors has amended the vesting schedule of your stock options.
Your stock options currently vest at a rate of 20%, 20%, 30%, 30% on each
respective annual anniversary of your vesting commencement date.
Under the new schedule, 1/48th of your stock options will vest on each
monthly anniversary of your vesting commencement date(s). This new schedule
will take effect as soon as the Veritas transaction closes, and is
retroactive to the vesting commencement date of each of your grants. You
will always have more options vested under the new schedule than under the
old. The benefits of this new vesting schedule will be available to you for
the exchange offer.
4
<PAGE>
The following is an example of how your vesting is affected, assuming the
following:
<TABLE>
<S> <C>
Date of Grant May 1, 1997
Vesting Commencement Date May 1, 1997
Number of Shares Granted 100
</TABLE>
Current Vesting Schedule
<TABLE>
<CAPTION>
Date Elapsed time since Percentage Cumulative Total number
vesting vesting number of of unvested
commencement vested shares
date shares
<S> <C> <C> <C> <C>
May 1, 1997 0 0 0 100
- -----------------------------------------------------------------------
June 15, 1997* 1 month 15 days NA 0 100
- -----------------------------------------------------------------------
May 1, 1998 1 year 20% 20 80
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April 1, 1999* 1 year 11 months NA 20 80
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May 1, 1999 2 years 20% 40 60
- -----------------------------------------------------------------------
May 1, 2000 3 years 30% 70 30
- -----------------------------------------------------------------------
May 1, 2001 4 years 30% 100 0
- -----------------------------------------------------------------------
</TABLE>
* Under your current vesting schedule, options only vest on the annual
anniversary of the vesting commencement date, not monthly throughout the year.
New Vesting Schedule
<TABLE>
<CAPTION>
Date Elapsed time since Percentage Cumulative Total number
vesting vesting number of of unvested
commencement vested shares
date shares
<S> <C> <C> <C> <C>
May 1, 1997 0 0 0 100
- -----------------------------------------------------------------------
June 15, 1997* 1 month 15 days 1/48 1 99
- -----------------------------------------------------------------------
May 1, 1998 1 year 12/48 25 75
- -----------------------------------------------------------------------
Apr. 1, 1999 1 year 11 months 23/48 47 53
- -----------------------------------------------------------------------
May 1, 1999 2 years 24/48 50 50
- -----------------------------------------------------------------------
May 1, 2000 3 years 36/48 75 25
- -----------------------------------------------------------------------
May 1, 2001 4 years 48/48 100 0
- -----------------------------------------------------------------------
</TABLE>
*Under the new vesting schedule, options vest on the monthly anniversary of the
vesting commencement date, not daily.
Q: Why is Seagate Software's board of directors changing the vesting schedule?
A: The New Veritas stock option plan will have a 1/48th vesting schedule. The
Network & Storage Management Group business employees who become New Veritas
employees will receive the benefits of this 1/48th vesting schedule. The
Seagate Software board of directors wanted to offer the same vesting
schedule to employees who remained with Seagate Software.
Q: What is my vesting schedule if I leave Seagate Software before the Veritas
transaction closes?
A: The new 1/48th vesting schedule does not take effect until the Veritas
transaction closes. Until that time, the original vesting schedule remains
in effect. As a result, if you leave Seagate Software before the Veritas
transaction closes, your original vesting schedule will apply.
5
<PAGE>
Questions About the Exchange Rate
Q: What is meant by the term exchange rate?
A: The exchange rate refers to the number of shares of Seagate Technology
common stock that will be issued for each share of Seagate Software common
stock in the exchange offer.
Q: How is the exchange rate determined?
A: The exchange rate will be determined by dividing the value per share of
Seagate Software by the value per share of Seagate Technology as described
below.
Q: How will the value of a Seagate Technology share be determined for the
purpose of our exchange offer?
A: Since Seagate Technology shares are publicly traded on the New York Stock
Exchange, determining the value of Seagate Technology for the purpose of the
exchange offer is straight-forward. The value will be equal to the average
closing price of Seagate Technology shares for five trading days ending on
the sixth day before the close of the Veritas transaction.
Q: How is the value of a Seagate Software share determined for the purpose of
our exchange offer?
A: Because Seagate Software is not a publicly traded company, the determination
of its value is more involved than the process for determining the value of
Seagate Technology. The formula for determining the value per share is based
on two main components: the value of Seagate Software's Information
Management Group business and the value of the shares of New Veritas
received in exchange for the Network & Storage Management Group business.
The formula looks like this:
<TABLE>
<S> <C> <C>
Value of Value of Information Management Group business + Value
Seagate of New Veritas shares + Option proceeds
Software = ------------------------------------------------------
Per
Share/Option Total Seagate Software Shares and Options Outstanding
</TABLE>
The various components of this formula are described below.
Q: How is the value of the Information Management Group business determined for
the purposes of the exchange offer?
A: Seagate Software's Board of Directors will make the ultimate decision on the
value of the Information Management Group business. Their determination will
be based on a number of factors, including the Information Management Group
business' historical and projected revenue, earnings and cash flow. While
the final valuation of Information Management Group business will be
determined by the Seagate Software Board of Directors as of six days prior
to the closing of the Veritas transaction, it is currently estimated to be
approximately $ .
6
<PAGE>
Q: How is the value of the New Veritas shares received determined?
A: The value of New Veritas shares will be equal to the average closing price
of Veritas stock for the five trading days ending the sixth day before the
close of the Veritas transaction multiplied by the total number of New
Veritas shares received.
Q: What is meant by "Options proceeds"?
A: This is the amount of money that would be received if all Seagate Software
option holders were to exercise their options. When you exercise your
options, you pay the exercise price in return for shares. The money you pay
is an asset of Seagate Software.
Q: Why do you divide by "Total Shares and Options outstanding"?
A: Dividing by this number is necessary to calculate the total value per share
or option of Seagate Software.
Q: Can you give me an example of how the exchange rate works?
A: While the values for the purpose of the exchange rate will be determined at
the end of the sixth business day before the close of the Veritas
transaction, for the purposes of this example we are using best estimates of
the values at the time this document was filed, as set forth below:
Value of Seagate Technology per share: $39
Value of Seagate Software Information Management Group $500 Million
Value of New Veritas Shares Received $2.92 Billion
Option Proceeds $94 Million
Total Seagate Software Shares and Options Outstanding 66.8 Million
Substituting the applicable numbers into the formula outlined earlier for
determining the value per share of Seagate Software results in a value per
share of Seagate Software of $53 (rounded to the nearest dollar).
Given these values the exchange rate would be equal to 1.359 ($53/$39). If
this were the actual exchange rate and you were to tender 100 shares of
Seagate Software common stock for the purpose of the exchange offer, you
would receive 139 shares of Seagate Technology common stock.
Q: After the Veritas transaction closes and the exchange offer is complete,
will the value of Seagate Software be influenced by the value of New
Veritas?
A: Yes, following the Veritas transaction, Seagate Software will be comprised
of two major components: (1) the value of New Veritas shares held by Seagate
Software and (2) the value of Information Management Group business. Both of
these components will significantly impact the value of Seagate Software.
7
<PAGE>
Q: How will I know what the exchange rate is?
A: You can call 1-800-xxx-yyyy in North America and 1-831-aaa-bbbb outside
North America for a current exchange rate.
Question About Tax Consequences
Q: What are the tax consequences of participating in this exchange offer?
A: The tax consequences of our exchange offer vary according to your country of
residence. Please see the information set forth on pages 37-42 of this
document for a description of the income tax consequences relating to the
exchange of shares by residents of the United States and certain other
countries. Seagate Software stockholders and option holders are urged to
consult their own tax advisors as to the specific tax consequences to them
of the exchange.
8
<PAGE>
SUMMARY
This summary highlights certain information from this document and may not
contain all of the information that is important to you. To understand our
exchange offer fully and for a more complete description of the terms of our
exchange offer and the exchange, you should read carefully this entire
prospectus and the documents we have referred you to. See "Where You Can Find
More Information." (Pages 30-31)
The Companies
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
(831) 438-6550
Seagate Technology operates in a single industry segment by designing,
manufacturing and marketing products for storage, retrieval and management of
data on computer and data communications systems. These products include disc
drives and disc drive components, tape drives and software.
Seagate Technology designs, manufactures and markets a broad line of rigid
magnetic disc drives. These products are used in computer systems ranging from
desktop personal computers to workstations and supercomputers as well as in
multimedia applications such as digital video and video-on-demand. Seagate
Technology also designs and markets tape drives ranging in capacity from 8
gigabytes to 200 gigabytes for low cost storage and protection of large volumes
of data. Seagate
Technology currently produces backup solutions for market segments from desktop
personal computers to midrange servers to complement its line of disc drive
products.
Seagate Software, Inc.
915 Disc Drive
Scotts Valley, California 95066
(831) 438-6550
Seagate Software develops and markets software products and provides related
services enabling business users and information technology professionals to
store, access and manage enterprise information. Seagate Software is currently
comprised of two operating groups, the Information Management Group and the
Network & Storage Management Group. Network & Storage Management Group offers
network and storage management software solutions, which enable information
technology professionals to manage distributed network resources and to secure
and protect enterprise data. Network & Storage Management Group's products
include features such as system backup, disaster recovery, migration,
replication, automated client protection, storage resource management,
scheduling, event correlation and desktop management. Information Management
Group offers business intelligence software solutions which include features
such as query and reporting, automated report scheduling and distribution,
information delivery across the World Wide Web, on-line analytical processing,
forecasting, statistical analysis, discovery and data mining. After the closing
of the Veritas transaction (as described below) Seagate Software will continue
to operate its Information Management Group business. In fiscal 1998,
Information Management Group revenue represented approximately 40% of Seagate
Software's total revenue.
9
<PAGE>
Headquartered in Scotts Valley, California, Seagate Software currently has over
40 offices and operations in 17 countries worldwide. After the contribution of
its Network & Storage Management Group business to New Veritas in connection
with the Veritas transaction, Seagate Software will have 31 offices and
operations in 16 countries worldwide. Seagate Software is a majority-owned and
consolidated subsidiary of Seagate Technology.
Our Exchange Offer
We are offering to acquire from Seagate Software stockholders all outstanding
shares of Seagate Software common stock in exchange for shares of Seagate
Technology common stock.
The purpose of our exchange offer is to provide all Seagate Software
stockholders with an opportunity to exchange their shares for shares tradeable
in a public market.
If you are a Seagate Software optionholder, you may only participate in our
exchange offer by exercising the vested portion of your options and becoming a
stockholder of Seagate Software. If you are an optionholder of Seagate Software
who will become an employee of New Veritas in the Veritas transaction, you will
also have the opportunity to participate in the New Veritas option exchange
offer in connection with the Veritas transaction. Information regarding the New
Veritas option exchange offer has been or will be sent to eligible participants
in a separate document.
If you accept our exchange offer, you will receive that number of shares of
Seagate Technology common stock calculated by
multiplying the number of shares of Seagate Software common stock that you
tender by the exchange rate. The exchange rate will be determined six days
prior to the closing of the Veritas transaction and will be primarily based on
a per share valuation of the Information Management Group business by Seagate
Software's board of directors and on the average closing prices of Veritas and
Seagate Technology common stock for the five day period ending on the sixth day
before the closing of the Veritas transaction. Based on Seagate Software's
current estimated range for the valuation of its Information Management Group
business and the average closing prices of Veritas and Seagate Technology
common stock for the day period ending on , 1999, we currently estimate
that the exchange rate will be between a range of and .
Historically, the market prices of Seagate Technology's and Veritas' common
stock have varied greatly. For example, during Seagate Technology's quarter
ended January 1, 1999, the highest and lowest sales prices were $34 1/2 and $19
13/16. During Veritas' quarter ended December 31, 1998, the highest and lowest
sales prices were $65.00 and $23.75. Any fluctuation in the market price of
Seagate Technology's or Veritas' common stock during the period in which the
exchange rate is calculated will affect the number of shares of Seagate
Technology that you will receive in the exchange.
On , 1999, the last sales price of Seagate Technology common stock was
$ , as reported on the New York Stock Exchange. On , 1999, the last sales
price of Veritas common stock was $ , as reported on the Nasdaq National
Market. The Seagate Software common stock has no established public trading
market.
Neither the Seagate Technology Board of Directors nor the Seagate Software
Board of Directors makes any recommendation to any
10
<PAGE>
Seagate Software stockholder as to whether to tender all or a portion of his or
her Seagate Software shares for this exchange offer. Each Seagate Software
stockholder must make his or her own decision as to whether to tender all or a
portion of his or her Seagate Software shares.
In our exchange, we will not issue any fractional shares to you. Instead, the
number of shares you receive in this exchange offer will be rounded down to the
nearest whole number of shares.
The Exchange Agent
The exchange agent for our offer is Harris Trust Company of New York. Its
address is by mail: Wall Street Station, P.O. Box 1010, New York, NY 10268-1010
or by hand/overnight delivery: 88 Pine Street, 19th Floor, New York, NY 10005.
Income Tax Consequences of Exchange of Shares
The tax consequences of participating in this exchange offer vary depending on
what your individual circumstances are. Please carefully read pages 37 through
42 of this document for a detailed explanation.
Trademarks
This document contains trademarks of Seagate Technology and Seagate Software
and may contain trademarks of others.
Seagate Technology and Seagate Software Risk Factors
In connection with your evaluation of this exchange offer, you should consider
the information under the section entitled, "Seagate Technology Risk Factors"
beginning on page 21 and "Factors Affecting Seagate Software's Future Operating
Results" contained in Seagate Software's Quarterly Report on Form 10-Q for the
quarter ended October 2, 1998 which is incorporated in this document by
reference. See pages 30 and 31 for information about how to receive a copy of
this or other reports filed by Seagate Software and Seagate Technology with the
Securities and Exchange Commission.
11
<PAGE>
SUMMARY SELECTED CONDENSED FINANCIAL DATA
We are providing the following financial information of Seagate Technology and
Seagate Software. Seagate Software is approximately 99.6% owned by Seagate
Technology on an outstanding shares basis. The consolidated historical results
of Seagate Technology include the results of Seagate Software. This financial
information should help you analyze the financial aspects of our exchange
offer.
The financial information of Seagate Technology for fiscal 1994 through fiscal
1998 is derived from Seagate Technology's audited financial statements for the
same periods, and the financial information for the three months ended October
3, 1997 and October 2, 1998 is derived from unaudited financial statements. The
financial information of Seagate Software is derived from Seagate Software's
audited financial statements for fiscal 1995 through fiscal 1998 and unaudited
financial statements for fiscal 1994 and the three months ended October 3, 1997
and October 2, 1998. The financial information for the three months ended
October 2, 1998 for Seagate Technology and Seagate Software is not necessarily
indicative of results that may be achieved for the remainder of fiscal 1999.
This financial information is only a summary and you should read it in
conjunction with the Seagate Technology's financial statements (and related
notes) and the Seagate Software financial statements (and related notes)
contained in the annual reports and other information on file with the SEC. See
"Where You Can Find More Information" on page 30.
Selected Historical Financial Data of Seagate Technology
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended Three Months Ended
------------------------------------------- ---------------------
July 3, June 27, June 28, June 30, July 1, October 2, October 3,
1998 1997 1996 1995 1994 1998 1997
------- -------- -------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $6,819 $8,940 $8,588 $7,256 $5,865 $1,553 $1,896
Gross margin............ 989 2,022 1,581 1,373 1,171 321 295
Income (loss) from
operations............. (686) 858 287 459 473 (37) (200)
Income (loss) before
extraordinary gain..... (530) 658 213 313 330 (30) (240)
Net income (loss)....... (530) 658 213 319 330 (30) (240)
Basic income (loss) per
share before
extraordinary gain..... (2.17) 2.82 1.07 1.64 1.76 (0.12) (0.98)
Basic net income (loss)
per share.............. (2.17) 2.82 1.07 1.67 1.76 (0.12) (0.98)
Diluted income (loss)
per share before
extraordinary gain..... (2.17) 2.62 0.97 1.44 1.56 (0.12) (0.98)
Diluted net income
(loss) per share....... (2.17) 2.62 0.97 1.47 1.56 (0.12) (0.98)
Total assets............ 5,645 6,723 5,240 4,900 4,308 5,603 6,075
Long-term debt, less
current portion........ 704 702 798 1,066 1,177 703 703
Stockholders' equity.... $2,937 $3,476 $2,466 $1,936 $1,635 $2,928 $3,234
Number of shares used in
per share computations:
Basic.................. 243.6 233.6 199.7 190.6 186.9 245.0 244.6
Diluted................ 243.6 257.9 236.1 244.7 235.8 245.0 244.6
</TABLE>
Seagate Technology's fiscal 1998 results of operations include a $347 million
restructuring charge, a $223 million write-off of in-process research and
development incurred primarily in connection with the acquisition of Quinta
Corporation, a $76 million charge for mark-to-market adjustments on
12
<PAGE>
certain of Seagate Technology's foreign currency forward exchange contracts and
a $22 million reduction in the charge recorded in fiscal 1997 as a result of
the adverse judgment in the Amstrad PLC litigation (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Seagate Technology's Form 10-K for the year ended July 3, 1998 incorporated by
reference in this document). The fiscal 1997 results of operations include a
$153 million charge as a result of the adverse judgment in the Amstrad PLC
litigation. The fiscal 1996 results of operations include a $242 million
restructuring charge as a result of the merger with Conner Peripherals, Inc.
and a $99 million write-off of in-process research and development primarily
incurred in connection with the acquisition of software companies. The fiscal
1995 results of operations include a $73 million write-off of in-process
research and development incurred in connection with business acquisitions.
The results for the quarter ended October 2, 1998 include a $77 million charge
in connection with an amendment to the purchase agreement for the August 1997
acquisition of Quinta Corporation and a $7 million charge related to the
separation agreement with Seagate Technology's former Chief Executive Officer.
The results for the quarter ended October 3, 1997 include a $216 million write-
off of in process research and development incurred primarily in connection
with the acquisition of Quinta Corporation and a $63 million charge for mark-
to-market adjustments on certain of Seagate Technology's foreign currency
forward exchange contracts.
Prior periods have been restated to reflect the merger with Conner Peripherals,
Inc. in February 1996 on a pooling of interests basis, a two-for-one stock
split, effected in the form of a stock dividend, in November 1996, and
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share," adopted in the second quarter of fiscal 1998.
Seagate Technology--Summary Unaudited Pro Forma Condensed Financial Data
The following information is provided to give you pro forma financial
information that provides a better picture of what the results of operations
and financial position of Seagate Technology might have looked like had the
exchange of Seagate Software shares for Seagate Technology shares contemplated
by the exchange offer and the Veritas transaction occurred at an earlier date.
The pro forma financial information includes the effects of the purchase by New
Veritas of Telebackup Systems Inc., a Canadian Corporation ("Telebackup
purchase") immediately subsequent to the Veritas transaction. This information
is provided as an example only. It does not show what the results of operations
or financial position of Seagate Technology would have been had the Veritas
transaction, the TeleBackup purchase, and the purchase of Seagate Software
shares by Seagate Technology actually occurred on the dates assumed. This
information also does not purport to indicate what Seagate Technology's future
operating results or consolidated financial position will be.
Please see "Seagate Technology--Unaudited Pro Forma Condensed Financial
Statements" beginning on page 57 for a more detailed explanation of this
analysis.
13
<PAGE>
The pro forma financial information is presented in accordance with U.S. GAAP.
Seagate Software, and Seagate Technology through consolidation of Seagate
Software, will recognize a gain and record certain intangible assets on the
contribution of the Network & Storage Management Group to New Veritas in
exchange for New Veritas common stock. As a result of the exchange of Seagate
Software shares for Seagate Technology shares pursuant to the exchange offer,
Seagate Software and Seagate Technology will record certain intangible assets
and compensation expense.
The pro forma statement of operations data for the year ended July 3, 1998 and
the three months ended October 2, 1998, includes recurring adjustments which
assume that the Veritas transaction, the TeleBackup purchase, and the purchase
of Seagate Software stock by Seagate Technology took place on June 28, 1997,
the first day of Seagate Technology's fiscal year 1998. The pro forma statement
of operations data for Seagate Technology eliminates the historical results of
the Network & Storage Management Group and includes Seagate Software's equity
interest in the results of New Veritas for the same periods (including
recurring amortization of related intangibles and goodwill) plus recurring
amortization of intangibles and goodwill associated with the purchase of shares
of Seagate Software stock by Seagate Technology, as described in the Notes to
the Seagate Software--Unaudited Pro Forma Condensed Financial Statements.
The pro forma balance sheet data has been prepared assuming the Veritas
transaction, the TeleBackup purchase, and the purchase of Seagate Software
stock by Seagate Technology took place on October 2, 1998.
14
<PAGE>
Seagate Technology--Selected Unaudited Pro Forma Condensed Financial
Information
(in millions, except per share data)
<TABLE>
<CAPTION>
Three Months
Year Ended Ended
July 3, 1998 October 2, 1998
------------ ---------------
<S> <C> <C>
Pro Forma Statement of Operations Data:
Revenue....................................... $6,644 $1,505
Loss from operations.......................... (699) (46)
Net loss...................................... (666) (67)
Net loss per share--basic..................... $(2.70) $(0.27)
Net loss per share--diluted................... $(2.70) $(0.27)
Number of shares used in computing per share
amounts--basic............................... 247.0 248.5
Number of shares used in computing per share
amounts--diluted............................. 247.0 248.5
</TABLE>
<TABLE>
<CAPTION>
As of
October 2, 1998
---------------
<S> <C>
Pro Forma Balance Sheet Data:
Working capital.............................................. $2,219
Total assets................................................. 6,500
Retained earnings............................................ 1,717
Stockholders' equity......................................... 3,464
</TABLE>
15
<PAGE>
Seagate Technology--Comparative Per Share Data
The following tables present certain unaudited historical and pro forma per
share data that reflect the exchange of Seagate Software shares for Seagate
Technology shares pursuant to the exchange offer, the completion of the Veritas
transaction and the TeleBackup Purchase based upon the historical financial
statements of Seagate Technology. The data presented below should be read in
conjunction with "Seagate Technology--Unaudited Pro Forma Condensed Financial
Statements" and the historical financial statements of Seagate Technology
incorporated by reference in this document and the historical financial
statements of Seagate Software included in this document. The unaudited pro
forma combined financial data does not necessarily indicate the operating
results that would have been achieved had the combinations been in effect as of
the beginning of the periods presented or future results of operations or
financial position.
Seagate Technology--Historical
<TABLE>
<CAPTION>
Year Ended Three Months Ended
or as of or as of
July 3, 1998 October 2, 1998
------------ ------------------
<S> <C> <C>
Net loss per share--basic.................... $(2.17) $(0.12)
Net loss per share--diluted.................. $(2.17) $(0.12)
Book value per common share(1)............... $12.00 $11.94
</TABLE>
Seagate Technology--Pro Forma(2)(3)
<TABLE>
<CAPTION>
Year Ended Three Months Ended
July 3, 1998 October 2, 1998
------------ ------------------
<S> <C> <C>
Net loss per share--basic.................... $(2.70) $(0.27)
Net loss per share--diluted.................. $(2.70) $(0.27)
Book value per common share.................. $14.00 $13.95
</TABLE>
- --------
(1) The historical book value per common share is computed by dividing
stockholders' equity as of the end of each period for which such
computation is made by the number of shares of common stock outstanding at
the end of each period.
(2) The pro forma comparative per share data has been calculated assuming
option holders exercise options to purchase 1,833,079 shares of Seagate
Software common stock and that these shares from the exercise of stock
options plus 467,000 shares held by existing minority interest shareholders
(2,300,079 shares out of 4,715,939 vested shares and options issued and
outstanding) are exchanged for Seagate Technology stock and assuming
33,398,286 shares of New Veritas are issued to Seagate Software in
connection with the Veritas transaction.
(3) As a result of the Veritas transaction, the TeleBackup purchase and the
exchange of Seagate Software shares for Seagate Technology shares pursuant
to the exchange offer, Seagate Technology expects to incur write-offs
related to in-process research and development as well as compensation
costs currently estimated at $183.6 million. The pro forma book value per
share includes the effect of these charges; however, the pro forma net loss
per share does not reflect these charges since they are non-recurring.
These charges will be reflected in Seagate Technology's consolidated
financial statements in the period the Veritas transaction, the TeleBackup
purchase and the purchase by Seagate Technology of certain outstanding
shares of Seagate Software are completed.
16
<PAGE>
Selected Historical Financial Data of Seagate Software(1)
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Ended
------------------------------------------------- --------------------------
July 3, June 27, June 28, June 30, July 1, October 2, October 3,
1998 1997 1996 1995 1994 1998 1997
-------- -------- --------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $293,226 $216,950 $ 141,586 $ 92,796 $ 30,696 $ 74,875 $ 63,022
Gross profit............ 242,766 169,161 112,567 70,417 23,556 62,515 49,226
In-process research and
development............ 6,800 2,613 96,958 73,177 -- -- --
Write-down of goodwill,
developed technology
and intangibles........ 1,900 17,177 2,157 -- -- -- --
Restructuring costs .... 2,524 9,502 -- -- -- --
Unusual items .......... 13,446
Income (loss) from
operations............. 6,905 (64,033) (137,806) (80,166) (11,068) 1,583 (3,399)
Net income (loss)....... (8,490) (57,700) (129,668) (82,864) (6,884) 852 (2,915)
Net income (loss) per
common share
Basic.................. (51.59) (852.11) -- -- -- 3.09 (28.12)
Diluted................ (51.59) (852.11) -- -- -- 0.01 (28.12)
Total assets............ 136,040 143,594 201,598 101,928 20,854 123,272 136,040
Stockholders' equity.... $ 54,149 $ 61,618 $ 115,602 $ 47,215 $ 6,978 $ 56,016 $ 54,149
Number of shares used in
per share computations
Basic.................. 164,571 67,714 -- -- -- 275,314 103,659
Diluted................ 164,571 67,714 -- -- -- 59,984,218(1) 103,659
</TABLE>
- --------
(1) Includes the impact of dilutive convertible preferred stock held by Seagate
Technology.
17
<PAGE>
Seagate Software--Summary Unaudited Pro Forma Condensed Financial Data
The following information is provided to give the holders of Seagate Software
stock pro forma financial information which gives a better picture of what the
results of operations and financial position of Seagate Software might have
looked like had the exchange of Seagate Software shares for Seagate Technology
shares contemplated by this exchange offer and the Veritas transaction occurred
at an earlier date. The pro forma financial information also includes the
effects of the TeleBackup purchase immediately subsequent to the Veritas
transaction. This information is provided as an example only. It does not show
what the results of operations or financial position of Seagate Software would
have been had the Veritas transaction, the TeleBackup purchase and the purchase
of Seagate Software shares by Seagate Technology actually occurred on the dates
assumed. This information also does not purport to indicate what Seagate
Software's future operating results or consolidated financial position will be.
Please see "Seagate Software--Unaudited Pro Forma Condensed Financial
Statements" for a more detailed explanation of this analysis.
The pro forma financial information is presented in accordance with U.S. GAAP.
Seagate Software will recognize a gain and record certain intangible assets on
the contribution of the Network & Storage Management Group business to New
Veritas in exchange for New Veritas common stock. In addition, Seagate
Technology will purchase certain outstanding shares of Seagate Software and as
a result Seagate Software will record certain intangible assets and
compensation expense.
The pro forma statement of operations data for the year ended July 3, 1998 and
the three months ended October 2, 1998, includes recurring adjustments which
assume that the Veritas transaction, the TeleBackup purchase and the purchase
of Seagate Software stock by Seagate Technology took place on June 28, 1997,
the first day of Seagate Software's fiscal 1998. The pro forma statement of
operations data for Seagate Software eliminates the historical results of the
Network & Storage Management Group business and includes Seagate Software's
equity interest in the results of New Veritas for the same periods, as
described in the Notes to the Seagate Software Unaudited Pro Forma Condensed
Financial Statements.
The pro forma balance sheet data has been prepared assuming the Veritas
transaction, the TeleBackup purchase and the purchase of Seagate Software stock
by Seagate Technology took place on October 2, 1998.
The pro forma statements of operations include the historical results of
Seagate Software less the historical results of the Network & Storage
Management Group business plus Seagate Software's equity interest in the pro
forma results of New Veritas for the same periods as described in the notes to
the Seagate Software Unaudited Pro Forma Condensed Financial Statements
(including recurring amortization of related intangibles and goodwill) plus
recurring amortization of intangibles and goodwill associated with the purchase
of shares of Seagate Software stock by Seagate Technology.
18
<PAGE>
Seagate Software--Selected Unaudited Pro Forma Condensed Financial Information
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three
Year Ended Months Ended
July 3, 1998 October 2, 1998
------------ ---------------
<S> <C> <C>
Pro Forma Statement of Operations Data:
Total revenues................................ $ 118,180 $ 26,342
Loss from operations.......................... (5,371) (7,474)
Net loss...................................... (144,474) (35,615)
Net loss per share--basic..................... $ (55.17) $ (13.60)
Net loss per share--diluted................... $ (55.17) $ (13.60)
Number of shares used in computing per share
amounts--basic............................... 2,619 2,619
Number of shares used in computing per share
amounts--diluted............................. 2,619 2,619
</TABLE>
<TABLE>
<CAPTION>
As of
October 2, 1998
---------------
<S> <C>
Pro Forma Balance Sheet Data:
Working capital.............................................. $ 4,410
Total assets................................................. 1,025,138
Retained earnings............................................ 181,678
Stockholders' equity......................................... 593,693
</TABLE>
Seagate Software--Comparative Per Share Data
The following tables present certain unaudited historical and pro forma per
share data that reflect the completion of the Veritas transaction, the
TeleBackup purchase and the purchase of Seagate Software shares by Seagate
Technology based upon the historical financial statements of Seagate Software.
The data presented below should be read in conjunction with "Seagate Software--
Unaudited Pro Forma Condensed Financial Statements" and the historical
financial statements of Seagate Software included in this document. The
unaudited pro forma condensed financial data does not necessarily indicate the
operating results that would have been achieved had the Veritas transaction,
the TeleBackup purchase and the purchase of Seagate Software shares by Seagate
Technology been in effect as of the beginning of the periods presented or
future results of operations or financial position.
The historical book value per common share is computed by dividing
stockholders' equity as of the end of each period for which such computation is
made, adjusted for the preferred stock liquidation preference, and by the
number of shares of common stock outstanding that are not subject to
repurchase, at the end of each period.
The pro forma comparative per share data has been calculated assuming option
holders exercise options to purchase 1,833,079 shares of Seagate Software
common stock and that these shares from the exercise of stock options plus
467,000 shares held by existing minority interest shareholders (2,300,079
shares out of 4,715,939 vested shares and options issued and outstanding) are
exchanged for Seagate Technology stock and assuming 33,398,286 shares of New
Veritas are issued to Seagate Software in connection with the Veritas
transaction.
19
<PAGE>
As a result of the Veritas transaction, the TeleBackup purchase and the
exchange of Seagate Software shares for Seagate Technology shares pursuant to
the exchange offer, Seagate Software expects to incur write-offs related to in-
process research and development as well as compensation costs currently
estimated at $183.6 million. The pro forma book value per share includes the
effect of these charges; however, the pro forma net loss per share does not
reflect these charges since they are non-recurring. These charges will be
reflected in Seagate Software's consolidated financial statements in the period
that the Veritas transaction, the TeleBackup purchase and the purchase by
Seagate Technology of certain outstanding shares of Seagate Software are
completed.
Seagate Software--Historical
<TABLE>
<CAPTION>
Three
Year Ended Months Ended
or as of or as of
July 3, 1998 October 2, 1998
------------ ---------------
<S> <C> <C>
Basic net income (loss) per share............... $ (51.59) $ 3.09
Diluted net income (loss) per share............. $ (51.59) $ 0.01
Book value per common share..................... $(1,509.97) $(1,185.75)
</TABLE>
Seagate Software--Pro Forma
<TABLE>
<CAPTION>
Three
Year Ended Months Ended
July 3, 1998 October 2, 1998
------------ ---------------
<S> <C> <C>
Basic net loss per share........................ $(55.17) $(13.60)
Diluted net loss per share...................... $(55.17) $(13.60)
Book value per common share..................... $ 0.93 $ 0.62
</TABLE>
20
<PAGE>
SEAGATE TECHNOLOGY RISK FACTORS
Seagate Technology competes in the data storage industry, and there are a
number of factors that in the past have affected all of the companies in our
industry including us. Many of these factors may also impact our business in
the future.
SLOWDOWN IN DEMAND FOR COMPUTER SYSTEMS MAY CAUSE A DECLINE IN DEMAND FOR
SEAGATE TECHNOLOGY'S PRODUCTS
Our products are components in computer systems. The demand for computer
systems has been volatile in the past and often has had an exaggerated effect
on the demand for our disc drive and tape drive products in any given period.
In the past, unexpected slowdowns in demand for computer systems have generally
caused sharp declines in demand for disc drives and tape drive products. We
expect that this situation will occur again in the future and that demand for
our disc drive and tape drive products may be reduced.
In our industry, the supply of drives periodically exceeds demand. When this
happens, the over supply of available products causes us to have higher than
anticipated inventory levels and we experience intense price competition from
other disc drive and/or tape drive manufacturers.
SEAGATE TECHNOLOGY'S FINANCIAL RESULTS WILL VARY
We often experience a high volume of sales at the end of the quarter, so we may
not be able to determine that our fixed costs are too high relative to sales
until late in any given quarter. Since this happens late in the quarter, we do
not have enough time to reduce these costs. As a result, we would not be as
profitable or may even incur a loss. In addition, our operating results have
been and may in the future 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, such
as Compaq,
. our product mix with respect to higher margin, more recently introduced disc
drive products versus older, lower margin disc drive products,
. accelerated reduction in the price of our disc drive products due to an
oversupply of disc drives in the world market,
. manufacturing delays or interruptions particularly at our major manufacturing
facilities in Malaysia, Thailand, China and Singapore,
. acceptance by customers of competing technologies in lieu of our products,
. variations in the cost of components for our products,
. limited access to components that we obtain from a single or a limited number
of suppliers,
. our inability to reduce our fixed costs to match revenues in any quarter
because of our vertical manufacturing strategy,
. the impact of changes in foreign currency exchange rates on the cost of our
products and the effective price of such products to foreign consumers, and
. competition and consolidation in the data storage industry.
21
<PAGE>
For example, our revenue decreased to $1.553 billion in the first quarter of
fiscal 1999 from $1.896 billion in the first quarter of fiscal 1998 as a result
of increased competition that resulted in significant price decreases, a shift
in mix away from our higher price products and continuing weakness in demand
for our disc drive products. In addition, our future operating results may also
be adversely affected, if we receive an adverse judgment or settlement in any
of the legal proceedings to which we are a party.
Seagate Technology Faces Intense Competition and May Not Be Able to Compete
Effectively
Even during periods when demand is stable, the data storage industry is
intensely competitive and vendors experience price erosion over the life of a
product. We expect that our competitors will offer new and existing products at
lower prices if necessary to gain or retain market share and customers. We also
expect that price erosion in our industry will continue for the foreseeable
future. Because we may need to reduce our prices to retain market share, the
competition could adversely affect our results of operations in any given
quarter. We have experienced and expect to continue to experience intense
competition from a number of domestic and foreign companies including the other
leading independent disc drive manufacturers, as well as large integrated
multinational manufacturers such as
. Fujitsu Limited,
. International Business Machines Corporation,
. NEC Corporation,
. Samsung Electronics Co. Ltd., and
. Toshiba Corporation.
We also face indirect competition from present and potential customers,
including several of the computer manufacturers listed above, that continuously
evaluate whether to manufacture their own drives or purchase them from outside
sources. If our customers decide to manufacture their own drives, it could have
a material adverse effect on our business, results of operations and financial
condition.
We also compete with manufacturers of products that use alternative data
storage and retrieval technologies. Products based upon such alternative
technologies, including optical recording technology and semiconductor memory
(flash memory, SRAM and DRAM), may compete with our products.
We may not be able to compete successfully against current or future
competitors. If we fail to compete successfully, our business, operating
results and financial condition may be materially adversely affected.
Seagate Technology May Not Develop Products in Time to Meet Changing
Technologies
Our customers have demanded new generations of drive products as advances in
other hardware components and software have created the need for improved
storage products with features such as increased storage capacity or more
advanced technology. As a result, the life cycles of our products have been
shortened, and we have been required to constantly develop and introduce new
cost-effective drive products within time to market windows that have become
progressively shorter. We had research and development expenses of $420
million, $459 million and $585 million in fiscal 1996, 1997 and 1998,
respectively.
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When we develop new disc and tape drive products with higher capacity and more
advanced technology, our operating results may decline because the increased
difficulty and complexity of producing such disc drives increases the
likelihood of reliability, quality or operability problems. If our products
suffer increases in failures, are of low quality or are not reliable, customers
may reduce their purchases of our products and our manufacturing rework and
scrap costs and service and warranty costs may increase. In addition, a decline
in the reliability of our products may make us less competitive as compared
with other disc and tape drive manufacturers.
Our products are used in combination with other hardware, such as
microprocessors, and other software. Seagate Technology's future success will
also require strong demand by consumers and businesses for computer systems,
storage upgrades to computer systems and multimedia applications, such as
digital video and video-on-demand. If delivery of our products is delayed, our
original equipment manufacturer ("OEM") customers may use our competitors'
products in order to meet their production requirements. In addition, if
delivery of those OEMs' computer systems into which our products are integrated
is delayed, consumers and businesses may purchase comparable products from the
OEMs' competitors. The consumers and businesses may wait to make their
purchases if they want to buy a product that has been announced but not yet
released, we would not be able to sell our existing inventory of products. If
customers hold back in anticipation of a new product or buy from a competitor
instead, our operating results may be significantly adversely impacted.
Consumers have shown that they want to purchase personal computers costing less
than $1,000. We are developing low cost disc drives to meet the demand for disc
drives that are components of low cost personal computers. However, we may not
be able to produce disc drives that meet our quality and performance standards
at a cost low enough to yield gross margins comparable to those of our current
overall product mix.
Seagate Technology discontinued production of disc drives that use media
smaller than 3.5 inches in January 1998. We are continuing research and
development of smaller drives, because we believe that to compete successfully
to supply components for mobile, laptop, notebook and ultraportable computers,
we must supply a smaller product. We intend to re-enter this market with a
durable, low power application in the future, although there can be no
assurance that we will be able to do so successfully.
Seagate Technology's Vertical Integration Strategy Entails a High Level of
Fixed Costs
The cost, quality and availability of certain components, including heads,
media, application specific integrated circuits, motors, printed circuit boards
and custom semiconductors are critical to the successful production of disc
drives. Our strategy of vertical integration has allowed us to internally
manufacture many of the critical components used in our products. We have
pursued a strategy of vertical integration of our manufacturing processes in
order to reduce costs, control quality and assure availability and quality of
certain components.
Seagate Technology's vertical integration strategy entails a high level of
fixed costs and requires a high volume of production and sales to be
successful. During periods of decreased production, such as we are now
experiencing, these high fixed costs have had, and could in the future have, a
material adverse effect on our operating results and financial condition. In
addition, a strategy of vertical
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integration has in the past and could continue to delay our ability to
introduce products containing market-leading technology, because we may not
have developed the technology in house and do not have access to external
sources of supply without incurring substantial costs. For example, over the
past two years we have experienced delays in product launches due to delays in
production of certain components due to slower than anticipated internal
development and manufacturing scale-up of new designs.
Seagate Technology has Experienced Delays in the Introduction of Products due
to Supply of Components
Seagate Technology also relies on independent suppliers for certain components.
In the past, we have experienced production delays when we are unable to obtain
sufficient quantities of certain components. Any prolonged interruption or
reduction in the supply of any key components could have a material adverse
effect on our business, operating results and financial condition. We rely on
single or limited source suppliers for certain components used in our products.
We may not be able to obtain components that meet our specifications and
quality standards at prices that enable us to earn a profit on the finished
products. For example, in the past Seagate Technology has experienced delays
obtaining head stack assemblies and certain integrated circuits for printed
circuit board assemblies due to lead time requirements or changes in
specifications. As a result, certain of our suppliers substantially increased
the price of such components, and we have incurred increased costs for certain
of these components as a result of supply shortages. If we experience any
extended interruption or reduction in the supply of any key components, our
business, results of operations and financial condition could be materially
adversely affected.
If Seagate Technology's Customers Delay or Cancel Orders, Seagate Technology's
Revenues will be Adversely Affected
The data storage industry has been characterized by large volume OEM purchase
agreements and large distributor orders. Typically, our OEM purchase agreements
permit the OEMs to cancel orders and reschedule delivery dates without
significant penalties. In the past, orders from many of our OEMs were canceled
or delivery schedules were delayed as a result of changes in the requirements
of the OEMs' customers. The delay of our OEMs have had a material adverse
effect on our results of operations in the past and may again in the future.
Our distributors and OEMs typically furnish us with non-binding indications of
their near-term requirements, with product deliveries based on our weekly
confirmations. To the extent actual orders from distributors and OEMs decrease
from their non-binding forecasts, such variances could have a material adverse
effect on our business, results of operations and financial condition.
Seagate Technology Faces Risks from Its International Operations
Seagate Technology has significant offshore operations including manufacturing
facilities, sales personnel and customer support operations. We have
manufacturing facilities in Singapore, Thailand, the People's Republic of
China, Scotland, Northern Ireland and Malaysia, in addition to those in the
United States. Our offshore operations are subject to certain inherent risks
including:
. fluctuations in currency exchange rates, such as the $76 million pre-tax
charge to income Seagate Technology incurred in fiscal 1998 from marking our
hedge positions to market,
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. longer payment cycles for sales in foreign countries,
. difficulties in staffing and managing international manufacturing operations,
. seasonal reductions in business activity in the summer months in Europe and
certain other countries,
. increases in tariffs and duties, price controls, restrictions on foreign
currencies and trade barriers imposed by foreign countries, and
. political unrest, particularly in areas in which we have manufacturing
facilities.
These factors could have a material adverse effect on our business, operating
results and financial condition in the future.
Seagate Technology's products are priced in U.S. dollars even when sold to
customers who are located abroad. The currency instability in the Asian and
other financial markets may make our products more expensive than products sold
by other manufacturers that are priced in one of the affected currencies.
Therefore, foreign customers may reduce purchases of our products. We
anticipate that the recent turmoil in financial markets and the recent
deterioration of the underlying economic conditions in certain countries,
including those in Asia, may have an impact on our sales to customers located
in or whose end-user customers are located in those countries due to:
. the impact of currency fluctuations on the relative price of our products,
. restrictions on government spending imposed by the International Monetary
Fund in those countries receiving the International Monetary Fund's
assistance,
. customers' reduced access to working capital to fund purchases of disc drive
components or software, such as our products due to:
. higher interest rates,
. reduced bank lending due to contractions in the money supply or the
deterioration in the customer's or its bank's financial condition, or
. the inability to access other financing.
Seagate Technology Faces Risks from the Spin-off of Seagate Software's Network
& Storage Management Group
We consolidated our software businesses into a single entity called Seagate
Software in 1996. Seagate Software's business currently consists of two primary
divisions, Network & Storage Management Group and Information Management Group.
We announced the Veritas transaction on October 5, 1998. Seagate Technology's
Seagate Software subsidiary and Seagate Software employees who will become New
Veritas employees and who hold stock options in Seagate Software will receive
approximately 40% of the fully-diluted equity in New Veritas. See "The Exchange
Offer--Background and Reasons for the Exchange Offer."
We face a number of risks prior to and after the closing of the Veritas
transaction including:
. our management personnel may be distracted from the day to day operations by
the Veritas transaction,
. Information Management Group employees may be distracted by concerns about
whether we will continue to operate that business or spin it off,
. Network & Storage Management Group customers may delay or cancel orders due
to uncertainty about the spin-off,
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. the ongoing OEM relationship with the Network & Storage Management Group and
our tape drive operations may be disrupted,
. we have agreed not to compete in certain storage management software
businesses for a specified period of time after the closing of the Veritas
transaction and may not be able to benefit from future opportunities in that
market,
. we will not have control over the management of New Veritas, although
initially we will have two representatives on its board of directors, and
. we will only be permitted to sell our interest in New Veritas in limited
increments in compliance with certain SEC rules or to bear the expense of
filing a registration statement.
Acquisition Related Accounting Charges Will Delay and Reduce Seagate
Technology's Profits
We intend to continue our expansion into complementary data technology
businesses through internal growth as well as acquisitions. Acquisitions
involve numerous risks, including 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. We expect that we will
continue to incur substantial expenses as we acquire other businesses,
including charges for the write-off of in-process research and development. Our
operating results have fluctuated in the past and may fluctuate in the future
because of the timing of such write-offs. For example, we incurred a charge to
operations in the first quarter of fiscal 1998 of approximately $214 million
for the write-off of in-process research and development related to our
acquisition of Quinta Corporation. We anticipate a substantial charge to
operations later in fiscal 1999 for the write-off of in-process research and
development related to the contribution of the Network & Storage Management
Group business to New Veritas and will experience ongoing charges related to
the amortization of purchased intangibles.
Systems Failures Could Adversely Affect Seagate Technology's Business
Seagate Technology's operations are dependent on our ability to protect our
computer equipment and the information stored in our databases from damage by
fire, natural disaster, power loss, telecommunications failures, unauthorized
intrusion and other catastrophic events. We believe that we have taken prudent
measures to reduce the risk of interruption in our operations. However, we
cannot be sure that these measures are sufficient. Any damage or failure that
causes interruptions in our operations could have a material adverse effect on
our business, results of operations and financial condition.
Seagate Technology May Experience Year 2000 Computer Problems That Harm Its
Business
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. Seagate Technology considers a product to be in
"Year 2000 compliance" if
. the product's performance and functionality are unaffected by processing of
dates prior to, during and after the year 2000, but only if
. all products (for example hardware, software and firmware) used with the
product properly exchange accurate date data with it.
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Seagate Technology's Products. We are assessing the capability of our products
to determine whether or not they are in Year 2000 compliance. Although we
believe our disc and tape drive products and certain of our software products
are in Year 2000 compliance, we have determined that certain software products
produced by Seagate Software, which are not material to Seagate Technology, are
not and will not be Year 2000 compliant. We are taking measures to inform our
customers that those products are not and will not be Year 2000 compliant. To
assist our customers in evaluating their Year 2000 issues, our Seagate Software
subsidiary has developed a list of those products that are Year 2000 compliant
as stand-alone products. The list is located on Seagate Software's World Wide
Web page and is periodically updated when assessment of the Year 2000
compliance of additional products is completed. To date, the costs Seagate
Technology has incurred related to these programs have been immaterial.
However, the assessment of whether a complete system will operate correctly
depends on the BIOS capability and software design and integration, and for
many end-users this will include BIOS, software and components provided by
companies other than Seagate Technology or Seagate Software. Seagate Technology
considers a disc drive or tape product to be Year 2000 capable if when used
properly and in conformity with the product information provided by us, our
product will accurately store, display, process, provide and/or receive data
from, into and between 1999 and 2000, including leap year calculations if all
other technology used in combination with the Seagate Technology disc drive or
tape product properly exchanges date data with the Seagate Technology product.
We are incurring various costs to provide customer support and customer
satisfaction services regarding Year 2000 issues and anticipate that these
expenditures will continue in fiscal 1999 and thereafter. In addition, we have
contacted our major customers to determine whether their products into which
our products have been and will be integrated are Year 2000 compliant. Seagate
Technology has received assurances of Year 2000 compliance from a number of
those customers. Many other customers have not responded and are under no
contractual obligation to provide us with Year 2000 compliance information.
Seagate Technology is taking steps with respect to new customer agreements to
ensure that the customers' products and internal systems are Year 2000
compliant.
Even if our products are Year 2000 compliant, we may be named as a defendant in
litigation against the vendors of all of the component products of systems if
some components of the systems is unable to properly manage data related to the
Year 2000. Our customer agreements typically contain provisions designed to
limit our liability for such claims. It is possible, however, that these
measures will not provide protection from liability claims, as a result of
existing or future federal, state or local laws or ordinances or unfavorable
judicial decisions. If any such claims are brought against Seagate Technology,
regardless of their merit, our business, financial condition and results of
operations could be materially adversely affected from factors that include
increased warranty costs, customer satisfaction issues and the costs of
potential lawsuits.
Seagate Technology's Systems. We have also initiated a comprehensive program to
address Year 2000 readiness in our internal systems and with our customers and
suppliers. Our program has been designed to address our most critical internal
systems first and to gather information regarding the Year 2000 compliance of
products supplied to Seagate Technology and into which our products are
integrated. Seagate Technology conducted a Year 2000 inventory of information
technology systems
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in the first quarter of 1997. Risk assessment was substantially complete by the
end of the second quarter of 1997, and remediation activities continue to be on
schedule. Approximately 1,400 items were identified, and as of January 1999,
118 items remain unresolved, with most scheduled for completion by July 1999.
An initial inventory of non-information technology systems was completed in the
third quarter of 1997. A second inventory in the second and third quarters of
1998 included all manufacturing operations with special emphasis on embedded
technology and facilities. Approximately 7,000 items were identified (non-
information technology and embedded combined) of which approximately two-thirds
are Year 2000 compliant. As of January 1999, risk assessment is 95% complete
and we believe that we will resolve all non-compliant items by July 1999.
We are using the following phased approach to Year 2000 readiness: inventory,
assessment, disposition, test and audit. Anticipated dates of completion of
each phase are as follows:
<TABLE>
<S> <C>
1. Inventory.............................................. Complete
2. Assessment............................................. March 1, 1999
3. Disposition............................................ July 1, 1999
4. Test................................................... July 1, 1999
5. Audit.................................................. August 1, 1999
</TABLE>
These activities are intended to encompass all major categories of systems in
use by Seagate Technology, including manufacturing, engineering, sales, finance
and human resources. To date, we have not incurred material costs related to
assessment and remediation of Year 2000 readiness. We currently expect that the
total cost of our Year 2000 readiness programs, excluding redeployed resources,
will not exceed $10 million over the next fiscal year. This total cost estimate
does not include potential costs related to any customer or other claims or the
costs of internal software or hardware replaced in the normal course of
business. The total cost and time to completion estimates are based on the
current assessment of our Year 2000 readiness needs and are subject to change
as the projects proceed.
We are installing and testing new computer software for our financial,
accounting, inventory control, order processing and other management
information systems. In the course of these upgrades, we are identifying Year
2000 dependencies in such systems and are implementing changes to such systems
to make them Year 2000 compliant. The successful implementation of these new
systems is crucial to the efficient operation of our business. We cannot
provide any assurance that we will implement our new systems in an efficient
and timely manner or that the new systems will be adequate to support our
operations. Problems with installation or initial operation of the new systems
could cause substantial management difficulties in operations planning,
financial reporting and management and thus could have a material adverse
effect on our business, financial condition and results of operations. We do
not expect the cost of bringing our systems into Year 2000 compliance to have a
material effect on our financial condition or results of operations.
Seagate Technology's material third party relationships include relationships
with suppliers, customers and financial institutions. Seagate Technology has
identified 600 suppliers which are critical to our operations, and we have
surveyed each to provide details of their Year 2000 efforts, including internal
systems, operations and supply chain as well as a schedule for their projects.
As of January 1999, 97% of such suppliers have responded affirmatively and been
approved. Efforts continue to validate the remaining suppliers, but plans will
be developed for any that fail validation, including alternate sources or
additional inventory for sole source suppliers.
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Seagate Technology's largest customers were also surveyed regarding their Year
2000 efforts. We currently do not anticipate any material impact due to a Year
2000-related failure of a major customer. All of our financial institutions
have been surveyed. All of our primary banking activities can be accommodated
by our two major multi-national banking partners with the exception of payroll
in certain Asian countries which must be handled in local currency. We are
following Year 2000 progress in these areas closely and will develop specific
contingency plans for meeting payroll if we cannot obtain assurance that these
local banks are fully prepared.
Because Seagate Technology's core and mission-critical systems are either
complete or in the final stages of completion, we do not consider failure of
these systems to be within a reasonable Year 2000 worst case scenario. We
believe we are primarily at risk due to failures within external
infrastructures such as utilities and transportation systems. We are currently
examining these risk areas to develop responses and action plans. These include
a potential business shutdown at all locations on December 30, 1999, and where
feasible, power down on December 31, 1999 with controlled startup prior to
business resumption on January 3, 2000.
While we currently expect that the Year 2000 issues will not pose significant
operational problems, we could experience material adverse effects on our
business if the implementation of new systems is delayed. We could also
experience material adverse effects on our business if we fail to fully
identify all Year 2000 dependencies in our systems and in the systems of our
suppliers, customers and financial institutions. Those material adverse effects
could include delays in the delivery or sale of Seagate Technology's products.
Therefore, we are developing contingency plans for continuing operations in the
event such problems arise.
Seagate Technology's Stock Price Will Fluctuate
Our stock price has varied greatly as has the volume of shares of our common
stock that are traded. We expect these fluctuations to continue due to factors
such as:
. announcements of new products, services or technological innovations by us or
our competitors
. announcements of major restructurings by us or our competitors
. quarterly variations in our results of operations
. changes in revenue or earnings estimates by the investment community and
speculation in the press or investment community
. general conditions in the data storage industry or the personal computer
industry
. changes in our revenue growth rates or the growth rates of our competitors
. sales of large blocks of our stock
The stock market may from time to time experience extreme price and volume
fluctuations. Many technology companies have experienced such fluctuations. In
addition, our stock price may be affected by general market conditions and
domestic and international macroeconomic factors unrelated to our performance.
Often such fluctuations have been unrelated to the operating performance of the
specific companies. The market price of our common stock may experience
significant fluctuations in the future. For example, our stock price fluctuated
from a high of $45 3/4 to a low of $17 3/4 during fiscal year 1998.
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Seagate Technology Faces Risks from the Conversion to a Single European
Currency
On January 1, 1999, certain member states of the European Economic Community
fixed their respective currencies to a new currency, the Single European
Currency. On that day the Single European Currency became a functional legal
currency within these countries. During the three years beginning on January 1,
1999, business in these countries will be conducted both in the existing
national currency, such as the French Franc or the Deutsche Mark, as well as
the Single European Currency. Companies operating in or conducting business in
these countries will need to ensure that their financial and other software
systems are capable of processing transactions and properly handling the
existing currencies and the Single European Currency. We are still assessing
the impact that the introduction and use of the Single European Currency will
have on our internal systems. We will take corrective actions based on such
assessment but we do not presently expect that introduction and use of the
Single European Currency will materially affect our foreign exchange and
hedging activities or use of derivative instruments or will result in any
material increase in our costs. While we will continue to evaluate the impact
of the Single European Currency introduction over time, based on currently
available information, we do not believe that the introduction of the Single
European Currency will have a material adverse impact on our financial
condition or overall trends in results of operations, nor have the introduction
and use of the Single European Currency had such effects to date.
WHERE YOU CAN FIND MORE INFORMATION
Seagate Technology and Seagate Software file annual, quarterly and special
reports, proxy statements and other information with the SEC's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the SEC's web site
at http://www.sec.gov.
Seagate Technology filed a Registration Statement on Form S-4 to register with
the SEC the Seagate Technology common stock to be issued to the Seagate
Software stockholders in the exchange. This document is a part of that
registration statement. As allowed by SEC rules, this document does not contain
all the information you can find in the registration statement or the exhibits
to the registration statement.
The SEC allows us to "incorporate by reference" the documents (and information
therein) we file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this document, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the Seagate Technology and
Seagate Software documents listed below and any future filings with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended:
Seagate Technology
Annual Report on Form 10-K for the year ended July 3, 1998; Proxy Statement
dated September 24, 1998; Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998; Current Report on
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Form 8-K dated October 20, 1998; and the description of Seagate Technology
common stock contained in the Registration Statement on Form 8-A/A dated
December 2, 1994.
Seagate Software
Annual Report on Form 10-K for the year ended July 3, 1998; Quarterly Report on
Form 10-Q for the quarter ended October 2, 1998; Current Report on Form 8-K
dated October 20, 1998; and the description of the Seagate Software common
stock contained in Amendment No. 1 to the Registration Statement on Form 10
dated December 7, 1997.
How to Obtain These Documents
You may request a copy of these filings, at no cost, by writing or telephoning:
<TABLE>
<S> <C>
Seagate Technology Seagate Software
Nancy Hamm Diana Cartwright
Investor Relations Investor Relations
Seagate Technology, Inc. Seagate Software, Inc.
920 Disc Drive 915 Disc Drive
Scotts Valley, California 95066 Scotts Valley, California 95067
(831) 438-6550 (831) 438-6550
Nancy e [email protected]
</TABLE>
You should rely only on the information incorporated by reference or provided
in this document or any supplement. We have not authorized anyone else to
provide you with different information. We are not making our offer in any
state where our offer is not permitted. You should not assume that the
information in this document or any supplement is accurate as of any date other
than the date on the front of those documents.
We obtained the information in this document regarding Seagate Software from
Seagate Software management and publicly available documents filed with the
SEC.
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<PAGE>
THE EXCHANGE OFFER
The Exchange Offer and the Exchange Rate
We are offering to acquire from Seagate Software stockholders all outstanding
shares of Seagate Software common stock in exchange for shares of Seagate
Technology common stock. If you hold options to purchase shares of Seagate
Software common stock, you may exercise all or any portion of such options
which are vested and participate in the exchange offer as a stockholder of
Seagate Software. For information relating to the specifics of our exchange
offer, including the calculation of the exchange rate, please read carefully
the information set forth under the section entitled "Frequently Asked
Questions" on pages 1 through 7 of this document.
Neither the Seagate Technology Board of Directors nor the Seagate Software
Board of Directors makes any recommendation to any Seagate Software stockholder
as to whether to tender any or all of his or her Seagate Software shares. Each
Seagate Software stockholder must make his or her own decision as to whether to
tender any or all of his or her Seagate Software shares.
Background and Reasons for the Exchange Offer
The boards of directors of Veritas, Seagate Technology and Seagate Software
have agreed to combine the Network & Storage Management Group business of
Seagate Software with the business of Veritas. Pursuant to the Veritas
agreement, Seagate Software will contribute the Network & Storage Management
Group business to a newly-formed corporation, New Veritas. Seagate Software
together with the optionees of Seagate Software who become employees of New
Veritas will own approximately 40% of the fully-diluted equity securities of
New Veritas. Veritas stockholders, option holders and holders of convertible
debt will convert their Veritas securities on a one-for-one basis for New
Veritas securities and will receive approximately 60% of New Veritas. These
transactions are referred to as the "Veritas transaction." New Veritas common
stock will be publicly traded on the Nasdaq National Market. On the day the
Veritas transaction closes, employees of the Network & Storage Management Group
business will become employees of New Veritas and cease to be employees of
Seagate Software or Seagate Technology, as the case may be. As a result,
employees of Seagate Software who become New Veritas employees and who exchange
their Seagate Software options for New Veritas options will have the ability to
sell their shares in a public market. We wish to provide a similar opportunity
for all Seagate Software stockholders and holders of vested options, including
the significant number of such persons who will not transfer to New Veritas and
therefore will not be eligible for the New Veritas option exchange offer.
The Expiration Date
The exchange offer will expire on the expiration date, which is 12:00 midnight,
New York City time, on , 1999, unless we extend this time. If we extend
this time, we will publicly announce the extension as soon as practicable after
we make the extension. We will make the public announcement no later than 9:00
a.m. Eastern time on the next business day after the previously scheduled
expiration date. Without limiting the manner in which we may choose to make a
public announcement, we will not have any obligation to publish or communicate
any such public announcement other than by making a release to the Dow Jones
News Service.
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<PAGE>
Conditions to the Exchange Offer
The exchange will not occur unless certain conditions are satisfied prior to
the expiration date. These conditions are as follows:
. the Registration Statement relating to the shares to be issued in the
exchange shall have become effective under the Securities Act of 1933, as
amended, and shall not be the subject of any stop-order or proceedings
seeking a stop-order;
. any applicable waiting periods for the exchange offer shall have expired or
been terminated and no decree, ruling, temporary restraining order,
preliminary injunction or permanent injunction or other order preventing the
consummation of the exchange shall have been issued by any federal or state
court or governmental agency which remains in effect; and
. the Veritas transaction shall have closed. The conditions to the closing of
the Veritas transaction are described in the Veritas agreement and the
Veritas management information circular/joint proxy statement/prospectus (the
"Veritas proxy materials") which is on file with the SEC. These conditions
include, but are not limited to, the following:
- the principal terms of the Veritas agreement and the Veritas transaction
shall have been approved and adopted by a majority of the Veritas
stockholders and a majority of the Seagate Software stockholders;
- the Registration Statement relating to the shares to be issued by New
Veritas in the Veritas transaction shall have become effective under the
Securities Act of 1933, as amended, and shall not be the subject of any
stop-order or proceedings seeking a stop-order and the Veritas proxy
materials shall at the effective time of the Veritas transaction not be
subject to any proceedings commenced or overtly threatened by the SEC;
and
- any applicable waiting periods for the Veritas transaction shall have
expired or been terminated and no decree, ruling, temporary restraining
order, preliminary injunction or permanent injunction or other order
preventing the consummation of the Veritas transaction shall have been
issued by any federal or state court or governmental agency which remains
in effect.
Termination of the Exchange Offer
Seagate Technology reserves the right, in our sole discretion to terminate our
exchange offer and not accept for exchange any tendered Seagate Software shares
not already accepted for exchange or exchanged.
If the exchange offer is terminated without our acceptance of any tendered
shares of Seagate Software common stock, we will return promptly all such
shares tendered to the appropriate Seagate Software stockholders.
Exchange of Shares and Certificates
If you deliver a properly completed and executed letter of transmittal, which
you received along with this document, and stock certificates representing your
shares of Seagate Software common stock
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<PAGE>
prior to the expiration date to the exchange agent at its address (or have
followed the exercise procedure set forth for your vested options on the letter
of transmittal), then you will have accepted the exchange offer as to the
number of shares reflected on the stock certificates delivered by you. If you
hold vested options to purchase shares of Seagate Software common stock and you
elect to exercise such options and participate in the exchange offer, you
should review the letter of transmittal for instructions on tendering the
shares that you receive upon exercise of your options.
You must choose how to deliver the letter of transmittal, stock certificates
and other necessary documents to the exchange agent, and you bear the risk of
how you make this delivery. We recommend that you use an overnight or hand
delivery service rather than a mail service. In all cases, you should allow
sufficient time to assure timely delivery. You should send your letter of
transmittal, stock certificates, and other necessary documents to the exchange
agent at the address provided in this document and the letter of transmittal.
If you want us to issue the stock certificates representing your Seagate
Technology common stock in a name other than the name in which your stock
certificates are registered, you must properly endorse or otherwise place in
proper form for transfer the stock certificates you are surrendering.
If the letter of transmittal is signed by a person other than the registered
holder of any Seagate Software common stock listed therein, the stock
certificates reflecting ownership of such Seagate Software common stock must be
endorsed or accompanied by appropriate stock powers that authorize the person
to tender the Seagate Software common stock on behalf of the registered holder,
in either case signed as the name of the registered holder or holders appears
on these stock certificates.
If the letter of transmittal, any stock certificates representing Seagate
Software common stock tendered, or any stock powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of a
corporation or others acting in a fiduciary or representative capacity, these
persons should so indicate when signing and, unless waived by us, submit with
the letter of transmittal evidence satisfactory to us of their authority to so
act.
After the expiration date, the exchange agent will send us written notice of
the amount of outstanding Seagate Software common stock validly tendered in the
exchange. Promptly after we receive this notice, if all the conditions under
the Veritas agreement or described in this document are satisfied or waived,
then we will exchange each validly tendered share of Seagate Software common
stock for the number of shares of Seagate Technology common stock based on the
exchange rate. We then will deliver by registered mail stock certificates
representing the appropriate number of shares of Seagate Technology common
stock to the stockholders participating in the exchange. For information
regarding fractional shares, see "--Fractional Shares." (page 35).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered shares of Seagate Software
common stock will be determined by us in our sole discretion, and our
determination will be final and binding. We reserve the absolute right to
reject any and all shares of Seagate Software common stock not properly
tendered or any shares of Seagate Software common stock our acceptance of which
would, in the opinion of our counsel, be unlawful. We reserve the absolute
right to waive any irregularities or conditions of tenders as to particular
shares of Seagate Software common stock. Unless waived by us, any defects or
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irregularities in connection with tenders of shares of Seagate Software common
stock must be cured within the time we determine. Neither we, the exchange
agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of shares of Seagate Software
common stock nor shall any of them incur any liability for failure to give any
notification. Tenders of shares of Seagate Software common stock will not be
deemed to have been made until such defects or irregularities have been cured
or waived. As soon as practicable following the expiration date, the exchange
agent will return without cost any stock certificates representing Seagate
Software common stock that were not properly tendered and as to which defects
or irregularities have not been cured or waived to the tendering holder of
these stock certificates, unless otherwise provided in the letter of
transmittal.
If any of the stock certificates representing your Seagate Software common
stock have been mutilated, lost, stolen or destroyed, you should contact the
exchange agent at the address below for further instruction.
Exchange Agent for Shares and Certificates
Harris Trust Company of New York is the exchange agent for our exchange offer.
If you have any questions or requests for additional copies of this document,
please direct them to the exchange agent as follows:
By mail: Overnight, courier or hand delivery:
Harris Trust Company of New York Harris Trust Company of New York
Wall Street Station 88 Pine Street, 19th Floor
P.O. Box 1010 New York, NY 10005
New York, NY 10268-1010
By facsimile transmission:
(212) 701-7636
For confirmation by telephone:
(212) 701-7694
Fractional Shares
We will not issue any fractional shares to you in the exchange. Instead, the
number of shares you receive in this exchange offer will be rounded down to the
nearest whole number of shares.
Fees and Expenses
Seagate Technology will not make any payment to brokers, dealers or others
soliciting acceptances of the exchange offer.
Transfer Taxes
Holders who tender their Seagate Software shares for exchange will not be
obligated to pay any transfer tax in connection therewith.
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Appraisal Rights
Holders of Seagate Software shares or vested options will not have dissenters'
rights or appraisal rights in connection with the exchange offer.
Proxies
There is no stockholder vote required with respect to this exchange offer. We
are not asking you for a proxy and you are requested not to send us a proxy.
Withdrawal Rights
Once you have tendered your Seagate Software common stock, your tender is
irrevocable and you cannot withdraw your shares, except that your Seagate
Software shares tendered in our exchange may be withdrawn at any time prior to
the expiration date of our exchange offer if we have not accepted such shares.
If the exchange is terminated without our acceptance of any tendered shares of
Seagate Software common stock, we will return promptly all shares tendered to
the appropriate Seagate Software stockholders. See "--Termination of the
Exchange Offer."
Regulatory Approvals Required
We are not aware of any license or regulatory permit material to our business
that might be adversely affected by our acquisition of Seagate Software common
stock as contemplated in the exchange offer or of any approval or other action
by any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for our acquisition or
ownership of Seagate Software common stock as contemplated by the exchange
offer. Should any such approval or other action be required, we currently
contemplate that we will seek such approval or take such other action. Without
limitation to any other approval that may be required, to the extent that the
acquisition of Seagate Technology common stock by any holder(s) of Seagate
Software common stock pursuant to the exchange offer results in the requirement
of Seagate Technology and such holder(s) to file Notification and Report Forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
with the Federal Trade Commission and the Antitrust Division of the Department
of Justice, Seagate Technology and such holder(s) will file the required
Notification and Report Forms. We do not currently anticipate that any Hart-
Scott Rodino filings will be required with respect to the exchange offer. With
respect to any such holder(s) of Seagate Software common stock, the exchange
could not occur until the waiting period(s) under the Hart-Scott Rodino
Antitrust Improvement Act of 1976 had expired or been granted early
termination; until such time, Seagate Technology would have no obligation under
the exchange offer, with respect to such holder(s), to accept for payment and
pay for Seagate Software common stock. Seagate Technology cannot predict
whether it may determine that it is required to delay the acceptance for
payment of, or payment for, Seagate Software common stock tendered pursuant to
the exchange offer pending the outcome of any such matter. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that the failure to
obtain any such approval or other action might not result in adverse
consequences to Seagate Technology's business. Seagate Technology's obligations
under the exchange offer to accept for payment and pay for Seagate Software
common stock are subject to certain conditions. See "--Conditions to the
Exchange Offer."
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Material Income Tax Considerations of Exchange of Shares
The following discussion addresses the material income tax considerations of
the exchange offer that are generally applicable to holders of vested shares
of Seagate Software common stock exchanging their Seagate Software common
stock for Seagate Technology common stock. Stockholders of Seagate Software
should be aware that the following discussion does not address all income tax
considerations that may be relevant to particular Seagate Software
stockholders in light of their particular circumstances, such as stockholders
who are dealers in securities, or (except as described below) who acquired
their Seagate Software common stock in compensatory transactions. In addition,
the following discussion does not address the tax consequences of any
transactions effectuated prior to or after the exchange offer (whether or not
such transactions are in connection with the exchange offer) except, to the
extent discussed below, the exercise of vested options or vested rights to
purchase Seagate Software common stock in anticipation of the exchange.
Furthermore, the following discussion does not address the tax consequences of
the exchange offer under the tax laws of countries other than the national
income and capital gains tax regimes of the United States (the "U.S."), Canada
and the United Kingdom (the "U.K."), as set forth below. Accordingly, Seagate
Software stockholders are urged to consult their own tax advisors as to the
specific tax consequences to them of the exchange, including the applicable
U.S. federal, state, local, Canadian (federal and provincial), U.K. and other
foreign tax consequences to them of the exchange offer.
Material United States Income Tax Consequences of Exchange of Shares
The following discussion is based on the U.S. Internal Revenue Code,
applicable Treasury Regulations, judicial authority and administrative rulings
and practice, all as of the date hereof. The Internal Revenue Service is not
precluded from adopting a contrary position. In addition, there can be no
assurance that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the statements and
conclusions set forth herein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the
transactions taken in connection with the exchange offer.
The exchange is intended to qualify as a reorganization under Section 368(a)
of the U.S. Internal Revenue Code (a "Reorganization"). In the event the
exchange so qualifies, subject to the limitations and qualifications referred
to herein:
(1) No gain or loss will be recognized by the holders of Seagate Software
common stock upon the receipt of Seagate Technology common stock solely in
exchange for such Seagate Software common stock in the exchange offer;
(2) The aggregate tax basis of the Seagate Technology common stock so received
by the stockholders of Seagate Software in the exchange will be the same as
the aggregate tax basis of the Seagate Software common stock surrendered in
exchange therefor;
(3) The holding period of the Seagate Technology common stock so received by
each stockholder of Seagate Software in the exchange will include the period
for which the Seagate Software common stock surrendered in exchange therefor
was considered to be held, provided that the Seagate Software common stock so
surrendered is held as a capital asset on the date of the exchange; and
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(4) Neither Seagate Technology nor Seagate Software will recognize gain or loss
solely as a result of the exchange.
Neither Seagate Technology nor Seagate Software has requested a ruling from the
IRS in connection with the exchange. Seagate Technology and Seagate Software
have received an opinion from Ernst & Young LLP (the "U.S. Tax Opinion"), to
the effect that, for U.S. federal income tax purposes, the exchange should
constitute a reorganization within the meaning of Section 368(a) of the U.S.
Internal Revenue Code. The U.S. Tax Opinion neither binds the IRS nor precludes
the IRS from adopting a contrary position. The U.S. Tax Opinion is subject to
certain assumptions and qualifications and is based in part on the truth and
accuracy of certain representations of Seagate Technology and Seagate Software.
Of particular importance is the representation and assumption to the effect
that no consideration other than Seagate Technology stock is being issued as
consideration for the Seagate Software shares in the exchange.
A successful IRS challenge to the Reorganization status of the exchange would
result in a Seagate Software stockholder recognizing gain or loss with respect
to each share of Seagate Software common stock surrendered equal to the
difference between the stockholder's basis in such share and the fair market
value, as of the date of the exchange, of the Seagate Technology common stock
received in exchange therefor. In such event, a Seagate Software stockholder's
aggregate basis in the Seagate Technology common stock so received would equal
its fair market value, and the stockholder's holding period for such stock
would begin the day after the exchange.
Even if the exchange qualifies as a reorganization, a recipient of shares of
Seagate Technology common stock would recognize gain to the extent that such
shares were considered to be received in exchange for services or property
(other than solely Seagate Software common stock). All or a portion of such
gain may be taxable as ordinary income. Gain would also have to be recognized
to the extent that a Seagate Software stockholder was treated as receiving
(directly or indirectly) consideration other than Seagate Technology common
stock in exchange for the Seagate Software common stock.
Seagate Software stockholders are urged to consult their own tax advisors in
light of their personal circumstances.
Material Canadian Income Tax Consequences of Exchange of Shares
The following discussion addresses the material Canadian income tax
considerations that are generally applicable to Canadian resident holders of
Seagate Software common stock exchanging their Seagate Software common stock
for Seagate Technology common stock. Stockholders of Seagate Software should be
aware that the following discussion does not deal with all Canadian income tax
considerations that may be relevant to particular Seagate Software stockholders
in light of their particular circumstances.
The following discussion is based the Canadian income tax laws as of the date
hereof. Revenue Canada or an applicable Canadian provincial taxing authority is
not precluded from successfully
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adopting a contrary position. In addition, there is no assurance that future
legislative, judicial or administrative changes or interpretations will not
affect the accuracy of the statements and conclusions set forth herein. Any
such changes or interpretations could be applied retroactively and could affect
the tax consequences to stockholders of Seagate Software participating in the
exchange offer.
The exchange of stock pursuant to the exchange offer will be a taxable
transaction for a Seagate Software stockholder resident in Canada. Any Canadian
resident holder of shares of Seagate Software common stock would be considered
to have disposed of the holder's shares of Seagate Software common stock for
proceeds (expressed in Canadian dollars) determined at the time of the exchange
equal to the fair market value of the shares of Seagate Technology common stock
received. A gain or loss (being the difference expressed in Canadian dollars
between the proceeds and the tax basis of the shares of Seagate Software common
stock exchanged) may be realized on this disposition. Generally, where the
shares of Seagate Software common stock exchanged are held as investment
property and were obtained by virtue of employment and the holder does not deal
with shares and other securities in a manner similar to a trader or dealer of
securities, the Seagate Software common stock exchanged would be considered
capital property. In such a case, only three-quarters of the capital gain on
the disposition of such shares would be taxable capital gain subject to income
tax.
The tax basis of the shares of Seagate Technology common stock received on the
exchange will be equal to the fair market value (expressed in Canadian dollars)
of those shares determined at the time of exchange. The tax basis of each share
of Seagate Technology common stock owned by the holder after the exchange is
equal to the total tax basis of all shares of Seagate Technology common stock
(including those that are not obtained from the exchange) owned by the holder
divided by the total number of such shares owned.
Seagate Software stockholders are urged to consult their own tax advisors in
light of their personal circumstances.
Material United Kingdom Income Tax Consequences of Exchange of Shares
The following is a discussion of the material United Kingdom tax considerations
of U.K. resident holders of Seagate Software common stock exchanging their
Seagate Software common stock for Seagate Technology common stock. The
discussion relates only to U.K. resident holders of stock in Seagate Software
and is confined to their U.K. tax position.
Stockholders of Seagate Software should be aware that the following discussion
does not deal with all U.K. tax considerations that may be relevant to a
particular U.K. resident in light of his or her particular circumstances.
The following discussion is based on our best judgement regarding the
application of U.K. taxation legislation. The views expressed are not binding
on the Courts and there is no assurance that the Inland Revenue will not seek
to assert a contrary position. Furthermore, no assurance can be given that
future legislation, judicial or administrative changes or interpretations will
not adversely affect the accuracy of the statements and conclusions set forth
herein. These could be on either a
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prospective or retroactive basis. We undertake no responsibility to advise you
of any new developments in the application or interpretation of the U.K.
taxation laws.
Neither Seagate Technology nor Seagate Software has requested advance
confirmation from the Inland Revenue that the Inland Revenue is satisfied that
the provisions of Section 135 will apply to the proposed exchange. Seagate
Technology and Seagate Software have received an opinion from The United
Kingdom firm of Ernst & Young, a member of Ernst & Young International, (the
"U.K. Tax Opinion"), to the effect that, for U.K. tax purposes, the proposed
transaction will fall within the rules applicable to reorganizations.
The U.K. Tax Opinion does not bind the Inland Revenue nor preclude the Inland
Revenue from adopting a contrary position. The U.K. Tax Opinion, subject to
certain assumptions and qualifications, is based in part on the truth and
accuracy of certain representations of Seagate Technology and Seagate Software.
Capital Gains Tax. The exchange offer will fall within the U.K. tax laws for
reorganizations with the result that:
(1) No gain or loss will be recognized by the holders of Seagate Software
common stock upon receipt of Seagate Technology common stock solely in exchange
for such Seagate Software common stock in the exchange.
(2) The aggregate tax basis of the Seagate Technology common stock so received
by the stock holders of Seagate Software in the exchange will be the same as
the aggregate tax basis of the Seagate Software common stock surrendered in
exchange therefor.
(3) The holding period of the Seagate Technology common stock so received by
each stockholder of Seagate Software in the exchange will include the period
for which the Seagate Software common stock surrendered in exchange therefor
was considered to be held as a capital asset on the date of the exchange.
Income Tax. The U.K. Tax Opinion concludes that the exchange offer constitutes
a company reorganization, in which case, no income tax charge should arise on
the exchange offer.
Seagate Software Stockholders Are Urged to Consult Their Own Tax Advisors in
Light of Their Personal Circumstances.
Material Tax Consequences to Optionees
The following discussion addresses the material tax consequences to holders of
vested Seagate Software options who exercise their options in connection with
the exchange offer. The discussion is based on interpretations of the existing
authorities. The applicable taxing authorities are not precluded from
successfully adopting a contrary position to that described herein. In
addition, there is no assurance that future legislative, judicial, or
administrative changes or interpretations will not affect the accuracy of the
statements and conclusions set forth herein. Any such changes or
interpretations could be applied retroactively and could affect the tax
consequences to holders of Seagate Software options who exercise their vested
options.
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All Option Holders Are Urged to Consult Their Own Tax Advisors Prior to the
Exercise of Any Options in Light of Their Personal Circumstances.
U.S. Consequences. You will not recognize taxable income upon the exercise of
an incentive stock option ("ISO"). However, the difference between the option
exercise price paid for the shares and the fair market value of the shares on
the date of exercise will be alternative minimum taxable income and may subject
you to the alternative minimum tax ("AMT") under Section 55 of the Internal
Revenue Code.
Assuming that the exchange offer constitutes a reorganization (as concluded in
the U.S. Tax Opinion), then the exchange of your Seagate Software stock for
Seagate Technology shares in the exchange offer will not be considered the
disposition of the stock and will not result in the recognition of taxable
income.
If you sell or otherwise dispose of the Seagate Technology common stock you
receive in connection with the exchange offer, you will recognize taxable
income for any amount in excess of the ISOs aggregate exercise price. If you
dispose of the shares more than two years from the grant date of your ISO and
more than one year after the exercise of your ISO, then upon the sale or other
disposition, any gain you recognize will be long term capital gain and any loss
will be long term capital loss. If you dispose of your shares before the end of
either of the holding periods described in the preceding sentence, then you
will recognize ordinary income in the year of the disposition equal to the
excess, if any, of the fair market value of the shares at exercise (or, if
less, the amount realized on the disposition of the shares) over the option
exercise price paid for the such shares. Any further gain or loss realized by
you will be taxed as capital gain or loss.
With respect to the exercise of a Nonstatutory Stock Option ("NSO"), upon
exercise you will recognize ordinary income in an amount equal to the
difference between the option exercise price you pay for the shares and the
fair market value on the date of exercise. Your basis will be the fair market
value of such shares on the date of exercise. Assuming that the exchange offer
constitutes a reorganization (as concluded in the U.S. Tax Opinion), then the
exchange of your Seagate Software stock for Seagate Technology shares in the
exchange offer will not be considered the disposition of the stock and will not
result in the recognition of taxable income. Upon a taxable disposition of the
Seagate Technology shares you receive in the exchange offer, any gain or loss
is generally treated as capital gain or loss. If you were an employee of
Seagate Technology, Seagate Software or any of their respective subsidiaries,
at the time of exercise, any income recognized upon exercise of your NSO will
constitute wages for which Seagate Software will be required to withhold.
Canadian Consequences. A Canadian resident employee of Seagate Software or its
Canadian subsidiaries (each a "Canadian Employer") who by virtue of his or her
employment with the Canadian Employer obtained a stock option to acquire
Seagate Software common stock and who exercises such vested option is generally
required to include in his or her employment income the fair market value of
the Seagate Software common stock so acquired (determined at the time of
exercise) less the actual amount paid or to be paid by the employee to acquire
those shares. As a result of the exercise, the tax basis of the shares so
acquired is adjusted to equal the fair market value of the shares at the time
of the exercise. Where the employee also owns other Seagate Software common
stock, the tax basis per share of the Seagate Software common stock is
calculated as the
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total tax basis of all shares of Seagate Software common stock owned by the
employee divided by the total number of such shares owned.
Where an employee includes in his or her employment income a benefit from
exercising a stock option, as discussed above, an offsetting deduction equal to
25% to the benefit may be available in computing his or her taxable income for
the year of the exercise provided certain conditions are met. A Canadian
resident employee of the Canadian Employer who exercises a stock option
(obtained because of his or her employment with the Canadian Employer) to
acquire Seagate Software common stock should be entitled to this deduction.
Income tax, Canada Pension Plan premiums or Quebec Pension Plan premiums will
be payable on this employment benefit arising from the exercise of the stock
option. The Canadian Employer will generally withhold form the employee's
future pay checks the amounts of income tax, Canada Pension Plan premiums or
Quebec Pension Plan premiums arising from this benefit and remit them to
Revenue Canada and, if appropriate, Revenue Quebec. Relief from such source
withholding may be available where hardship to the employee would result.
U.K. Consequences.
Options Obtained By Reason Of Employment. Where the option holder acquired the
options as a director or employee, he or she will be liable for U.K. income tax
(payable at the time of exercise) on an amount equal to the excess of the
market value (on the date of exercise of the options) of the Seagate Software
shares acquired as a result of the exercise of the option, over the amount paid
to exercise the option. The amount that is subject to income tax is added to
the cost of the shares acquired upon exercise for purposes of computing the
U.K. capital gains tax, if any, on the subsequent sale of the shares.
Any further gain arising on the subsequent sale of the shares will make the
option holder liable for U.K. capital gains tax.
Options Not Obtained By Reason Of Employment. Where the option holder did not
acquire the options as a director or employee, the exercise of the options will
not result in either a U.K. income tax or U.K. capital gains tax liability.
Any gain (excess of sale proceeds over the exercise price) arising on the
subsequent sale of the shares will make the option holder liable for U.K.
capital gains tax.
Accounting Treatment
The exchange of Seagate Technology shares for Seagate Software shares held for
more than six months and not subject to a right of repurchase in favor of
Seagate Software will be accounted for as a purchase of minority interest of
Seagate Software and, accordingly, the acquired assets and liabilities,
including goodwill and other intangibles, pertaining to the acquired minority
interest in Seagate Software will be recorded at their estimated fair values.
Any amount related to in-process research and development will be written off
in the period of acquisition.
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Seagate Technology shares exchanged for Seagate Software shares acquired
through the exercise of employee stock options and held for less than six
months or Seagate Software shares subject to a right of repurchase in favor of
Seagate Software will result in compensation expense equal to the difference
between the price paid by the holder of the shares and the value of the Seagate
Technology shares at the date of the exchange. The compensation expense will be
recognized immediately, or, if there is vesting, over the vesting period, of
the Seagate Technology shares issued.
The pro forma financial statements of Seagate Technology and Seagate Software
also include the impact of the Veritas transaction and the TeleBackup Purchase
by New Veritas. See "Seagate Technology--Unaudited Pro Forma Condensed
Financial Statements and Seagate Software--Unaudited Pro Forma Condensed
Financial Statements."
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DESCRIPTION OF SEAGATE TECHNOLOGY CAPITAL STOCK
The authorized capital stock of Seagate Technology consists of 600,000,000
shares of Seagate Technology common stock, $.01 par value, and 1,000,000 shares
of Seagate Technology preferred stock, $.01 par value.
As of October 2, 1998, there were 245,250,840 shares of Seagate Technology
common stock outstanding held of record by 7,483 registered stockholders.
Subject to preferences that may be applicable to any outstanding Seagate
Technology preferred stock, holders of Seagate Technology common stock are
entitled to receive ratably such dividends as may be declared by the Seagate
Technology Board of Directors out of funds legally available therefor. Seagate
Technology has not paid any cash dividends on the Seagate Technology common
stock. Each holder of Seagate Technology 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 and the bylaws of
Seagate Technology, stockholders may cumulate their votes in the election of
directors. In the event of a liquidation, dissolution or winding up of Seagate
Technology, holders of Seagate Technology common stock are entitled to share
ratably in all assets remaining after payment of liabilities and the
liquidation preference of any outstanding Seagate Technology preferred stock.
Holders of Seagate Technology common stock have no preemptive rights and have
no rights to convert their Seagate Technology common stock into any other
securities and there are no redemption provisions with respect to such shares.
The transfer agent and registrar for the Seagate Technology common stock is
Harris Trust Company of California.
As of October 2, 1998, there were no shares of Seagate Technology preferred
stock outstanding. The Seagate Technology preferred stock may be issued from
time to time in one or more series. The Seagate Technology 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 Technology has no present plans to issue any shares
of Seagate Technology preferred stock.
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COMPARISON OF STOCKHOLDER RIGHTS
In the event that the exchange offer is consummated, Seagate Software's
stockholders whose shares of Seagate Software common stock are tendered
pursuant to the exchange offer will become Seagate Technology stockholders.
Their rights will be governed by the Seagate Technology Certificate of
Incorporation, the Seagate Technology Bylaws and the laws of the State of
Delaware.
Certain differences between the rights of Seagate Software stockholders and
Seagate Technology stockholders are set forth below. As both Seagate Software
and Seagate Technology are organized under the laws of Delaware, these
differences primarily arise from various provisions of the Seagate Technology
Certificate of Incorporation, the Seagate Technology Bylaws, the Seagate
Software Certificate of Incorporation and the Seagate Software Bylaws. This
summary contains a description of the material differences in stockholder
rights, but is not meant to be relied upon as an exhaustive list or detailed
description of the provisions discussed herein and is qualified in its entirety
by reference to the laws of the State of Delaware, the Seagate Technology
Certificate of Incorporation, the Seagate Technology Bylaws, the Seagate
Software Certificate of Incorporation, and the Seagate Software Bylaws.
Stockholder Meetings
The Seagate Technology Bylaws provide that Seagate Technology 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 Technology.
Under the Seagate Software Bylaws, Seagate Software's stockholders may call a
special meeting of stockholders, provided that one or more of the stockholders
calling for the special meeting, in the aggregate, hold not less than a
majority of the shares entitled to vote at such meeting.
Director Nominations
The Seagate Technology Bylaws currently provide for a seven 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 Seagate
Software Bylaws provide that the number of directors shall be five, which
number may be changed by a Bylaw or Certificate of Incorporation amendment duly
adopted by the Seagate Software board or by the stockholders of Seagate
Software. The Seagate Software board currently consists of four directors and
one vacancy.
Indemnification
The Seagate Technology Certificate of Incorporation and the Seagate Software
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 Technology Bylaws
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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 Technology. The Seagate Technology
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
Technology, 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 Technology; except that no indemnification shall be made in the event
that such person shall be adjudged to be liable to Seagate Technology, unless a
court determines that indemnification is fair and reasonable in view of all the
circumstances. The Seagate Technology Bylaws and the Seagate Software
Certificate of Incorporation require Seagate Technology and Seagate Software,
respectively, to pay all expenses incurred by a director or officer 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 Technology and Seagate Software, respectively. The Seagate
Software Bylaws provide that Seagate Software 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.
46
<PAGE>
INFORMATION ABOUT SEAGATE TECHNOLOGY
Certain statements in this document are forward-looking statements based on
current expectations, and entail various risks and uncertainties that could
cause actual results to differ materially from those expressed in such forward-
looking statements. Such risks and uncertainties are set forth under "Seagate
Technology Risk Factors."
General
Seagate Technology operates in a single industry segment by designing,
manufacturing and marketing products for storage, retrieval and management of
data on computer and data communications systems. These products include disc
drives and disc drive components, tape drives and software.
Seagate Technology designs, manufactures and markets a broad line of rigid
magnetic disc drives for use in computer systems ranging from desktop personal
computers to workstations and supercomputers as well as in multimedia
applications such as digital video and video-on-demand. Our products currently
include rigid disc drive models with form factors from 3.5 to 5.25 inches and
capacities from 1 gigabyte to 47 gigabyte. In January 1998, we discontinued
production of 2.5 inch disc drives for the mobile computer market due to
intense competition resulting in a substantial loss of market share. However,
we are continuing research and development in this area and intend to reenter
this market at a future date. We sell our products to original equipment
manufacturers for inclusion in their computer systems or subsystems, and to
distributors, resellers, dealers, system integrators and retailers. We have
pursued a strategy of vertical integration and accordingly we design and
manufacture rigid disc drive components including recording heads, discs, disc
substrates, motors and custom integrated circuits. We also assemble certain of
the key subassemblies for use in our products including printed circuit board
and head stack assemblies. Seagate Technology products are currently
manufactured primarily in the Far East with limited production in the United
States. In addition to our core product line of rigid disc drives and related
components, we have broadened our strategy to more fully address the markets
for storage, retrieval and management of data.
In line with this broadened strategy, we have made the following investments:
In January 1993, we began investing in SanDisk Corporation, a flash memory
company. In July 1994, we began investing in Dragon Systems, Inc., a developer
of speech and language technology, including speech recognition software. In
December 1994, we acquired Applied Magnetics Corporation's tape head
subsidiary, a manufacturer of magnetic recording heads for tape drives. In
February 1996, we added tape drives to its product line as a result of its
merger with Conner Peripherals, Inc. In June 1997, we began investing in
Gadzoox Networks, Inc., a manufacturer of Fibre Channel based storage network
connectivity products. In August 1997, we acquired Quinta Corporation, a
developer of optically assisted Winchester disc drives. We anticipate that our
broadened strategy may include additional acquisitions of, investments in and
strategic alliances with complementary businesses, products and technologies to
enable lower cost per megabyte, faster time to market, increased capacity, and
better performance characteristics for our products. Our strategy includes
acquiring companies that possess technology and development personnel which
provide long-term growth potential to our business. In addition, following the
closing of the Veritas transaction, those optionees of Seagate Software who
will become employees of New Veritas and our Seagate Software subsidiary will
own an
47
<PAGE>
approximately 40% interest on a fully-diluted basis of New Veritas (a new
entity that will own Veritas and Seagate Software's Network & Storage
Management Group business).
Seagate Technology's executive offices are located at 920 Disc Drive, Scotts
Valley, California, 95066, and its telephone number is (831) 438-6550.
Stock and Dividend Information
Seagate Technology's common stock trades on the New York Stock Exchange under
the symbol "SEG." The price range per share, reflected in the table below, is
the highest and lowest sale prices for Seagate Technology's common stock as
reported by the New York Stock Exchange during each quarter since the Company's
fiscal year 1997. Seagate Technology's present policy is to retain its earnings
to finance future growth. Seagate Technology has never paid cash dividends and
has no present intention to pay cash dividends. At October 2, 1998, there were
7,483 stockholders of record of Seagate Technology's common stock.
<TABLE>
<CAPTION>
High Low
-------- ---------
<S> <C> <C>
1997:
First Quarter................................................ $29 5/16 $18 1/16
Second Quarter............................................... 42 3/4 25 7/8
Third Quarter................................................ 56 1/4 37 3/8
Fourth Quarter............................................... 54 1/4 32 1/2
1998:
First Quarter................................................ $45 3/4 $ 34 1/8
Second Quarter............................................... 40 5/8 18 7/16
Third Quarter................................................ 27 3/16 17 3/4
Fourth Quarter............................................... 29 5/8 19 7/16
1999:
First Quarter................................................ 27 3/8 16 1/8
Second Quarter............................................... 34 1/2 19 13/16
</TABLE>
On , 1999, the last sales price of Seagate Technology common stock, as
reported by the New York Stock Exchange, was $ per share.
You should obtain current market quotations for Seagate Technology common
stock. In recent months, the market price of Seagate Technology common stock
has fluctuated substantially due to volatility in the market place. The market
price of Seagate Technology common stock will fluctuate between the date of
this document and the closing date thereafter. We can give you no assurances
concerning the market price of Seagate Technology common stock before or after
the date on which the exchange offer is consummated.
48
<PAGE>
INFORMATION ABOUT SEAGATE SOFTWARE AND THE INFORMATION MANAGEMENT GROUP
Certain statements in this document are forward-looking statements based on
current expectations, and entail various risks and uncertainties that could
cause actual results to differ materially from those expressed in such forward-
looking statements. Such risks and uncertainties are set forth in Seagate
Software's Quarterly Report on Form 10-Q for the quarter ended October 2, 1998
under "Factors Affecting Seagate Software's Future Operating Results" that is
incorporated by reference in this document.
General
Seagate Software develops and markets software products and provides related
services enabling business users and information technology professionals to
store, access and manage enterprise information. Seagate Software is currently
comprised of two operating groups, the Information Management Group and the
Network & Storage Management Group. Each operating group provides products in
distinct segments of the Enterprise Information Management market. The Network
& Storage Management Group offers network and storage management software
solutions, which focus on the availability component of enterprise information
management by enabling information technology professionals to manage
distributed network resources and to secure and protect enterprise data.
Network & Storage Management Group's products include features such as system
backup, disaster recovery, migration, replication, automated client protection,
storage resource management, scheduling, event correlation and desktop
management. The Network & Storage Management Group will be contributed to New
Veritas in the Veritas transaction.
The Information Management Group offers business intelligence software
solutions featuring the delivery and analysis components of enterprise
information management. The Information Management Group's products include
features such as query and reporting, automated report scheduling and
distribution, information delivery across the World Wide Web, on-line
analytical processing, forecasting, statistical analysis, discovery and data
mining. After the closing of the Veritas transaction, Seagate Software will
continue to operate its Information Management Group business. In fiscal 1998,
the Information Management Group's revenue represented approximately 40% of
Seagate Software's total revenue.
Headquartered in Scotts Valley, California, Seagate Software currently has over
40 offices and operations in 17 countries worldwide. After the Veritas
transaction, Seagate Software will have 31 offices and operations in 16
countries. Seagate Software is a majority-owned and consolidated subsidiary of
Seagate Technology.
Products
Following the Veritas transaction, the Information Management Group will
continue to offer a breadth of business intelligence software products
featuring enterprise information management functionality:
. Seagate Crystal Reports for Microsoft BackOffice(TM)--Generates a set of top-
requested reports to ease systems administration functions for the Microsoft
BackOffice family of products.
. Seagate Crystal Info(TM)--Provides decision-makers with shared access to
reporting and analysis capabilities, so users get fast access to business
information without having to interact with the
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database. Whether using a Web browser or Windows, users can schedule, view
and analyze reports and multidimensional OLAP cubes in a secure environment.
This product contains an enterprise-friendly multi-tier architecture to lower
network traffic and increase user productivity.
. Seagate Crystal Reports(TM)--Provides query and report writing functions for
Windows. A developer and end-user tool, Seagate Crystal Reports allows users
to access most types of personal computer and structured query language data
and design a variety of reports and integrate them into database
applications.
. Seagate Holos(R)--Provides a flexible OLAP development environment for
rapidly delivering a range of applications that focus on key business issues
and accurately reflect business processes. These "business-aware"
applications allow enterprises to harness and analyze the increasing volumes
of data and guide users to the information to improve decision making.
Information Management Group will also continue to offer network and storage
management products by virtue of ongoing agreements with New Veritas.
Information Management Group provides its software products to customers under
non-exclusive, non-transferable license agreements (including shrink-wrap
licenses for certain products). As is customary in the software industry, in
order to protect its intellectual property rights, Information Management
Group does not sell or transfer title to its software products to customers.
Information Management Group enters into both object-code only and source-code
licenses of its products. Under Information Management Group's current
standard end-user license agreement, licensed software may be used solely for
the customers' internal operations and only at specified sites, which may be
comprised of a stand-alone computer, a single network server with multiple
terminals or multiple network servers with multiple terminals.
Sales and Marketing
Information Management Group utilizes a direct sales force and certain
indirect sales channels, such as distributors and OEM relationships, for sales
of its selected products to end users. These distributors and OEMs may also
sell other products that are complementary to or compete with those of
Information Management Group. Information Management Group provides sales and
marketing programs to encourage the sale of its products, but there can be no
assurance that its distributors and OEMs will not place a higher priority on
competing products. Agreements with its distributors and OEMs are generally
non-exclusive and may be terminated by either party without cause.
Information Management Group generally markets its products domestically and
overseas through a network of Seagate Software subsidiaries. These
subsidiaries utilize authorized distributors and direct sales forces.
Information Management Group adapts certain products for foreign markets,
including translation and documentation, and Information Management Group
prepares marketing and sales support programs accordingly. Information
Management Group has organized its sales management into geographical regions
to increase the effectiveness of its sales efforts. Each region has offices
established in cities and countries near its largest existing or prospective
partners and customers.
Information Management Group's marketing efforts are designed to increase
awareness and consideration of, and to generate leads for, its products.
Marketing activities include print advertising in trade and technical
publications, on-line advertising on the World Wide Web, cooperative
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marketing with distributors and resellers, participation in seminars and
tradeshows, mailings to end users and other public relations efforts.
Information Management Group's marketing groups produce or oversee the
production of substantially all of the on-line and print product literature,
brochures, advertising and similar marketing and promotional material.
Revenue from one third-party customer, Ingram Micro, accounted for 12.2%, 8.7%,
13.9% and 10.1% of Information Management Group total revenues in fiscal 1996,
1997 and 1998 and the quarter ended October 2, 1998, respectively. Indirect
revenues, which include sales to distributors and OEMs, were 60.2%, 32.2%,
40.1% and 34.3% of total revenues during fiscal 1996, 1997 and 1998 and the
quarter ended October 2, 1998, respectively. Revenues outside of the Americas
were 18.3%, 27.8%, and 34.1% of total revenues during fiscal 1996, 1997 and
1998, respectively.
During fiscal 1996, 1997 and 1998 and the quarter ended October 2, 1998,
Information Management Group generated export revenues from the United States
of approximately $1.1 million, $3.4 million, $8.3 million and $2.6 million,
respectively. Information Management Group's revenues outside of the Americas
were primarily denominated in the U.S. dollar, and accordingly Information
Management Group believes that its exposure to foreign currency fluctuations is
not material and does not engage in foreign currency hedging programs.
Technical Support and Maintenance
Information Management Group operates its own technical support groups. The
technical support groups are located at various sites around the world,
including the U.S., Canada and Europe, and provide pre-sale, installation and
post-sale support to current users and potential customers evaluating
Information Management Group products. Certain technical support groups also
offer seven-day, 24-hour toll-free telephone services. Information Management
Group believes that effective technical support during product evaluation
substantially contributes to product acceptance, and that post-sale support has
been, and will continue to be, a substantial factor in maintaining customer
satisfaction.
Information Management Group offers maintenance programs for certain of its
software products, which may consist of product enhancements, updated products
and technical support. Generally, customers renew maintenance and support on an
annual basis by paying a maintenance fee. Maintenance revenue implicit in new
product sales and recurring maintenance charges are recognized ratably over the
period the maintenance and support services are to be provided.
Competition
The business intelligence software market in which Information Management Group
competes is comprised of numerous competitors and Information Management Group
expects competition to increase. Information Management Group has recently
experienced increased competition from additional entrants into its market,
including companies that specialize in the development, marketing and support
of business intelligence products. Many of Information Management Group's
current and prospective competitors have significantly greater financial,
technical and marketing resources than Information Management Group. In
addition, many prospective customers may have the internal capability to
implement business intelligence solutions.
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The competitive factors affecting the market for Information Management Group
software products include the following:
. product functionality;
. performance and reliability;
. demonstrable cost effective benefits for users relative to cost;
. price;
. quality of customer support and user documentation;
. ease of installation;
. vendor reputation;
. experience; and
. financial stability.
Information Management Group believes that it currently competes effectively
with respect to these factors. Information Management Group's ability to remain
competitive will depend, to a great extent, upon its ongoing performance in the
areas of product development and customer support. To be successful in the
future, Information Management Group must respond promptly and effectively to
the challenges of technological change and its competitors' innovations by
continually enhancing its own product offerings. Performance in these areas
will, in turn, depend upon Information Management Group's ability to attract
and retain highly qualified technical personnel in a competitive market for
experienced and talented software developers.
Patents and Intellectual Property Rights
Due to the rapidly changing nature of applicable technologies, Information
Management Group believes that the improvement of existing products, reliance
upon trade secrets and unpatented proprietary know-how and development of new
products are generally more important than patent protection. Information
Management Group has no United States or foreign patents, has one patent
application pending in the United States, and has no foreign patent
applications pending.
Information Management Group's license agreements have restrictions in place to
protect and defend its intellectual property. Information Management Group
realizes that although it has incorporated these restrictions, there is a
possibility for unauthorized use of its software. In addition to relying on
these contractual rights, Information Management Group has an ongoing trademark
registration program in which it registers certain of its product names,
slogans, and logos in the United States and in some foreign countries.
Employees
As of October 2, 1998, Information Management Group employed 876 persons, and
following the closing of the Veritas Transaction, expects to employ
approximately 1,000 persons. Information Management Group's success is highly
dependent on its ability to attract and retain qualified employees. Competition
for qualified employees is intense in the software industry. None of
Information Management Group's employees are represented by a labor union or
are the subject of a collective bargaining agreement. Information Management
Group has never experienced a work stoppage and believes that its employee
relations are good.
52
<PAGE>
Facilities
Seagate Software's executive offices are located in Scotts Valley, California.
Principal facilities are located in Florida, California, Canada and the United
Kingdom. A major portion of Seagate Software's facilities are occupied under
leases that expire at various times through 2006. The following is a summary of
square footage representing occupied space that will continue to be leased by
Seagate Software following the Veritas transaction:
<TABLE>
<CAPTION>
Square
Location Feet
- -------- -------
<S> <C>
North America
California
Southern California................................................... 2,556
Northern California................................................... 2,254
Colorado............................................................... 6,306
Mid-Continent.......................................................... 7,886
Northeast U.S.......................................................... 9,140
Southeast U.S.......................................................... 8,632
Other Domestic......................................................... 220
Canada................................................................. 99,848
-------
Total North America................................................... 136,842
Europe
England................................................................ 30,776
Germany................................................................ 3,594
Other Europe........................................................... 9,384
-------
Total Europe.......................................................... 43,754
Asia
Australia.............................................................. 12,180
Singapore.............................................................. 2,125
Other Pacific Rim...................................................... 5,675
Total Asia............................................................ 19,980
-------
Grand Total............................................................. 200,576
=======
</TABLE>
Legal Proceedings
On November 10, 1997, Vedatech Corporation commenced an action in the High
Court of Justice Chancery Division in the United Kingdom against Seagate
Software Information Management Group Ltd., a wholly-owned subsidiary of
Seagate Software, claiming breach of an oral agreement and infringement of a
Vedatech U.K. copyright in the Japanese translation of one of Seagate
Software's products and seeking monetary and injunctive relief. No specific
damage amount has yet been claimed. Seagate Software has hired local counsel in
the U.K., reviewed documents and conducted interviews. Seagate Software filed
an initial response in the U.K. court on January 13, 1998 and is now in the
discovery process.
Furthermore, on December 22, 1998, a former employee commenced an action in the
Superior Court of Santa Cruz County against Seagate Software claiming
promissory fraud and fraudulent inducement to enter a contract, breach of
contract, constructive wrongful discharge and related claims and seeking
monetary and injunctive relief. Specifically, the former employee alleges that
a Seagate
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<PAGE>
Software officer agreed to sell him a division of Network Storage & Management
Group's business. No specific damage amount has yet been claimed. Seagate
Software is in the initial stages of internal investigation relating to these
claims.
Seagate Software believes these complaints have no merit and intends to
vigorously defend these actions. However, if unfavorable outcomes were to
arise, there can be no assurance that such outcomes would not have a material
adverse effect on Seagate Software's liquidity, financial position or results
of operations.
In addition to the foregoing, Seagate Software is engaged in legal actions
arising in the ordinary course of its business and believes that the ultimate
outcome of these actions will not have a material adverse effect on Seagate
Software's financial position, liquidity, or results of operations.
Market for and Dividends Paid on Seagate Software Common Stock
There is no established public trading market for Seagate Software common
stock. Seagate Software common stock is not listed on a national securities
exchange and is not authorized for quotation on an interdealer quotation
system. As of October 30, 1998, there were 272 holders of record of Seagate
Software common stock. Seagate Software has never paid cash dividends and has
no present intention to pay cash dividends.
Security Ownership of Certain Beneficial Owners and Management of Seagate
Software
The following table sets forth certain information regarding the beneficial
ownership of Seagate Software's outstanding shares of common stock and
preferred stock on an as-converted basis (collectively with the common stock,
the "Common Equivalent Shares") as of October 30, 1998 by (i) each person who
is known to Seagate Software to be the beneficial owner of 5% or more of
Seagate Software's outstanding Common Equivalent Shares, (ii) each of Seagate
Software's executive officers named in the Seagate Software Summary
Compensation Table in Seagate Software's Annual Report on Form 10-K for the
fiscal year ended July 3, 1998, (iii) each of the Seagate Software's directors
in office as of October 30, 1998, and (iv) all directors and executive officers
as of October 30, 1998 as a group.
<TABLE>
<CAPTION>
Number of Percent of
Common Common
Equivalent Equivalent
Stockholder Shares Shares(1)
----------- ---------- ----------
<S> <C> <C>
Seagate Technology, Inc.(2).......................... 54,695,833 98.2%
920 Disc Drive
Scotts Valley, CA 95066
Stephen J. Luczo(3).................................. 54,729,833 98.2
Donald L. Waite(4)................................... 54,715,833 98.3
Gary B. Filler(5).................................... 54,706,833 98.2
Lawrence Perlman(6).................................. 54,706,833 98.2
Ellen E. Chamberlain(7).............................. 32,000 *
Terence R. Cunningham(8)............................. 400,000 *
Gregory B. Kerfoot(9)................................ 120,000 *
All directors and executive officers as a group (7
persons)(10)........................................ 55,323,833 99.0
</TABLE>
- --------
* Less than one percent.
(1) Applicable percentage ownership is based on 55,675,153 Common Equivalent
Shares outstanding as of October 30, 1998 together with applicable options
for such stockholder. Seagate Software's Series A Preferred Stock and
Special Voting Stock is reflected on an as-converted basis assuming a 1:1
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<PAGE>
conversion. Beneficial ownership is determined in accordance with the
rules of the SEC based on factors including voting and investment power
with respect to shares subject to applicable community property laws.
Common Equivalent Shares subject to options currently exercisable or
exercisable within 60 days after October 30, 1998 are deemed outstanding
for computing the percentage ownership of the person holding such options,
but are not deemed outstanding for computing the percentage of any other
person.
(2) Includes 54,695,833 shares of Series A Preferred Stock beneficially owned
by Seagate Technology to which the following individuals may be deemed, in
their capacity as directors of Seagate Technology, to have shared power to
vote or dispose of: Mr. Luczo, Mr. Filler, Mr. Perlman, Kenneth Haughton,
Robert A. Kleist, Thomas P. Stafford and Laurel L. Wilkening. However,
each of these individuals disclaims such beneficial ownership. Also
includes 7,200,000 shares of Class B Exchangeable Shares of Seagate
Software Information Management Group (Canada), Inc., ("the Information
Management Group Vancouver"), which may be exchanged at the option of the
holder, Seagate Technology International Holdings, a subsidiary of Seagate
Technology, for an equal number of shares of Series A Preferred Stock of
Seagate Software within 60 days of October 30, 1998 upon cancellation of
the outstanding share of Seagate Software's Special Voting Stock. Excludes
76,000 shares of Seagate Software's common stock held by or issuable
pursuant to options granted to Messrs. Luczo, Waite, Filler and Perlman
over which Seagate Technology does not possess sole or shared voting or
investment control and therefore of which Seagate Technology disclaims
beneficial ownership.
(3) Includes 34,000 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after October 30,
1998. Includes 54,695,833 shares of Series A Preferred Stock beneficially
owned by Seagate Technology to which Mr. Luczo may be deemed, in his
capacity as an officer of Seagate Technology, to have shared power to vote
or dispose of. However, Mr. Luczo disclaims such beneficial ownership.
(4) Includes 12,000 shares of common stock that are subject to repurchase by
Seagate Software. Seagate Software's repurchase right lapses for 6,000 and
6,000 shares on April 4, 1999 and 2000, respectively. Includes 54,695,833
shares of Series A Preferred Stock beneficially owned by Seagate
Technology to which Mr. Waite may be deemed, in his capacity as an officer
of Seagate Technology, to have shared power to vote or dispose of.
However, Mr. Waite disclaims such beneficial ownership.
(5) Includes 11,000 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after October 30,
1998. Includes 54,695,833 shares of Series A Preferred Stock beneficially
owned by Seagate Technology to which Mr. Filler may be deemed, in his
capacity as a director of Seagate Technology, to have shared power to vote
or dispose of. However, Mr. Filler disclaims such beneficial ownership.
(6) Includes 11,000 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after October 30,
1998. Includes 54,695,833 shares of Series A Preferred Stock beneficially
owned by Seagate Technology to which Mr. Perlman may be deemed, in his
capacity as a director of Seagate Technology, to have shared power to vote
or dispose of. However, Mr. Perlman disclaims such beneficial ownership.
(7) Includes 20,000 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after October 30,
1998.
(8) Includes 280,000 shares of common stock that are subject to repurchase by
Seagate Software on various dates through 2001.
(9) Includes 120,000 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after October 30,
1998.
(10) Includes 196,000 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after October 30,
1998. See notes 2 through 7 to this table regarding reporting of shares
held by Seagate Technology.
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<PAGE>
Based on the number of outstanding shares of Seagate Technology common stock as
of October 2, 1998 and after giving effect to the issuance of Seagate
Technology common stock and options in the exchange offer (assuming that all
outstanding shares of Seagate Software common stock are exchanged for Seagate
Technology common stock pursuant to the exchange offer), no director or
executive officers of Seagate Software or holder of 5% or more of Seagate
Software is Common Equivalent Shares will beneficially own more than 1% of the
outstanding Seagate Technology common stock immediately after the
exchange offer.
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SEAGATE TECHNOLOGY
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements consist of the
Seagate Technology Unaudited Pro Forma Condensed Statements of Operations for
the year ended July 3, 1998, and for the three months ended October 2, 1998,
and the Unaudited Pro Forma Condensed Balance Sheet as of October 2, 1998,
(collectively the "Seagate Technology Unaudited Pro Forma Condensed Financial
Statements"). The Seagate Technology Unaudited Pro Forma Condensed Financial
Statements give effect to the exchange of Seagate Software shares for Seagate
Technology shares pursuant to the exchange offer and the contribution by
Seagate Software of the Network & Storage Management Group business to New
Veritas in exchange for shares of New Veritas. The Seagate Technology Unaudited
Pro Forma Condensed Statements of Operations for the year ended July 3, 1998,
and for the three months ended October 2, 1998, gives effect to the
transactions as if they had taken place on June 28, 1997, the first day of the
fiscal year ended July 3, 1998. The Seagate Technology Unaudited Pro Forma
Condensed Balance Sheet gives effect to the transactions as if they had taken
place on October 2, 1998. The Seagate Technology Unaudited Pro Forma Condensed
Financial Statements are not necessarily indicative of what the actual
financial results would have been had the transaction taken place on June 28,
1997 or October 2, 1998 and do not purport to indicate the future results of
operations or financial position of Seagate Technology.
Upon the contribution of the Network & Storage Management Group business to New
Veritas in exchange for New Veritas stock Seagate Software (and Seagate
Technology through consolidation of Seagate Software) will record a gain on the
exchange equivalent to the difference between the fair value of the New Veritas
stock received reduced by approximately 41% and Seagate Software's basis in the
assets exchanged also reduced by approximately 41%. Because Seagate Software
will own approximately 41% of New Veritas, on an outstanding share basis after
the exchange, it will not recognize a gain on 100% of the contribution of the
Network & Storage Management Group business to New Veritas. Seagate Software's
and Seagate Technology's ownership percentage in New Veritas on an outstanding
share basis do not take into account outstanding stock options, warrants, or
convertible securities. Subsequent to the merger, Seagate Software and Seagate
Technology will account for Seagate Software's investment in New Veritas using
the equity method. Under the equity method of accounting, Seagate Software and
Seagate Technology will include in their respective financial results Seagate
Software's share of the net income or loss of New Veritas based upon the
percentage of outstanding shares of New Veritas owned by Seagate Software
adjusted for the difference in Seagate Software's carrying value of its
investment and its equity interest in New Veritas's net assets. The results of
New Veritas will include the results of TeleBackup if the TeleBackup purchase
described below is consummated. The Seagate Technology Unaudited Pro Forma
Statements have been prepared assuming the TeleBackup purchase is accounted for
using the purchase method of accounting.
In addition to the above, New Veritas plans to complete the TeleBackup purchase
immediately after the completion of the contribution of the Network & Storage
Management Group business to New Veritas. TeleBackup develops and markets
software technology that enables the automated backup and recovery of
electronic information created and stored on networked, remote and mobile PC-
based computer systems. The Seagate Technology Unaudited Pro Forma Condensed
Financial Statements include the impact of the TeleBackup purchase by New
Veritas through the issuance of 1,550,000 shares of New Veritas common stock
determined as of October 30 1998 using the closing price of Veritas common
57
<PAGE>
stock of $54.31 share on November 6, 1998. Under the terms of the TeleBackup
arrangement, the number of shares to be issued will increase up to 1,710,000
shares depending on the average price per share of Veritas and/or New Veritas,
as the case may be, common stock for the ten day period ending two days before
the closing date.
In addition to the inclusion of the transactions described for New Veritas,
Seagate Technology will offer to purchase all outstanding shares of Seagate
Software common stock not held by Seagate Software or one of its subsidiaries
in exchange for Seagate Technology common stock. The exchange ratio will be
determined based on the estimated fair value of Seagate Software shares divided
by the fair market value of Seagate Technology common stock. The estimated fair
value of the Seagate Software shares will be determined based upon the sum of
the fair value of the Network & Storage Management Group business (as measured
by the fair value of the shares to be received from New Veritas) plus the
estimated fair value for the Information Management Group of Seagate Software
as determined by the Seagate Software Board of Directors plus the assumed
proceeds from the exercise of all stock options, divided by the number of fully
converted shares of Seagate Software. The fair value of shares purchased less
the original price paid by the employees will be recorded as compensation
expense for those shares outstanding or vested less than six months. The
purchase of shares that have been outstanding and vested more than six months
will be accounted by Seagate Software as a purchase of minority interest and,
accordingly, in these pro forma financial statements the fair value of the
shares exchanged has been allocated to all of the identifiable tangible and
intangible assets, including in-process research and development and goodwill,
and liabilities of Seagate Software. The amounts allocated to in-process
research and development will be expensed in the period in which the shares are
exchanged.
As a result of the exchange of Seagate Software shares for Seagate Technology
shares pursuant to the exchange offer, the Veritas transaction, and the
TeleBackup purchase, Seagate Technology preliminarily estimates that it will
record a pre-tax gain of approximately $1,042 million, expenses related to
write-offs of in-process research and development of approximately $124 million
and compensation expense of approximately $59 million in the period these
transactions are consummated. In addition, Seagate Technology and Seagate
Software will record the value of certain intangible assets and goodwill that
will be amortized over periods of up to four years associated with these
transactions. The actual amount of the one-time gain and expenses, and the
amount of intangible assets and goodwill recorded is dependent on a number of
factors including, the price of Veritas stock prior to the Veritas transaction,
the number and average exercise prices for Veritas and Seagate Software stock
outstanding prior to the Veritas transaction and the number of shares of
Seagate Software stock ultimately exchanged into shares of Seagate Technology
stock.
The Seagate Technology Unaudited Pro Forma Condensed Balance Sheet as of
October 2, 1998, reflects the recognition of the one-time gain and expenses for
in-process research and development and compensation. The Seagate Technology
Unaudited Pro Forma Statements of Operations include the recurring effect of
the amortization of intangibles and goodwill and do not include the effect of
the one-time recognition of gain on the Veritas transaction and one-time
expenses related to in-process research and development and compensation. The
gain and the charges related to in-process research and development as well as
compensation will be reflected in Seagate Technology's financial statements
when the Veritas transaction and the TeleBackup purchase are consummated.
The Seagate Technology Unaudited Pro Forma Condensed Financial Statements
should be read in conjunction with the related notes included in this document
and the audited financial statements of Seagate Technology including the notes
that are included in Seagate Technology's Annual Report on Form 10-K for the
year ended July 3, 1998 incorporated by reference into this document.
58
<PAGE>
Seagate Technology Unaudited Pro Forma
Condensed Statement of Operations
Year Ended July 3, 1998
(In millions, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------
Less:
Network &
Storage Equity Interest Purchase of
Seagate Management in Operations Minority
Technology Group of New Veritas Interest Pro forma
---------- ---------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue................. $6,819 $175 $ $ $6,644
Cost of sales........... 5,830 23 1 (6) 5,808
Marketing and
administrative......... 502 90 412
Product development..... 585 32 553
In-process research and
development............ 223 7 216
Amortization of goodwill
and other intangibles.. 40 12 1 (6) 29
Restructuring........... 347 347
Unusual items........... (22) (22)
------ ---- ----- --- ------
Total operating
expenses........... 7,505 164 2 7,343
------ ---- ----- --- ------
Income (loss) from
operations............. (686) 11 (2) (699)
Equity in income (loss)
of New Veritas, net of
amortization of related
intangibles............ -- -- 27 (1) (217)
(238)(2)
(6)(3)
Interest and other,
net.................... (18) (1) (17)
------ ---- ----- --- ------
Income (loss) before
income taxes........... (704) 10 (217) (2) (933)
Benefit from (provision
for) income taxes...... 174 (6) 84 (4) 267
3 (5)
------ ---- ----- --- ------
Net income (loss)....... $ (530) $ 4 $(130) $(2) $ (666)
====== ==== ===== === ======
Net income (loss) per
share:*
Basic................. $(2.17) $(2.70)
Diluted............... $(2.17) $(2.70)
Number of shares used in
per share
computations:*
Basic................. 243.6 247.0
Diluted............... 243.6 247.0
</TABLE>
- --------
(*) The Network & Storage Management Group is an operating division of Seagate
Software and it has no formal capital structure; accordingly, share and per
share information is not presented.
See accompanying Notes to Seagate Technology Unaudited Pro Forma
Condensed Financial Statements.
59
<PAGE>
Seagate Technology Unaudited Pro Forma
Condensed Statement of Operations
Three Months Ended October 2, 1998
(In millions, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------
Less:
Network &
Storage Equity Interest Purchase of
Seagate Management in Operations Minority
Technology Group of New Veritas Interest Pro Forma
---------- ---------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue................. $1,553 $ 48 $ $ $1,505
Cost of sales........... 1,232 4 1,228
Marketing and
administrative......... 131 24 107
Product development..... 141 9 132
Amortization of goodwill
and other intangibles.. 9 3 1 (6) 7
Unusual items........... 77 77
------ ---- ---- --- ------
Total operating
expenses........... 1,590 40 1 1,551
------ ---- ---- --- ------
Income (loss) from
operations............. (37) 8 (1) (46)
Equity in income (loss)
of New Veritas, net of
amortization of related
intangibles............ -- -- 8 (1) (53)
(59)(2)
(2)(3)
Interest and other,
net.................... 16 -- (16)
------ ---- ---- --- ------
Income (loss) before
income taxes........... (21) 8 (53) (1) (83)
Benefit from (provision
for) income taxes...... (9) (4) 20 (4) 16
1 (5)
------ ---- ---- --- ------
Net income (loss)....... $ (30) $ 4 $(32) $(1) $ (67)
====== ==== ==== === ======
Net income (loss) per
share:*
Basic................. $(0.12) $(0.27)
Diluted............... $(0.12) $(0.27)
Number of shares used in
per share
computations:*
Basic................. 245.0 248.4
Diluted............... 245.0 248.4
</TABLE>
- --------
* The Network & Storage Management Group is an operating division of Seagate
Software and it has no formal capital structure; accordingly, share and per
share information is not presented.
See accompanying Notes to Seagate Technology Unaudited Pro Forma
Condensed Financial Statements.
60
<PAGE>
Seagate Technology Unaudited Pro Forma
Condensed Balance Sheets
As of October 2, 1998
(In millions)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------
Less:
Network &
Storage Purchase of
Seagate Management Equity Interest Minority
Technology Group in New Veritas Interest Pro Forma
---------- ---------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 431 $ 1 $ $ $ 430
Short-term
investments........... 1,443 -- 1,443
Accounts receivable,
net................... 761 17 744
Inventories............ 461 1 460
Deferred income taxes.. 232 -- 1 (7) 233
Other current assets... 244 7 5 (8) 242
------ ---- ------ --- ------
Total current assets... 3,572 26 6 3,552
Equipment and leasehold
improvements, net...... 1,665 12 1,653
Goodwill and other
intangibles, net....... 157 35 7 (13) 129
Equity investment in
Newco.................. -- -- 957 (9) 957
Other assets............ 209 209
------ ---- ------ --- ------
Total assets........... $5,603 $ 73 $ 963 $ 7 $6,500
====== ==== ====== === ======
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....... $ 521 $ 4 $ 5 (8) $ $ 522
Accrued employee
compensation.......... 182 9 173
Accrued expenses....... 646 9 637
Accrued income taxes... 5 6 1 (7) --
Current portion of
long-term debt........ 1 1
Deferred revenue....... 4 4 --
------ ---- ------ --- ------
Total current
liabilities........... 1,359 32 6 -- 1,333
Deferred income taxes... 431 2 388 (9) 1 (13) 818
Long-term debt.......... 703 -- 703
Other liabilities....... 182 182
------ ---- ------ --- ------
Total liabilities...... 2,675 34 394 1 3,036
------ ---- ------ --- ------
Stockholders'/Group
Equity:
Common stock........... 3 -- -- 3
Additional paid-in
capital............... 1,933 -- 59(10) 7 (13) 1,999
Retained Earnings...... 1,247 -- 1,042 (9) (1)(13) 1,717
(388)(9)
(124)(11)
(59)(10)
Group Equity........... 39 39 (12) --
Other comprehensive
income................ 5 -- 5
Deferred compensation.. (49) -- (49)
Treasury Common Stock.. (211) (211)
------ ---- ------ --- ------
Total stockholders'
equity/Group Equity... 2,928 39 569 6 3,464
------ ---- ------ --- ------
Total liabilities and
stockholders'
equity/Group Equity... $5,603 $ 73 $ 963 $ 7 $6,500
====== ==== ====== === ======
</TABLE>
See accompanying Notes to Seagate Technology Unaudited Pro Forma
Condensed Financial Statements.
61
<PAGE>
NOTES TO SEAGATE TECHNOLOGY
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
1. Pro Forma Basis of Presentation
These pro forma statements reflect the exchange of Seagate Software shares by
Seagate Technology pursuant to the exchange offer and the contribution of the
Network & Storage Management Group division of Seagate Software to New Veritas
in exchange for the issuance of approximately 33.4 million shares of New
Veritas common stock representing an approximate 41% interest in New Veritas on
an outstanding share basis. The number of shares to be received in the exchange
is based on the capitalization of Seagate Software and Veritas as of October
30, 1998 and the closing price of Veritas common stock of $54.31 per share on
November 6, 1998. The actual value will be dependent on the average closing
price per share of Veritas common stock on the five days ending on the third
business day prior to the closing date.
The exchange ratio for the exchange of Seagate Software shares for Seagate
Technology shares pursuant to the exchange offer will be determined based on
the estimated fair value of Seagate Software shares divided by the fair market
value of Seagate Technology common stock. The estimated fair value of the
Seagate Software shares will be determined based upon the sum of the fair value
of the Network & Storage Management Group (as measured by the fair value of the
shares to be received from New Veritas) plus the estimated fair value for the
Information Management Group as determined by the Seagate Software Board of
Directors plus the assumed proceeds from the exercise of all stock options,
divided by the number of fully converted shares of Seagate Software. The fair
value of shares purchased less the original price paid by the employees will be
recorded as compensation expense for those shares outstanding or vested less
than six months. The purchase of Seagate Software shares that have been
outstanding and vested more than six months will be accounted by Seagate
Software and Seagate Technology as a purchase of minority interest and,
accordingly, in these pro forma financial statements the fair value of the
shares exchanged has been allocated to all of the identifiable tangible and
intangible assets, including in-process research and development and goodwill,
and liabilities of Seagate Software. The amounts allocated to in-process
research and development will be expensed in the period in which the shares are
exchanged.
Because Seagate Software will own approximately 41% of New Veritas, including
the Network & Storage Management Group after the exchange, it will not
recognize a gain on 100% of the contribution of the Network & Storage
Management Group. Seagate Software and Seagate Technology will record a gain on
the exchange equivalent to the difference between approximately 59% of the fair
value of the New Veritas stock received and approximately 59% of Seagate
Technology's basis in the assets exchanged. Seagate Software and Seagate
Technology will account for its investment in New Veritas using the equity
method. Seagate Software and Seagate Technology will allocate the difference
between the recorded amount of its investment in New Veritas and the amount of
its underlying equity in the net assets of New Veritas based upon the fair
value of the underlying assets and liabilities of New Veritas (see Note 2).
Subsequent to the combination, Seagate Software's and Seagate Technology's
operating results will include approximately 41% of the operating results of
New Veritas, adjusted to amortize the difference between the recorded amount of
Seagate Software's investment and the amount of its underlying equity in the
net assets of New Veritas.
62
<PAGE>
NOTES TO SEAGATE TECHNOLOGY
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
New Veritas plans to complete a transaction to purchase TeleBackup immediately
subsequent to the combination with the Network & Storage Management Group. The
Seagate Technology Unaudited Pro Forma Statements include the impact of the
TeleBackup purchase by New Veritas and the issuance of 1,555,000 shares of New
Veritas determined as of October 30, 1998 using the closing price of Veritas
common stock of $54.31 on November 6, 1998. The actual value of the TeleBackup
purchase will be determined based on the average closing price per share of
Veritas common stock for a few days before and after the closing date. Under
the terms of the TeleBackup arrangement, the number of shares to be issued will
increase up to 1,710,000 shares depending on the average price per share of
Veritas and/or New Veritas, as the case may be, common stock for a ten day
period ending two days before the closing date.
63
<PAGE>
NOTES TO SEAGATE TECHNOLOGY
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
The Seagate Technology Unaudited Pro Forma Condensed Financial Statements have
been prepared based on assumptions relating to the fair value of the assets and
liabilities of New Veritas, TeleBackup and Seagate Software. The allocations
are based on preliminary information and the actual amounts may differ from
those reflected in the Seagate Technology Unaudited Pro Forma Condensed
Financial Statements after completion of valuations and other procedures. Below
is a table of the computation of gain, asset and liability allocation and
annual amortization of the intangible assets received (dollars in thousands):
Exchange of Seagate Software shares for Seagate Technology shares
(In thousands except for per share data)
<TABLE>
<CAPTION>
Annual
Amortization Amortization of
Amount Life Intangibles
------- ------------ ---------------
<S> <C> <C> <C>
Compensation expense associated with
the exchange of Seagate Software
shares outstanding and vested less
than 6 months....................... $58,709
Allocation of minority interest
purchase price to intangible assets
of Seagate Software:
Distribution channel............... $ 840 4 years $ 210
Developed technology............... 1,400 2 to 4 years 467
Trademarks and workforce........... 154 4 years 39
In-process research and
development....................... 958
Goodwill........................... 5,401 4 years 1,350
Deferred tax liability............. (958)
-------
Total............................ $ 7,795
=======
Value of minority interests
Shares of Seagate Software held for
more than 6 months................. 202,223
Market value of Seagate Software
common stock....................... $ 38.55
-------
Minority interest purchase price.... $ 7,795
Market value of Seagate Technology
common stock....................... $ 28.69
Number of Seagate Technology shares
issued for minority interests...... 271,745
</TABLE>
64
<PAGE>
NOTES TO SEAGATE TECHNOLOGY
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
Contribution of the Network & Storage Management Group Business to New Veritas
<TABLE>
<S> <C>
Computation of pro rata gain
Fair value of shares received................................... $1,813,944
Times: Pro rata percentage to be accounted for a fair value .... 58.72%
----------
Adjusted fair value of securities received...................... $1,065,176
Book value of Network & Storage Management Group business....... $ 39,372
----------
Times: Pro rata percentage to be accounted for at fair value.... 58.72%
----------
Book value exchanged............................................ 23,120
----------
Pro rata gain................................................... $1,042,056
==========
Computation of Investment in New Veritas
Book value of Network & Storage Management Group business....... $ 39,372
Times: Pro rata percentage to be accounted for at book value.... 41.28%
----------
Portion of investment in New Veritas with no step up in basis... $ 16,252
Plus: Adjusted fair value of securities received................ 1,065,176
----------
Investment in New Veritas....................................... $1,081,428
==========
</TABLE>
<TABLE>
<CAPTION>
Annual
Amortization Amortization of
Amount Life Intangibles
---------- ------------ ---------------
<S> <C> <C> <C>
Allocation of Investment in New
Veritas:
Tangible assets.................. $ 73,055
Intangible assets:
Distribution channel........... 123,900 4 years $30,975
Developed technology........... 206,500 2 to 4 years 68,833
Trademark and workforce........ 22,715 4 years 5,679
In-process research and
development................... 123,900
Goodwill....................... 531,358 4 years 132,840
----------
Investment in New Veritas.... $1,081,428
==========
</TABLE>
65
<PAGE>
NOTES TO SEAGATE TECHNOLOGY
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
Acquisition of TeleBackup
<TABLE>
<CAPTION>
Annual
Amortization Amortization of
Amount Life Intangibles
-------- ------------ ---------------
<S> <C> <C> <C>
Estimated acquisition cost:
Estimated purchase price.......... $ 84,456
Acquisition costs................. 3,949
--------
Total estimated acquisition
cost........................... $ 88,405
========
Purchase price allocation:
Tangible net assets acquired...... $ 3,725
Intangible assets:
Acquired distribution
channel/OEM agreements......... 48,000 4 years $12,000
Developed technology............ 6,800 4 years 1,700
Trademark/assembled workforce... 3,030 4 years 757
In-process research and
development.................... 3,000
Goodwill........................ 44,390 4 years 11,098
Deferred tax liabilities........ (20,540)
--------
Total......................... $ 88,405
========
</TABLE>
Tangible net assets of New Veritas principally include cash and investments,
accounts receivable, fixed assets and other current assets. Liabilities
principally include accounts payable, accrued compensation, and other accrued
liabilities.
The tangible net assets of TeleBackup acquired principally include cash and
fixed assets. Liabilities assumed principally include convertible debentures
and other non-current liabilities.
To estimate the value of the developed technology, the expected future cash
flows attributable to all existing technology was discounted, taking into
account risks related to the characteristics and applications of the
technology, existing and future markets, and assessments of the life cycle
stage of the technology. The developed technology is expected to be amortized
on the straight-line basis over its estimated useful life (two to four years)
which is expected to exceed the ratio of current revenues to the total of
current and anticipated revenues.
The value of the distribution networks and OEM agreements was estimated by
considering, among other factors, the size of the current and potential future
customer bases, the quality of existing relationships with customers, the
historical costs to develop customer relationships, the expected income and
associated risks. Associated risks included the inherent difficulties and
uncertainties in transitioning business relationships and risks related to the
viability of and potential changes to future target markets.
The value of trademarks was estimated by considering, among other factors, the
assumption that in lieu of ownership of a trademark, a company would be willing
to pay a royalty in order to exploit the related benefits of such trademark.
66
<PAGE>
NOTES TO SEAGATE TECHNOLOGY
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
The value of the assembled workforce was estimated as the costs to replace the
existing employees, including recruiting, hiring, and training costs for each
category of employee.
The value allocated to projects identified as in-process technology at New
Veritas, TeleBackup and Seagate Software (for the minority interest acquired)
will be charged to expense in the period the transactions close. These write-
offs are necessary because the acquired technologies have not yet reached
technological feasibility and have no future alternative uses. Seagate
Technology expects that the acquired in-process research and development will
be successfully developed, but there can be no assurance that commercial
viability of these products will be achieved.
The nature of the efforts required to develop the purchased in-process
technology into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements.
The value of the purchased in-process technology for New Veritas and TeleBackup
was estimated as the projected net cash flows related to such products,
including costs to complete the development of the technology and the future
revenues to be earned upon commercialization of the products, excluding
revenues attributable to future development efforts. These cash flows were then
discounted back to their net present value. The projected net cash flows from
such projects were based on management's estimates of revenues and operating
profits related to such projects.
Goodwill is calculated as the residual difference between the estimated amount
paid and the values assigned to identified tangible and intangible assets.
2. Pro Forma Net Loss per Share
The Seagate Technology Unaudited Pro Forma Condensed Statements of Operations
have been prepared as if the exchange of Seagate Software shares for Seagate
Technology shares pursuant to the exchange offer, the Veritas transaction, and
the TeleBackup purchase had all occurred at the beginning of fiscal 1998.
The pro forma weighted average shares outstanding assumes the following (in
millions):
<TABLE>
<CAPTION>
Year Three Months
Ended Ended
July 3, 1998 October 2, 1998
------------ ---------------
<S> <C> <C>
Weighted average historical shares outstanding... 243.6 245.0
Shares assumed issued pursuant to the exchange
offer........................................... 3.4 3.4
----- -----
Total weighted average shares outstanding........ 247.0 248.4
===== =====
</TABLE>
67
<PAGE>
3. Pro Forma Adjustments
The Seagate Technology Unaudited Pro Forma Statements give effect to the
following pro forma adjustments:
(1) To include Seagate Software's equity in the income of New Veritas prior
to the effect of the amortization of intangible assets, including goodwill,
associated with the Veritas transaction and the TeleBackup purchase.
(2) To reflect Seagate Software's interest in the amortization of
intangibles and goodwill resulting from to the Veritas transaction.
(3) To reflect Seagate Software's interest in the amortization of
intangibles and goodwill resulting from the TeleBackup purchase.
(4) To reflect the change in book/tax basis differences related to the
investment in New Veritas.
(5) To reflect the provision of income taxes for Seagate Software's equity
in the amortization of intangibles and goodwill related to the TeleBackup
purchase.
(6) To reflect the amortization of developed technology and intangibles and
goodwill resulting from the exchange of Seagate Software shares for Seagate
Technology shares pursuant to the exchange offer. The purchase of the
minority interest by Seagate Technology is recorded using fair values and
is reflected as a capital contribution to Seagate Software by Seagate
Technology and offsetting compensation expense or purchased in-process
research and development and intangibles recorded by Seagate Technology,
through consolidation.
(7) To reclassify a debit balance in accrued income taxes payable to other
current assets.
(8) To reclassify a loan receivable from Seagate Technology and affiliates
to a loan payable to Seagate Technology and affiliates.
(9) To reflect investment in New Veritas including step-up in basis of
assets and related deferred tax liability.
(10) Contributed capital and compensation expense resulting from the
purchase of Seagate Software common stock in exchange for Seagate
Technology common stock.
(11) Write-off of in-process research and development resulting from the
Veritas transaction.
(12) To eliminate the Network & Storage Management Group's group equity.
(13) To record purchased in-process research and development, intangibles
and goodwill, deferred taxes and a capital contribution resulting from
exchange of Seagate Software shares for Seagate Technology shares pursuant
to the exchange offer.
4. Effect of TeleBackup on Pro Forma Condensed Financial Statements
If the proposed business combination between Veritas and TeleBackup is not
consummated, the future operating results and financial position of Seagate
Technology will include only the equity in the combined operating results of
New Veritas and the Network & Storage Management Group business. By excluding
TeleBackup from the pro forma results, Seagate Technology's pro forma net loss
and net loss per share for fiscal 1998 would be reduced by approximately $3.7
million and $0.02 per share, respectively. Seagate Technology's pro forma net
loss for the three months ended October 2, 1998 would be reduced by
approximately $900,000. Seagate technology's pro forma net revenues, pro forma
net loss per share for the three months ended October 2, 1998, total assets,
and stockholders' equity would remain unchanged.
68
<PAGE>
SEAGATE SOFTWARE
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements consist of the
Seagate Software Unaudited Pro Forma Condensed Statements of Operations for the
year ended July 3, 1998, and for the three months ended October 2, 1998, and
the Unaudited Pro Forma Condensed Balance Sheet as of October 2, 1998,
(collectively the "Seagate Software Unaudited Pro Forma Condensed Financial
Statements"). The Seagate Software Unaudited Pro Forma Condensed Financial
Statements give effect to the exchange of Seagate Software shares for Seagate
Technology shares pursuant to the Exchange Offer and the contribution by
Seagate Software of the Network & Storage Management Group business to New
Veritas in exchange for shares of New Veritas. The Seagate Software Unaudited
Pro Forma Condensed Statements of Operations for the year ended July 3, 1998,
and for the three months ended October 2, 1998, gives effect to the
transactions as if they had taken place on June 28, 1997, the first day of the
fiscal year ended July 3, 1998. The Seagate Software Unaudited Pro Forma
Condensed Balance Sheet gives effect to the transactions as if they had taken
place on October 2, 1998. The Seagate Software Unaudited Pro Forma Condensed
Financial Statements are not necessarily indicative of what the actual
financial results would have been had the transaction taken place on June 28,
1997 or October 2, 1998 and do not purport to indicate the future results of
operations or financial position of Seagate Software.
Upon the contribution of the Network & Storage Management Group business to New
Veritas in exchange for New Veritas stock, Seagate Software will record a gain
on the exchange equivalent to the difference between the fair value of the New
Veritas stock received reduced by approximately 41% and Seagate Software's
basis in the assets exchanged also reduced by approximately 41%. Because
Seagate Software will own approximately 41% of New Veritas on an outstanding
share basis after the exchange, it will not recognize a gain on 100% of the
contribution of the Network & Storage Management Group business to New Veritas.
Seagate Software's ownership percentage in New Veritas on an outstanding share
basis does not take into account outstanding stock options, warrants, or
convertible securities. Subsequent to the merger, Seagate Software will account
for its investment in New Veritas using the equity method. Under the equity
method of accounting, Seagate Software will include in its financial results
its share of the net income or loss of New Veritas based upon the percentage of
outstanding shares of New Veritas owned by Seagate Software adjusted for the
difference in Seagate Software's carrying value of its investment and its
equity interest in New Veritas's net assets. The results of New Veritas will
include the results of TeleBackup if the TeleBackup purchase is consummated.
The Seagate Software Unaudited Pro Forma Condensed Financial Statements have
been prepared assuming the TeleBackup purchase is consummated using the
purchase method of accounting.
The accompanying Seagate Software Unaudited Pro Forma Condensed Statements of
Operations for the year ended July 3, 1998 and the three months ended October
2, 1998, reflect the purchase of these shares in the exchange offer as if it
had taken place on June 28, 1997, the first day of the fiscal year ended July
3, 1998. The Seagate Software Unaudited Pro Forma Condensed Balance Sheet
reflects the purchase of these shares as if it had taken place on October 2,
1998.
As a result of the contribution of the Network & Storage Management Group
business to New Veritas and the issuance of stock of Seagate Technology in
exchange for certain stock of Seagate
69
<PAGE>
Software, Seagate Software preliminarily estimates that it will record a pre-
tax gain of approximately $1,042 million and expenses related to write-offs of
in-process research and development of approximately $124 million and
compensation expense of approximately $59 million in the period these
transactions are consummated. In addition, Seagate Software will record the
value of certain intangible assets and goodwill that will be amortized over
periods up to four years associated with the exchange of Seagate Software
shares for Seagate Technology shares pursuant to the exchange offer. The actual
amount of the one-time gain and expenses, and the amount of intangible assets
and goodwill recorded is dependent on a number of factors including, the price
of Veritas stock prior to the merger, the number and average exercise prices
for Veritas and Seagate Software stock outstanding prior to the merger, the
number of shares of Seagate Software stock ultimately exchanged into shares of
Seagate Technology stock, and the completion of a final valuation.
The Seagate Software Unaudited Pro Forma Condensed Balance Sheet as of October
2, 1998, reflects the recognition of the one-time gain and expenses for in-
process research and development and compensation. The Seagate Software
Unaudited Pro Forma Statements of Operations include the recurring effect of
the amortization of intangibles and goodwill and do not include the effect of
the one-time recognition of gain on the contribution of the Network & Storage
Management Group business to New Veritas and one-time expenses related to in-
process research and development and compensation. The gain and the charges
related to in-process research and development as well as compensation will be
reflected in Seagate Software's financial statements when the Veritas
transaction and the TeleBackup purchase are consummated.
The Seagate Software Unaudited Pro Forma Condensed Financial Statements should
be read in conjunction with the related notes included in this document and the
audited financial statements including the notes thereto of Seagate Software
incorporated by reference in this document from Seagate Software's Annual
Report on Form 10-K for the year ended July 3, 1998 and the financial
statements and the notes thereto of the Network & Storage Management Group
business included in the Veritas proxy materials.
70
<PAGE>
Seagate Software Unaudited Pro Forma
Condensed Statement of Operations
Year Ended July 3, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------------
Less:
the Network Equity
& Storage Interest Purchase of
Seagate Management in Operations Minority
Software Group of New Veritas Interest Pro forma
-------- ----------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Licensing............. $243,285 $160,192 $ $ $ 83,093
Licensing from Seagate
Technology........... 5,469 5,048 421
Maintenance, support
and other............ 44,472 9,806 34,666
-------- -------- --------- ------- ---------
Total revenues...... 293,226 175,046 118,180
Cost of revenues:
Licensing............. 16,963 13,714 3,249
Licensing from Seagate
Technology........... 539 411 128
Maintenance, support
and other............ 19,687 2,067 17,620
Amortization of
developed
technologies......... 13,271 7,143 467 (6) 6,595
-------- -------- --------- ------- ---------
Total cost of
revenues........... 50,460 23,335 467 27,592
-------- -------- --------- ------- ---------
Gross profit............ 242,766 151,711 (467) 90,588
Operating expenses:
Sales and marketing... 129,343 68,314 61,029
Research and
development.......... 47,173 31,677 15,496
General and
administrative....... 37,124 22,254 14,870
In-process research
and development...... 6,800 6,800 --
Amortization of
goodwill and other
intangibles.......... 15,421 12,456 1,599 (6) 4,564
-------- -------- --------- ------- ---------
Total operating
expenses........... 235,861 141,501 1,599 95,959
-------- -------- --------- ------- ---------
Income (loss) from
operations............. 6,905 10,210 (2,066) (5,371)
Equity in income (loss)
of New Veritas, net of
amortization of
purchased intangibles.. -- -- 26,924 (1) (217,613)
(238,327)(2)
(6,210)(3)
Interest and other,
net.................... (10) (713) 703
-------- -------- --------- ------- ---------
Income before income
taxes.................. 6,895 9,497 (217,613) (2,066) (222,281)
Benefit from (provision
for) income taxes...... (15,385) (5,861) 84,561 (4) 286 (7) 77,807
2,484 (5)
-------- -------- --------- ------- ---------
Net income (loss)....... $ (8,490) $ 3,636 $(130,568) $(1,780) $(144,474)
======== ======== ========= ======= =========
Net income (loss) per
common share:*
Basic................. $ (51.59) $ (55.17)
Diluted............... $ (51.59) $ (55.17)
Number of shares used in
per share
computations:*
Basic................. 164,571 2,618,631
Diluted............... 164,571 2,618,631
</TABLE>
- --------
* The Network & Storage Management Group is an operating division of Seagate
Software and it has no formal capital structure; accordingly, share and per
share information is not presented.
See accompanying Notes to Seagate Software Unaudited Pro Forma
Condensed Financial Statements.
71
<PAGE>
Seagate Software Unaudited Pro Forma
Condensed Statement of Operations
Three Months Ended October 2, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------------------
Less:
the Network
& Storage Equity Interest Purchase of
Seagate Management in Operations Minority
Software Group business of New Veritas Interest Pro Forma
---------- -------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Licensing............. $ 58,671 $43,552 $ $ $ 15,119
Licensing from Seagate
Technology........... 2,156 2,027 129
Maintenance, support
and other............ 14,048 2,954 11,094
---------- ------- -------- ----- ---------
Total revenues...... 74,875 48,533 26,342
Cost of revenues:
Licensing............. 2,935 2,502 433
Licensing from Seagate
Technology........... 129 129 --
Maintenance, support
and other............ 6,430 935 5,495
Amortization of
developed
technologies......... 2,866 800 117 (6) 2,183
---------- ------- -------- ----- ---------
Total cost of
revenues........... 12,360 4,366 117 8,111
---------- ------- -------- ----- ---------
Gross profit............ 62,515 44,167 (117) 18,231
Operating expenses:
Sales and marketing... 36,007 18,960 17,047
Research and
development.......... 12,787 8,839 3,948
General and
administrative....... 8,940 5,422 3,518
Amortization of
goodwill and other
intangibles.......... 3,198 2,406 400 (6) 1,192
---------- ------- -------- ----- ---------
Total operating
expenses........... 60,932 35,627 400 25,705
---------- ------- -------- ----- ---------
Income (loss) from
operations............. 1,583 8,540 (517) (7,474)
Equity in income (loss)
of New Veritas, net of
amortization of
purchased intangibles.. -- -- 8,090 (1) (53,044)
(59,582)(2)
(1,552)(3)
Interest and other,
net.................... 312 (147) 459
---------- ------- -------- ----- ---------
Income before income
taxes.................. 1,895 8,393 (53,044) (517) (60,059)
Benefit from (provision
for) income taxes...... (1,043) (4,197) 20,597 (4) 72 (7) 24,444
621 (5)
---------- ------- -------- ----- ---------
Net income (loss)....... $ 852 $ 4,196 $(31,826) $(445) $ (35,615)
========== ======= ======== ===== =========
Net income (loss) per
common share:*
Basic................. $ 3.09 $ (13.60)
Diluted............... $ 0.01 $ (13.60)
Number of shares used in
per share
computations:*
Basic................. 275,314 2,618,631
Diluted............... 59,984,218 2,618,631
</TABLE>
- --------
* The Network & Storage Management Group business is an operating division of
Seagate Software and it has no formal capital structure; accordingly, share
and per share information is not presented.
See accompanying Notes to Seagate Software Unaudited Pro FormaCondensed
Financial Statements.
72
<PAGE>
Seagate Software Unaudited Pro Forma
Condensed Balance Sheets
As of October 2, 1998
(In thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------
Less:
the Network
& Storage Purchase of
Seagate Management Equity Interest Minority
Software Group in New Veritas Interest Pro Forma
--------- ----------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................. $ 10,418 $ 1,266 $ $ $ 9,152
Accounts receivable,
net.................. 44,416 17,465 26,951
Inventories........... 776 418 358
Loan receivable from
Seagate Technology
and affiliates....... -- 4,781 4,781 (8) --
Other current assets.. 4,386 2,108 4,906 (9) 7,184
--------- ------- ---------- ------- ----------
Total current assets.. 59,996 26,038 9,687 43,645
Equipment and
leasehold
improvements, net.... 15,257 11,732 3,525
Goodwill and other
intangibles, net..... 48,019 35,374 7,795 (14) 20,440
Equity investment in
New Veritas.......... -- -- 957,528 (10) 957,528
--------- ------- ---------- ------- ----------
Total assets........ $ 123,272 $73,144 $ 967,215 $ 7,795 $1,025,138
========= ======= ========== ======= ==========
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable to
Seagate Technology... $ 3,895 $ -- $ 4,781 (8) $ $ 8,676
Accounts payable...... 11,795 4,140 7,655
Accrued employee
compensation......... 14,100 9,019 5,081
Accrued expenses...... 17,080 9,102 7,978
Accrued income taxes.. 652 5,558 4,906 (9) --
Deferred revenue...... 14,208 4,363 -- 9,845
--------- ------- ---------- ------- ----------
Total current
liabilities........ 61,730 32,182 9,687 39,235
Deferred income
taxes................ 1,343 1,343 388,488 (10) 958 (14) 389,446
Other liabilities..... 284 247 -- 37
--------- ------- ---------- ------- ----------
Total liabilities... 63,357 33,772 398,175 958 428,718
--------- ------- ---------- ------- ----------
Common stock subject
to repurchase........ 3,899 -- (1,172)(15) 2,727
Stockholders' Equity:
Convertible preferred
stock................ 55 -- 55
Common stock.......... -- -- --
Additional paid-in 344,744 -- 58,709 (11) 7,795 (14) 412,420
capital.............. 1,172 (15)
Retained
Earnings/(Accumulated
deficit)............. (288,323) -- 1,042,056 (10) (958)(14) 181,678
(388,488)(10)
(123,900)(12)
(58,709)(11)
Group Equity.......... -- 39,372 39,372 (13) --
Foreign currency
translation
adjustment........... (460) -- (460)
--------- ------- ---------- ------- ----------
Total stockholders'
equity/Group
Equity............. 56,016 39,372 569,040 8,009 593,693
--------- ------- ---------- ------- ----------
Total liabilities
and stockholders'
equity/Group
Equity........... $ 123,272 $73,144 $ 967,215 $ 7,795 $1,025,138
========= ======= ========== ======= ==========
</TABLE>
See accompanying Notes to Seagate Software Unaudited Pro Forma Condensed
Financial Statements.
73
<PAGE>
NOTES TO SEAGATE SOFTWARE
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
1. Pro Forma Basis of Presentation
These pro forma statements reflect the contribution of the Network & Storage
Management Group division of Seagate Software to New Veritas in exchange for
the issuance of approximately 33,398,286 shares of New Veritas common stock
representing an approximate 41% interest in New Veritas on an outstanding share
basis (approximately 35% on a fully converted basis). The number of shares to
be received in the exchange is based on the capitalization of Seagate Software
and Veritas as of October 30, 1998 and the closing price of Veritas common
stock of $54.31 per share on November 6, 1998. The actual value will be
dependent on the average closing price per share of Veritas common stock on the
five days ending on the sixth business day prior to the closing date. In
addition, New Veritas will offer holders of options to purchase Seagate
Software common stock who become employees of New Veritas the opportunity to
surrender their options to purchase Seagate Software common stock and receive
options to purchase New Veritas common stock. These pro rata financial
statements assume that all eligible option holders will elect to exchange their
options for options of New Veritas. Accordingly, based on the exchange ratio
and 5,682,455 outstanding options held by employees of the Network & Storage
Management Group business as of October 30, 1998, New Veritas would issue
options to purchase 4,033,252 shares of New Veritas stock to employees of the
Network & Storage Management Group business.
Because Seagate Software will own approximately 41% of New Veritas, including
the Network & Storage Management Group business after the exchange, it will not
recognize a gain on 100% of the contribution of the Network & Storage
Management Group business. Seagate Software will record a gain on the exchange
equivalent to the difference between 59% of the fair value of the New Veritas
stock received and 59% of Seagate Software's basis in the assets exchanged.
Seagate Software will account for its investment in New Veritas using the
equity method. Seagate Software will allocate the difference between the
recorded amount of its investment in New Veritas and the amount of its
underlying equity in the net assets of New Veritas based upon the fair value of
the underlying assets and liabilities of New Veritas (see Note 2). Subsequent
to the Veritas transaction, Seagate Software's operating results will include
approximately 41% of the operating results of New Veritas, adjusted to amortize
the difference between the recorded amount of Seagate Software's investment and
the amount of its underlying equity in the net assets of New Veritas.
New Veritas plans to complete a transaction to purchase TeleBackup immediately
subsequent to the combination with the Network & Storage Management Group
business. The Seagate Software Unaudited Pro Forma Statements include the
impact of the TeleBackup purchase by New Veritas and the issuance of 1,555,000
shares of New Veritas determined as of October 30, 1998 using the closing price
of Veritas common stock of $54.31 on November 6, 1998. The actual value of the
TeleBackup purchase will be determined based on the average closing price per
share of Veritas common stock for a few days before and after the closing date.
Under the terms of the TeleBackup arrangement, the number of shares to be
issued will increase up to 1,710,000 shares depending on the average price per
share of Veritas and/or New Veritas, as the use maybe, common stock for a ten
day period ending two days before the closing date. In addition, TeleBackup's
outstanding options at the closing
74
<PAGE>
NOTES TO SEAGATE SOFTWARE
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
date will be exchanged for options to purchase New Veritas shares. As of
October 30, 1998, options to purchase 620,000 shares of New Veritas common
stock would be exchanged for the outstanding options to purchase TeleBackup
common stock.
In addition to the inclusion of the transactions described for New Veritas,
Seagate Technology will offer to purchase all outstanding shares of Seagate
Software common stock not held by Seagate Software or one of its subsidiaries
in exchange for shares of Seagate Technology common stock. The exchange ratio
will be determined based on the estimated fair value of Seagate Software shares
divided by the fair market value of Seagate Technology common stock. The
estimated fair value of the Seagate Software shares will be determined based
upon the sum of the fair value of the Network & Storage Management Group
business (as measured by the fair value of the shares to be received from New
Veritas) plus the estimated fair value for the Information Management Group as
determined by the Seagate Software Board of Directors plus the assumed proceeds
from the exercise of all stock options, divided by the number of fully
converted shares of Seagate Software. The fair value of shares purchased less
the original price paid by the employees will be recorded as compensation
expense for those shares outstanding or vested less than six months. The
purchase of shares that have been outstanding and vested more than six months
will be accounted by Seagate Software as a purchase of minority interest and,
accordingly, in these pro forma financial statements the fair value of the
shares exchanged has been allocated to all of the identifiable tangible and
intangible assets, including in-process research and development and goodwill,
and liabilities of Seagate Software. The amounts allocated to in-process
research and development will be expensed in the period in which the shares are
exchanged.
The Seagate Software Unaudited Pro Forma Statements have been prepared based on
assumptions relating to the fair value of the assets and liabilities of New
Veritas, TeleBackup and Seagate Software. The allocations are based on
preliminary information and the actual amounts may differ from those reflected
in the Seagate Software Unaudited Pro Forma Statements after completion of
valuations and other procedures. Below is a table of the computation of gain,
asset and liability allocation and annual amortization of the intangible assets
received (dollars in thousands):
New Veritas
<TABLE>
<S> <C>
Computation of gain
Fair value of shares received.................................. $1,813,944
Less: Book value of the Network & Storage Management Group
business...................................................... 39,372
----------
Unadjusted gain................................................ 1,774,572
Times: Pro rata adjustment..................................... 58.72%
----------
Pro rata gain.................................................. $1,042,056
==========
Deferred tax liability on pro rata gain........................ $ 388,488
==========
Computation of Investment in New Veritas
Historical basis in the Network & Storage Management Group
business...................................................... $ 39,372
Add: Pro rata gain............................................. 1,042,056
----------
Investment in New Veritas...................................... $1,081,428
==========
</TABLE>
75
<PAGE>
NOTES TO SEAGATE SOFTWARE
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Annual
Amortization Amortization of
Amount Life Intangibles
---------- ------------ ---------------
<S> <C> <C> <C>
Allocation of Investment in New
Veritas:
Tangible assets................... $ 73,055
Intangible assets:
Distribution channel............ 123,900 4 years $ 30,975
Developed technology............ 206,500 2 to 4 years 68,833
Trademark and workforce......... 22,715 4 years 5,679
In-process research and
development.................... 123,900
Goodwill........................ 531,358 4 years 132,840
----------
Fair value portion of
investment in New Veritas.... $1,081,428
==========
</TABLE>
Acquisition of Minority Interests of Seagate Software
<TABLE>
<CAPTION>
Annual
Amortization Amortization of
Amount Life Intangibles
------- ------------ ---------------
<S> <C> <C> <C>
Compensation expense resulting from
the exchange of stock outstanding and
vested less than 6 months............ $58,709
Allocation of minority interest
purchase price Intangible assets:
Distribution channel................ $ 840 4 years $ 210
Developed technology................ 1,400 2 to 4 years 467
Trademarks and workforce............ 154 4 years 39
In-process research and
development........................ 958
Goodwill............................ 5,401 4 years 1,350
Deferred tax liability.............. (958)
-------
Total............................. $ 7,795
=======
Value of minority interests
Shares of Seagate Software held for
more than 6 months.................. 202,223
Market value of Seagate Software
common stock........................ $ 38.55
-------
Minority interest purchase price..... $ 7,795
Market value of Seagate Technology
common stock........................ $ 28.69
Number of Seagate Technology shares
issued for minority interests....... 271,745
</TABLE>
76
<PAGE>
NOTES TO SEAGATE SOFTWARE
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
TeleBackup
<TABLE>
<CAPTION>
Annual
Amortization Amortization of
Amount Life Intangibles
-------- ------------ ---------------
<S> <C> <C> <C>
Estimated acquisition cost
Estimated purchase price.......... $ 84,456
Acquisition costs................. 3,949
--------
Total estimated acquisition
cost........................... $ 88,405
========
Purchase price allocation
Tangible net assets acquired...... $ 3,725
Intangible assets acquired:
Distribution channel/OEM
agreements..................... 48,000 4 years $12,000
Developed technology............ 6,800 4 years 1,700
Trademark/assembled workforce... 3,030 4 years 757
In-process research and
development.................... 3,000
Goodwill........................ 44,390 4 years 11,098
Deferred tax liabilities........ (20,540)
--------
Total......................... $ 88,405
========
</TABLE>
Tangible net assets of New Veritas principally include cash and investments,
accounts receivable, fixed assets and other current assets. Liabilities
principally include accounts payable, accrued compensation, and other accrued
liabilities.
The tangible net assets of TeleBackup acquired principally include cash and
fixed assets. Liabilities assumed principally include convertible debentures
and other non-current liabilities.
To determine the value of the developed technology, the expected future cash
flows attributable to all existing technology was discounted, taking into
account risks related to the characteristics and applications of the
technology, existing and future markets, and assessments of the life cycle
stage of the technology. The analysis resulted in a valuation for developed
technology which had reached technological feasibility and therefore was
capitalizable. The developed technology is being amortized on the straight-line
basis over its estimated useful life (two to four years) which is expected to
exceed the ratio of current revenues to the total of current and anticipated
revenues.
The value of the distribution networks and OEM agreements was determined by
considering, among other factors, the size of the current and potential future
customer bases, the quality of existing relationships with customers, the
historical costs to develop customer relationships, the expected income and
associated risks. Associated risks included the inherent difficulties and
uncertainties in transitioning business relationships and risks related to the
viability of and potential changes to future target markets.
The value of trademarks was determined by considering, among other factors, the
assumption that in lieu of ownership of a trademark, a company would be willing
to pay a royalty in order to exploit the related benefits of such trademark.
77
<PAGE>
NOTES TO SEAGATE SOFTWARE
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
The value of the assembled workforce was derived by estimating the costs to
replace the existing employees, including recruiting, hiring, and training
costs for each category of employee.
The value allocated to projects identified as in-process technology at New
Veritas, TeleBackup and Seagate Software (for the minority interest acquired)
will be charged to expense in the period the transactions close. These write-
offs are necessary because the acquired technologies have not yet reached
technological feasibility and have no future alternative uses. Seagate Software
expects that the acquired in-process research and development will be
successfully developed, but there can be no assurance that commercial viability
of these products will be achieved.
The nature of the efforts required to develop the purchased in-process
technology into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements.
The value of the purchased in-process technology for New Veritas and TeleBackup
was determined by estimating the projected net cash flows related to such
products, including costs to complete the development of the technology and the
future revenues to be earned upon commercialization of the products. These cash
flows were then discounted back to their net present value. The projected net
cash flows from such projects were based on management's estimates of revenues
and operating profits related to such projects.
Goodwill is determined based on the residual difference between the amount paid
and the values assigned to identified tangible and intangible assets.
2. Pro Forma Net Loss per Share
The Seagate Software Unaudited Pro Forma Condensed Statements of Operations
have been prepared as if the Veritas transaction, the TeleBackup purchase, and
the purchase of shares of Seagate Software common stock by Seagate Technology
had occurred at the beginning of the periods presented.
The pro forma weighted average shares outstanding assumes the following:
<TABLE>
<S> <C>
Estimated exercises of Seagate Software stock options
prior to the closing date that will be purchased by
Seagate Technology............................................ 1,833,079
Outstanding shares held by current employees estimated to
be purchased by Seagate Technology............................ 467,000
Outstanding shares held by former employees all purchased
by Seagate Technology......................................... 256,052
Outstanding shares currently held by Seagate Technology........ 62,500
---------
Total common shares outstanding.............................. 2,618,631
=========
</TABLE>
78
<PAGE>
NOTES TO SEAGATE SOFTWARE
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
3. Pro Forma Adjustments
The Seagate Software Unaudited Pro Forma Statements give effect to the
following pro forma adjustments:
(1) Equity in income of New Veritas computed at approximately 41% based on
estimated outstanding shares of New Veritas owned by Seagate Software prior
to the effect of the amortization of intangible assets, including goodwill,
associated with the Network & Storage Management Group combination and
TeleBackup purchase.
(2) To reflect the amortization of intangibles and goodwill related to the
Veritas transaction.
(3) To reflect the impact on Seagate Software's equity in the amortization
of intangibles and goodwill related to the TeleBackup purchase by New
Veritas.
(4) To reflect the change in book/tax basis differences related to the
investment in New Veritas.
(5) To reflect the provision of income taxes for Seagate Software's equity
in the amortization of intangibles and goodwill related to the TeleBackup
purchase.
(6) To reflect the amortization of developed technology and intangibles and
goodwill associated with the purchase of Seagate Software shares by Seagate
Technology. The purchase of the minority interest by Seagate Technology is
recorded using fair values and is reflected as a capital contribution to
Seagate Software by Seagate Technology and offsetting compensation expense
or purchased in-process research and development and intangibles recorded
by Seagate Software.
(7) To reflect the reduction of deferred taxes associated with intangible
assets related to the acquisition of Seagate Software shares by Seagate
Technology.
(8) To reclassify a loan receivable from Seagate Technology and affiliates
to a loan payable to Seagate Technology and affiliates.
(9) To reclassify the debit balance in accrued income taxes payable to
other current assets.
(10) To reflect investment in New Veritas including step-up in basis of
assets and related deferred tax liability.
(11) Contributed capital and compensation expense related to the purchase
of Seagate Software common stock in exchange for Seagate Technology common
stock.
(12) Write-off of in-process research and development related to the
Veritas transation.
(13) To eliminate group equity from the Network & Storage Management Group
business.
(14) To record purchased in-process research and development, intangibles
and goodwill, deferred taxes and a capital contribution associated with the
purchase of Seagate Software common stock by Seagate Technology.
(15) To record the purchase of Seagate Software common stock by Seagate
Technology.
79
<PAGE>
NOTES TO SEAGATE SOFTWARE
UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS--(Continued)
4. Effect of TeleBackup on Pro Forma Condensed Financial Statements
If the proposed business combination between Veritas and TeleBackup is not
consummated, the future operating results and financial position of Seagate
Technology will include only the equity in the combined operating results of
New Veritas and the Network & Storage Management Group business. By excluding
TeleBackup from the Seagate Software's pro forma results, pro forma net loss
and net loss per share for fiscal 1998 would be reduced by approximately $3.7
million and $1.42 per share, respectively. Seagate Software's pro forma net
loss and net loss per share for the three months ended October 2, 1998 would be
reduced by approximately $900,000 and $0.35 per share, respectively. Seagate
Software's Pro forma net revenues, total assets, and stockholders' equity would
remain unchanged.
80
<PAGE>
LEGAL MATTERS
The validity of the Seagate Technology common stock to be issued in connection
with the exchange offer will be passed upon by Wilson Sonsini Goodrich &
Rosati, Professional Corporation.
EXPERTS
The consolidated financial statements of Seagate Technology, Inc. incorporated
by reference in Seagate Technology, Inc.'s Annual Report (Form 10-K) for the
year ended July 3, 1998, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
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 of Seagate Software, Inc. appearing in
Seagate Software, Inc.'s Annual Report (Form 10-K) for the year ended July 3,
1998 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.
81
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's board of directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Registrant's Certificate of Incorporation and Bylaws provide for
indemnification of the Registrant's directors, officers, employees and other
agents to the maximum extent permitted by the Delaware Law. In addition, the
Registrant has entered into indemnification agreements with its officers and
directors.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits. The following exhibits are filed as part of this Registration
Statement.
<TABLE>
<CAPTION>
Notes:
------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization dated as of October 5,
1998 by and among Veritas Holding Corporation, Veritas
Software Corporation, the Registrant, Seagate Software, Inc.
and Seagate Software Network & Storage Management Group,
Inc........................................................... (A)
3.1 Certificate of Incorporation of Registrant, as amended........ (B)
3.2 By-Laws of Registrant, as amended............................. (C)
4.1 Indenture, dated as of March 1, 1997 between Seagate
Technology, Inc. and First Trust of California, National
Association, as Trustee....................................... (D)
4.2 Officers' Certificate pursuant to Section 301 of the
Indenture, without exhibits, establishing the terms of Seagate
Software's senior notes and senior debentures................. (D)
4.3 Form of Senior Note........................................... (D)
4.4 Form of Senior Debenture...................................... (D)
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation................................................... **
8.1 Form of opinion regarding U.S. federal tax matters............ *
8.2 Form of opinion regarding Canadian tax matters................ *
8.3 Form of opinion regarding U.K. tax matters.................... *
8.4 Form of opinion regarding tax consequences to optionees....... *
10.1 1983 Incentive Stock Option Plan and form of Stock Option
Agreement..................................................... (E)
10.2 Seagate Technology Employee Stock Purchase Plan, as amended... (J)
10.3 Registrant's Executive Stock Plan............................. (H)
10.4 Conner Peripherals, Inc. 1986 Incentive Stock Plan............ (H)
10.5 Building Agreement for Land at Private Lot A14547 in Yio Chu
Kang dated May 30, 1996 between Seagate Technology
International and Jurong Town Corporation..................... (J)
10.6 Lease Agreement dated July 18, 1994 between Universal
Appliances Limited and Seagate Technology (Thailand) Limited.. (J)
10.7 1991 Incentive Stock Option Plan and Form of Option Agreement,
as amended.................................................... (J)
10.8 Acquisition Agreement dated as of September 29, 1989 by and
among the Registrant, Control Data Corporation, Imprimus
Technology Incorporated and Magnetic Peripherals, Inc......... (F)
10.9 Amended and Restated Directors' Option Plan and Form of Option
Agreement..................................................... (G)
10.10 Amended and Restated Archive Corporation Stock Option and
Restricted Stock Purchase Plan--1981.......................... (H)
10.11 Amended and Restated Archive Corporation Incentive Stock
Option Plan--1981............................................. (H)
10.12 Conner Peripherals, Inc.--Arcada Holdings, Inc. Stock Option
Plan.......................................................... (I)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Notes:
------
<C> <S> <C>
10.13 Arcada Holdings, Inc. 1994 Stock Option Plan............... (I)
10.14 Separation Agreement and Release between the Registrant and
Alan F. Shugart dated as of July 29, 1998.................. (J)
10.15**+ Development and License Agreement dated as of October 5,
1998 by and among Seagate Technology, Inc., Veritas Holding
Corporation and Veritas Software Corporation...............
10.16**+ Cross License and OEM Agreement dated as of October 5, 1998
by and among Seagate Software Information Management Group,
Inc., Veritas Holding Corporation and Veritas Software
Corporation................................................
21.1 Subsidiaries of the Registrant............................. (J)
23.1 Consent of Ernst & Young LLP, Independent Auditors......... *
23.2 Consent of Ernst & Young LLP, Independent Auditors......... *
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)......................
23.4 Consent of Ernst & Young LLP (included in Exhibit 8.1)..... *
23.5 Consent of Ernst & Young LLP (included in Exhibit 8.2)..... *
23.6 Consent of Ernst & Young International (included in Exhibit
8.3)....................................................... *
23.7 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 8.4)...................... *
24.1 Power of Attorney (included on page II-6)..................
27.1 Financial Data Schedule.................................... (J)
</TABLE>
- --------
(A) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of Seagate Software's Current Report on Form 8-K dated October
5, 1998.
(B) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of Seagate Software's Registration Statement on Form S-3 (File
No. 33-13430) filed with the Securities and Exchange Commission on April
14, 1987.
(C) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of Seagate Software's Form 10-K, as amended, for the fiscal
year ended June 30, 1990.
(D) Incorporated by reference to exhibits filed in response to Item 7(b),
"Financial Statements and Exhibits" of Seagate Software's Current Report on
Form 8-K dated March 4, 1997.
(E) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of Seagate Software's Form 10-K for the fiscal year ended June
30, 1983.
(F) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of Seagate Software's Current Report on Form 8-K dated October
2, 1989.
(G) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of Seagate Software's Form 10-K for the fiscal year ended June
30, 1991.
(H) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-00697) as filed with the
Commission on February 5, 1996.
(I) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-01059) as filed with the
Commission on February 21, 1996.
(J) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form 10-K for the fiscal year ended July 3, 1998 as filed with
the Commission on August 20, 1998.
* Filed herewith.
** To be filed by amendment.
+ Certain information in these exhibits will be omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.46.
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or notes
thereto.
II-2
<PAGE>
Item 22. Undertakings
(a) the undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (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 or any material change to such
information in the Registration Statement set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective 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 form registration by means of post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes 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, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) 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.
(c) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the 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 forms.
(d) The registrant undertakes that every prospectus: (i) that is filed pursuant
to paragraph (c) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(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
II-3
<PAGE>
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
bonafide offering thereof.
(e) 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 foregoing provisions, and 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 of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day after 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 the Registration Statement through
the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and Seagate
Software being acquired involved therein, that was not the subject of and
included in the Registration Statement when it becomes effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to the 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 1st day of February
1999.
Seagate Technology, Inc.
/s/ Stephen J. Luczo
By: _________________________________
Stephen J. Luczo
Chief Executive Officer,
President,and a Director
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 1st day of February 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Stephen J. Luczo Chief Executive
- ------------------------------------- Officer, President,
Stephen J. Luczo and a Director
(Principal
Executive Officer)
/s/ Charles C. Pope Senior Vice
- ------------------------------------- President and Chief
Charles C. Pope Financial Officer
(Principal
Financial and
Accounting Officer)
* Co-Chairman of the
- ------------------------------------- Board
Gary B. Filler
* Co-Chairman of the
- ------------------------------------- Board
Lawrence Perlman
* Director
- -------------------------------------
Kenneth Haughton
* Director
- -------------------------------------
Robert A. Kleist
* Director
- -------------------------------------
Thomas P. Stafford
* Director
- -------------------------------------
Laurel L. Wilkening
*By: /s/ Charles C. Pope
________________________________
Charles C. Pope
Attorney-in-fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Document Description Notes:
------- -------------------- ------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization dated as of October 5, (A)
1998 by and among Veritas Holding Corporation, Veritas
Software Corporation, the Registrant, Seagate Software,
Inc. and Seagate Software Network & Storage Management
Group, Inc.
3.1 Certificate of Incorporation of Registrant, as amended. (B)
3.2 By-Laws of Registrant, as amended. (C)
4.1 Indenture, dated as of March 1, 1997 between Seagate (D)
Technology, Inc. and First Trust of California, National
Association, as Trustee.
4.2 Officers' Certificate pursuant to Section 301 of the (D)
Indenture, without exhibits, establishing the terms of
Seagate Software's senior notes and senior debentures.
4.3 Form of Senior Note. (D)
4.4 Form of Senior Debenture. (D)
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, PC. **
8.1 Form of opinion regarding U.S. federal tax matters. *
8.2 Form of opinion regarding Canadian tax matters *
8.3 Form of opinion regarding U.K. tax matters *
8.4 Form of opinion regarding tax consequences to optionees *
10.1 1983 Incentive Stock Option Plan and form of Stock Option (E)
Agreement.
10.2 Seagate Technology Employee Stock Purchase Plan, as amended. (J)
10.3 Registrant's Executive Stock Plan. (H)
10.4 Conner Peripherals, Inc. 1986 Incentive Stock Plan. (H)
10.5 Building Agreement for Land at Private Lot A14547 in Yio Chu (J)
Kang dated May 30, 1996 between Seagate Technology
International and Jurong Town Corporation.
10.6 Lease Agreement dated July 18, 1994 between Universal (J)
Appliances Limited and Seagate Technology (Thailand)
Limited.
10.7 1991 Incentive Stock Option Plan and Form of Option (J)
Agreement, as amended.
10.8 Acquisition Agreement dated as of September 29, 1989 by and (F)
among the Registrant, Control Data Corporation, Imprimus
Technology Incorporated and Magnetic Peripherals, Inc.
10.9 Amended and Restated Directors' Option Plan and Form of (G)
Option Agreement.
10.10 Amended and Restated Archive Corporation Stock Option and (H)
Restricted Stock Purchase Plan--1981.
10.11 Amended and Restated Archive Corporation Incentive Stock (H)
Option Plan--1981.
10.12 Conner Peripherals, Inc.--Arcada Holdings, Inc. Stock Option (I)
Plan.
10.13 Arcada Holdings, Inc. 1994 Stock Option Plan. (I)
10.14 Separation Agreement and Release between the Registrant and (J)
Alan F. Shugart dated as of July 29, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document Description Notes:
------- -------------------- ------
<C> <S> <C>
10.15**+ Development and License Agreement dated as of October 5,
1998 by and among Seagate Technology, Inc., Veritas Holding
Corporation and Veritas Software Corporation.
10.16**+ Cross-License and OEM Agreement dated as of October 5, 1998
by and among Seagate Software Information Management Group,
Inc., Veritas Holding Corporation and Veritas Software
Corporation.
21.1 Subsidiaries of the Registrant. (J)
23.1 Consent of Ernst & Young LLP, Independent Auditors *
23.2 Consent of Ernst & Young LLP, Independent Auditors *
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
23.4 Consent of Ernst & Young, LLP (included in Exhibit 8.1) *
23.5 Consent of Ernst & Young, LLP (included in Exhibit 8.2) *
23.6 Consent of Ernst & Young International (included in Exhibit *
8.3)
23.7 Consent of Wilson Sonsini Goodrich & Rosati; Professional *
Corporation (included in Exhibit 8.4)
24.1 Power of Attorney (included on page II-6).
27.1 Financial Data Schedule. (J)
</TABLE>
- --------
(A) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of Seagate Software's Current Report on Form 8-K dated October
5, 1998.
(B) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of Seagate Software's Registration Statement on Form S-3 (File
No. 33-13430) filed with the Securities and Exchange Commission on April
14, 1987.
(C) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of Seagate Software's Form 10-K, as amended, for the fiscal
year ended June 30, 1990.
(D) Incorporated by reference to exhibits filed in response to Item 7(b),
"Financial Statements and Exhibits" of Seagate Software's Current Report on
Form 8-K dated March 4, 1997.
(E) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of Seagate Software's Form 10-K for the fiscal year ended June
30, 1983.
(F) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of Seagate Software's Current Report on Form 8-K dated October
2, 1989.
(G) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of Seagate Software's Form 10-K for the fiscal year ended June
30, 1991.
(H) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-00697) as filed with the
Commission on February 5, 1996.
(I) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-01059) as filed with the
Commission on February 21, 1996.
(J) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form 10-K for the fiscal year ended July 3, 1998 as filed with
the Commission on August 20, 1998.
* Filed herewith.
** To be filed by amendment.
+ Certain information in these exhibits will be omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.46.
2
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF ERNST & YOUNG LLP]
January 28, 1999
Board of Directors
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
Board of Directors
Seagate Software, Inc.
915 Disc Drive
Scotts Valley, California 95066
Re: Exchange of Seagate Technology, Inc. shares for
Seagate Software, Inc. shares
Ladies and Gentlemen:
We have acted as tax advisors to Seagate Technology, Inc., a Delaware
corporation, ("Seagate Technology") in connection with its proposed acquisition
of the common shares of Seagate Software, Inc., a Delaware Corporation and a
majority-owned subsidiary of Seagate Technology, ("Seagate Software") in
exchange for common shares of Seagate Technology (the "Reorganization"). The
proposed exchange of Seagate Technology shares for Seagate Software shares will
occur pursuant to the terms of the "Exchange Offer" contained in the Seagate
Technology Registration Statement on Form S-4 (the "Registration Statement")
filed in connection with this transaction, and approved by the Board of
Directors of Seagate Technology on October 29, 1998, as evidenced by the minutes
thereof (the Exchange Offer and board minutes will jointly be referred to
hereafter as the "Plan of Reorganization"). The Reorganization and certain
proposed transactions incident thereto are described in the Registration
Statement which includes the Offering Circular/Prospectus of Seagate Technology
(the "Offering Circular/Prospectus"). This opinion is being rendered pursuant to
the requirements of Item 21(a) of Form S-4 under the Securities Act of 1933, as
amended. Unless otherwise indicated, any capitalized terms used herein and not
otherwise defined have the meaning ascribed to them in the Offering
Circular/Prospectus.
In connection with this opinion, we have examined and are familiar with the
Plan of Reorganization, the Registration Statement, and such other presently
existing documents, records and matters of law as we have deemed necessary or
appropriate for purposes of our opinion. In
<PAGE>
[LOGO OF ERNST & YOUNG LLP]
addition, we have assumed (i) that the Reorganization will be consummated in the
manner contemplated by the Offering Circular/Prospectus and in accordance with
the provisions of the Plan of Reorganization, (ii) the truth and accuracy of the
representations and warranties made by Seagate Technology and Seagate Software
in the Plan of Reorganization, and (iii) the truth and accuracy of the
certificates of representations to be provided to us by Seagate Technology and
Seagate Software.
Based upon and subject to the foregoing, the discussion contained in the
Registration Statement under the caption "Material U.S. Federal Income Tax
Considerations," subject to the limitations and qualifications described
therein, expresses our opinion as to the material U.S. Federal income tax
consequences if the Reorganization is effected in accordance with the terms of
the Plan of Reorganization. Because this opinion is being delivered prior to the
Effective Time of the Reorganization, it must be considered prospective and
dependent on future events. There can be no assurance that changes in the law
will not take place which could affect the U.S. Federal income tax consequences
of the Reorganization or that contrary positions may not be taken by the
Internal Revenue Service.
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement. We also consent to the reference to our
firm name wherever appearing in the Registration Statement with respect to the
discussion of the material U.S. Federal income tax consequences of the
Reorganization, including the Offering Circular/Prospectus constituting a part
thereof, and any amendment thereto. In giving this consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, nor do we
thereby 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,
/s/ Ernst & Young LLP
<PAGE>
EXHIBIT 8.2
December 9, 1998
private and confidential
Board of Directors
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
Board of Directors
Seagate Software, Inc.
915 Disc Drive
Scotts Valley, California 95066
Ladies and Gentlemen:
Re: Exchange of Seagate Technology, Inc. shares for Seagate Software, Inc.
shares
We have acted as tax advisors to Seagate Technology, Inc. ("Seagate
Technology"), Seagate Software, Inc. ("Seagate Software") and Seagate Software
Information Management Group Inc. ("SSIMG") in connection with the Canadian
income taxation aspects of the share exchange transaction outlined below.
Scope of our opinion
We have been asked to give an opinion on the material Canadian income tax
consequences for the exchange (the "Exchange") of vested and non-vested shares
in Seagate Software for vested and non-vested shares in Seagate Technology, Inc.
("Seagate Technology"), a Delaware corporation. Our opinion also covers the
material Canadian income tax consequences of an employee of SSIMG exercising
vested Seagate Software stock options in order to participate in the Exchange.
The Exchange will occur pursuant to the terms of the "Exchange Offer" contained
in the Seagate Technology Registration Statement on Form S-4 (the "Registration
Statement") to be filed in connection with this transaction, and approved by the
Board of Directors of Seagate Technology on October 29, 1998, as evidenced by
the minutes thereof (the Exchange Offer and board minutes will jointly be
referred to hereafter as the "Plan of Reorganization").
<PAGE>
-2-
Opinion
Based upon and subject to the foregoing, the discussions (which are reproduced
below) contained in the Registration Statement under the caption "Material
Canadian Income Tax Consequences of Exchange of Shares" and in the "Canadian
Consequences" section under the caption "Material Tax Consequences to
Optionees", subject to the limitations and qualifications described therein,
express our opinion as to the material Canadian income tax consequences of the
exchange pursuant to the Exchange Offer effected in accordance with the terms of
the Plan of Reorganization. Because this opinion is being delivered prior to the
Effective Time of the exchange pursuant to the Exchange Offer, it must be
considered prospective and dependent on future events. There can be no assurance
that changes in the law will not take place which could affect the Canadian
income tax consequences of the exchange pursuant to the Exchange Offer or that
contrary positions may not be taken by Revenue Canada and the applicable
Canadian provincial taxing authorities.
In addition, our opinion is subject to the limitations and qualifications
expressed under the heading of "Material Income Tax Considerations of Exchange
of Shares" and under the heading of "Material Tax Consequences to Optionees".
Material Canadian Income Tax Consequences of Exchange of Shares
The following discussion addresses the material Canadian income tax
considerations that are generally applicable to Canadian resident holders
of Seagate Software common stock exchanging their Seagate Software common
stock for Seagate Technology common stock. Stockholders of Seagate Software
should be aware that the following discussion does not deal with all
Canadian income tax considerations that may be relevant to particular
Seagate Software stockholders in light of their particular circumstances.
The following discussion is based on the Canadian income tax laws as of the
date hereof. Revenue Canada or an applicable Canadian provincial taxing
authority is not precluded from adopting a contrary position. In addition,
there is no assurance that future legislative, judicial or administrative
changes or interpretations will not affect the accuracy of the statements
and conclusions set forth herein. Any such changes or interpretations could
be applied retroactively and could affect the tax consequences of the
exchange pursuant to the Exchange Offer to stockholders of Seagate Software
participating in the Exchange Offer.
The exchange pursuant to the Exchange Offer will be a taxable transaction
for a Seagate Software stockholder resident in Canada. Any Canadian
resident holder of shares of Seagate Software common stock would be
considered to have disposed of the holder's shares of Seagate Software
common stock for proceeds (expressed in Canadian dollars)
<PAGE>
-3-
determined at the time of the exchange pursuant to the Exchange Offer equal to
the fair market value of the shares of Seagate Technology common stock received.
A gain or loss (being the difference expressed in Canadian dollars between the
proceeds and the tax basis of the shares of Seagate Software common stock
exchanged) may be realized on this disposition. Generally, where the Seagate
Software common stock exchanged are held as investment property and were
obtained by virtue of employment and the holder does not deal with shares and
other securities in a manner similar to a trader or dealer of securities, the
Seagate Software common stock exchanged would be considered capital property. In
such a case, only three-quarter of the capital gain on the disposition of such
shares would be taxable capital gain subject to income tax.
The tax basis of the shares of Seagate Technology common stock received on the
exchange pursuant to the Exchange Offer will be equal to the fair market value
(expressed in Canadian dollars) of those shares determined at the time of the
exchange pursuant to the Exchange Offer. The tax basis of each share of Seagate
Technology common stock owned by the holder after the exchange pursuant to the
Exchange Offer is equal to the total tax basis of all shares of Seagate
Technology common stock (including those that are not obtained from the exchange
pursuant to the Exchange Offer) owned by the holder divided by the total number
of such shares owned.
Material Tax Consequences to Optionees
Canadian Consequences. A Canadian resident employee of Seagate Software or its
Canadian subsidiary (the "Canadian Employer") who by virtue of his or her
employment with the Canadian Employer obtained a stock option to acquire Seagate
Software common stock and who exercises such vested option is generally required
to include in his or her employment income the fair market value of the Seagate
Software common stock so acquired (determined at the time of exercise) less the
actual amount paid or to be paid by the employee to acquire those shares. As a
result of the exercise, the tax basis of the shares so acquired is adjusted to
equal the fair market value of the shares at the time of the exercise. Where the
employee also owns other Seagate Software common stock, the tax basis per share
of the Seagate Software common stock is calculated as the total tax basis of all
shares of Seagate Software common stock owned by the employee divided by the
total number of such shares owned.
Where an employee includes in his or her employment income a benefit from
exercising a stock option, as discussed above, an offsetting deduction equal to
25% of the benefit may be available in computing his or her taxable income for
the year of the exercise provided certain conditions are met. A Canadian
resident employee of the Canadian Employer who exercises a stock option
<PAGE>
-4-
(obtained because of his or her employment with the Canadian Employer)
to acquire Seagate Software common stock should be entitled to this
deduction.
Income tax and Canada Pension Plan premiums or Quebec Pension Plan
premiums will be payable on this employment benefit arising from the
exercise of the stock option. The Canadian Employer will generally
withhold from the employee's future pay checks the amounts of income
tax and Canada Pension Plan premiums or Quebec Pension Plan premiums
arising from this benefit and remit them to Revenue Canada and, if
appropriate, Revenu Quebec. Relief from such source withholding may be
available where hardship to the employee would result.
The opinion has been delivered to you for the purposes of being included in
documents to be filed with the United States Securities and Exchange Commission.
We hereby consent to the filing of this opinion as such an exhibit. We also
consent to the reference to our firm name wherever appearing in the Registration
Statement with respect to the discussion of the material Canadian income tax
consequences of the Reorganization, including the Offering Circular/Prospectus
constituting a part thereof, and any amendment thereto. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder, nor do we
thereby 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.
Yours sincerely,
Ernst & Young LLP
<PAGE>
EXHIBIT 8.3
[LETTERHEAD OF ERNST & YOUNG APPEARS HERE]
Seagate Technology, Inc. 18 November 1998
920 Disc Drive
Scotts Valley 4/BSM/AHM/SJL
California 95066-4544
USA
Dear Sir
We have acted as tax advisors to Seagate Technology, Inc., Seagate Software,
Inc., and Seagate Software Information Management Group Limited (IMG), and
Seagate Software Limited (NSMG), wholly owned subsidiaries of Seagate
Software, Inc. (SSI), a majority owned subsidiary of Seagate Technology, Inc.
(STI), a Delaware corporation, in connection with the United Kingdom taxation
aspects of proposed transactions relating to the share exchange transactions
outlined below.
SCOPE OF OUR OPINION
We have been asked to give an opinion on the United Kingdom taxation
consequences for employees, former employees and individual consultants to IMG
and NSMG of the exercise of vested options in SSI and the exchange of vested
and non vested shares in SSI for vested and non vested shares in STI.
OPINION
Based on our examination of the information provided by the Company, we are of
the opinion that if the transactions outlined above proceed:
Where the exercised options were obtained by reason of the relevant
individual's employment, the individual will be liable to UK income tax
on the benefit received on exercise. For these purposes, the benefit
received will be an amount equal to the excess of the market value (on
the date on which the option is exercised) of the shares acquired as a
consequence of exercising the option over the aggregate of the price
paid (if any) for the grant of the option and the exercise price. The
amount so taxed will then be regarded as the purchase price (base cost)
of the shares for UK capital gains tax purposes. On the subsequent
disposal of the shares, any gain (excess of sale proceeds over base
cost) realised on the disposal will be subject to UK capital gains tax.
<PAGE>
[ERNST & YOUNG LOGO APPEARS HERE] 18 November 1998
2
Where the exercised options were not obtained by reason of the
relevant individual's employment, no UK tax liability will arise on
the exercise of the option. For the purposes of UK capital gains tax,
the base cost of the shares acquired on the exercise of the options
will be the aggregate of the price paid (if any) for the grant of the
option and the exercise price. On the subsequent disposal of the
shares, any gain (excess of sale proceeds over base cost) realised on
the disposal will be subject to UK capital gains tax.
Vested stock in SSI, held by UK individuals, may be exchanged for
vested stock in STI without incurring any UK income tax or capital
gains tax liabilities.
Unvested stock in SSI, held by UK individuals, may be exchanged for
unvested stock in STI without incurring any UK income tax or capital
gains tax liabilities.
The basis of these opinions are as follows:
EXERCISE OF OPTIONS
Options Obtained By Reason of Employment
United Kingdom taxation legislation states that, where a person realise a gain
by the exercise of a right to acquire shares in a body corporate and that
right was obtained by that person as a director or employee of that or any
other body corporate, he shall be liable to UK income tax on an amount equal
to that gain. [Section 135 ICTA 1988].
Where an individual is so taxed, the amount that is taxed under Section 135 is
treated as forming part of the allowable cost (for the purposes of UK capital
gains tax) of the shares acquired by exercise of the option. [Section 120(4)
TCGA 1992].
The subsequent sale of the shares will be a disposal of a capital asset and
any further gain will be liable to UK capital gains tax.
Options Not Obtained By Reason of Employment
In the absence of specific legislation (e.g. Section 135 above) the exercise
of an option does not result in any UK taxable income nor is it regarded as a
disposal of a capital asset so as to give rise to any UK taxable capital gain.
The subsequent sale of the shares will be a disposal of a capital asset and
any resulting gain will be liable to UK capital gains tax.
EXCHANGE OF SHARES
Capital Gains Tax
United Kingdom taxation legislation states that, where there is a
reorganisation of a company's share capital, the reorganisation shall not be
treated as involving any disposal of the original
<PAGE>
[ERNST & YOUNG LOGO APPEARS HERE] 18 November 1998
3
shares or any acquisition of the new holding or any part of it, but the
original shares (taken as a single asset) and the new holding (taken as a
single asset) shall be treated as the same asset acquired as the original
shares were acquired. [Section 127 TCGA 1992].
Further, where a company ("company A") {STI} issues shares or debentures to a
person in exchange for shares or debentures of another company ("company B")
{SSI} and company A {STI} holds, or in consequence of the exchange will hold,
more than one-quarter of the ordinary share capital of company B {SSI},
Section 127 (see above) shall apply, with any necessary adaptations, as if the
two companies mentioned were the same company and the exchange were a
reorganisation of its share capital. [Section 135 TCGA 1992].
Thus, given that STI is the ultimate parent of SSI and, therefore, holds more
than 25% of the ordinary share capital of SSI, the exchange of SSI shares for
STI shares will be treated as a tax free exchange for UK capital gains tax
purposes.
UK tax legislation provides that the Inland Revenue may be requested to give
advance confirmation that the Inland Revenue are satisfied that the provisions
of Section 135 will apply to a particular exchange of shares. The Inland
Revenue has not been requested by the Company to give such clearance in
respect of the proposed exchanges of shares. We recommend that time
permitting, the Company seek such clearance from Inland Revenue.
Income Tax
As the shares are capital assets, no UK income tax consequences flow from the
exchange unless the shares were acquired by the individual by reason of his
employment and the shares are subject to restrictions.
Where the shares were acquired by reason of the individual's employment and
they are subject to restrictions, there is a potential liability to UK income
tax when those restrictions are removed [Section 78 FA 1988] or when the
shares are sold [Section 79 FA 1988].
However, where the shares are sold (or disposed of) as a result of a company
reorganisation (see above), section 127 TCGA 1992 shall apply for income tax
purposes. [Section 82(3) FA 1988].
Consequently, the exchange of SSI shares for STI shares will not create any UK
income tax liability.
This opinion represents and is based on our best judgement regarding the
application of United Kingdom taxation legislation. Our opinion is not binding
on the Courts and there is no assurance that the Inland Revenue will not seek
to assert a contrary position. Furthermore, no assurance can be given that
future legislation, on either a prospective or retroactive basis, would not
adversely affect the accuracy of the conclusions stated therein. We undertake
no responsibility to
<PAGE>
[ERNST & YOUNG LOGO APPEARS HERE] 18 November 1998
4
advise you of any new developments in the application or interpretation of the
United Kingdom taxation laws.
The opinion relates only to the IMG and NSMG employees, former employees and
individual consultants who are holders of stock in SSI and is confined to
their United Kingdom tax position.
The opinion has been delivered to you for the purposes of being included in
documents to be filed with the United States Securities and Exchange
Commission. We hereby consent to the filing of this opinion as such an
exhibit.
The above opinion is given for the purpose of advising STI/SSI on the UK tax
implication of the outlined transactions on the relevant employees, former
employees and individual consultants of IMG and NSMG. Because others may
choose to rely on it for a different purpose, Ernst & Young assumes no
responsibility whatsoever in respect of or arising out of or in connection
with the contents of this report to parties other than STI, SSI and relevant
employees, former employees and individual consultants of IMG and NSMG. If
other persons choose to rely in any way on the contents of this report they do
so entirely at their own risk.
Yours faithfully
For The United Kingdom firm of Ernst & Young
/s/ Ernst & Young
<PAGE>
EXHIBIT 8.4
January 29, 1999
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
Seagate Software, Inc.
920 Disc Drive
Scotts Valley, California 95066
Re: Offer to Exchange Shares of Seagate Technology, Inc. for Shares of
Seagate Software, Inc.
Ladies and Gentlemen:
We have acted as counsel to Seagate Technology, Inc., a Delaware
corporation ("STI") and Seagate Software, Inc., a Delaware Corporation, ("SSI")
in connection with the proposed Offer to Exchange Shares of Seagate Technology,
Inc. for Shares of Seagate Software, Inc. (the "Exchange Offer") as approved by
the STI Board of Directors on October 29, 1998, as evidenced in the minutes
thereof. The Exchange Offer is described in the Registration Statement on Form
S-4 (the "Registration Statement") of STI. This opinion is being rendered
pursuant to the requirements of Item 21(a) of Form S-4 under the Securities Act
of 1933, as amended. Unless otherwise indicated, any capitalized terms used
herein and not otherwise defined have the meaning ascribed to them in the
Registration Statement.
In connection with this opinion, we have examined and are familiar with the
Registration Statement, and such other presently existing documents, records and
matters of law as we have deemed necessary or appropriate for purposes of our
opinion. In addition, we have assumed (i) that the Exchange Offer will be
consummated in the manner contemplated by and in accordance with the provisions
of the Reorganization Agreement and (ii) the truth and accuracy of the
certificates of representations to be provided to us by STI and SSI.
Based upon and subject to the foregoing, the discussion contained in the
Registration Statement under the subcaption "U.S. Consequences" under the
caption "Material Tax Consequences to Optionees," subject to the limitations and
qualifications described therein, expresses our opinion as to the material
Federal income tax consequences of the exercise of incentive and nonstatutory
stock options. Because this opinion is being delivered prior to the Exchange
Offer, it must be
<PAGE>
Seagate Technology, Inc.
Seagate Software, Inc.
January 29, 1999
Page 2
considered prospective and dependent on future events. There can be no
assurance that changes in the law will not take place which could affect the
Federal income tax consequences of the exercise of incentive and nonstatutory
stock options or that contrary positions may not be taken by the Internal
Revenue Service.
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement. We also consent to the reference to our
firm name wherever appearing in the Registration Statement with respect to the
discussion of the material Federal income tax consequences of the exercise of
incentive and nonstatutory stock options, and any amendment thereto. In giving
this consent, we do not thereby admit that we in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby 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,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-4 No. 333-67585) of
Seagate Technology, Inc. for the registration of shares of its common stock and
to the incorporation by reference therein of our report dated July 14, 1998
(except for the second paragraph of the Acquisition note, as to which the date
is July 31, 1998, and the first and second paragraphs of the Patent Litigation
note, as to which the date is August 17, 1998) with respect to the consolidated
financial statements of Seagate Technology, Inc. incorporated by reference in
its Annual Report (Form 10-K) for the year ended July 3, 1998 and the related
consolidated financial statement schedule included therein, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
January 29, 1999
<PAGE>
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-4 No. 333-67585) of
Seagate Technology, Inc. for the registration of shares of its common stock and
to the incorporation by reference therein of our report dated July 17, 1998,
with respect to the financial statements of Seagate Software, Inc. included in
its Annual Report (Form 10-K) for the year ended July 3, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
January 29, 1999
