<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14D-1
Tender Offer Statement Pursuant To Section
14(d)(1) Of The Securities Exchange Act Of 1934
SEAGATE SOFTWARE, INC.
(Name of Subject Company)
SEAGATE TECHNOLOGY, INC.
(Bidder)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
811804 103
(CUSIP Number of Class of Securities)
Donald L. Waite
Executive Vice President
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95067
(831) 438-6550
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
with a copy to:
Larry W. Sonsini, Esq.
John T. Sheridan, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
----------------
CALCULATION OF FILING FEE
<TABLE>
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- -----------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Title of each class of maximum aggregate Amount of
securities to be Amount to be offering price offering registration
registered registered(1) per share(2) price(2) fee(3)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value.................. 9,000,000 $1.3494318 $12,144,887 $2,429
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, par
value $0.01 per share, of Seagate Technology, Inc. that may be issued
pursuant to the exchange offer described herein.
(2) For the purpose of calculating the filing fee only, this table assumes the
purchase of 9,000,000 shares of Common Stock, par value $0.001 per share,
of Seagate Software, Inc. These computations are based on the book value
of the shares of common stock of Seagate Software, Inc. at November 3,
1998 that may be exchanged for the securities being registered.
(3) The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934 equals 1/50th of 1% of the
value of the shares to be purchased.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C> <C>
Amount Previously Paid: $3,378 Filing Party: Seagate Technology, Inc.
Form or Registration No.: 333-67585 Date Filed: November 19, 1998
April 21, 1999.
</TABLE>
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- -------------------------------------------------------------------------------
<PAGE>
CUSIP No. 811804103 14D-1 Page 2 of 7 Pages
1. Name of Reporting Persons: Seagate Technology,
Inc.I.R.S. Identification No. of Above Person
(entities only): 94-2612933
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds (see instructions): WC
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[_]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting
Person:
54,695,833 shares of common stock
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7):
98.2%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
2
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
relates to an exchange offer by Seagate Technology, Inc., to purchase all
outstanding shares of common stock, par value $0.001 per share (the "Seagate
Software common stock"), of Seagate Software, Inc., a Delaware corporation,
not currently directly or indirectly owned by Seagate Technology, upon the
terms and subject to the conditions set forth in the Offering Circular/
Prospectus dated April 23, 1999 (the "Offer to Exchange") and in the related
Letter of Transmittal (the "Letter of Transmittal" which, together with the
Offer to Exchange, as each may be amended and supplemented from time to time,
constitute the "Offer"), and is intended to satisfy the reporting requirements
of Section 14(d) of the Securities Exchange Act of 1934, as amended. Copies of
the Offer to Exchange, the Letter of Transmittal and related documents are
filed with this Schedule 14D-1 as Exhibits (a)(1), and (a)(2) hereto,
respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Seagate Software, Inc., a Delaware
corporation, which has its principal executive and operating offices at 915
Disc Drive, Scotts Valley, California 95066.
(b) The class of securities to which this statement relates is Seagate
Software common stock, $.001 par value per share, and the Offer is for all
outstanding Seagate Software common stock at the exchange rate described in
the Offer to Exchange and the Letter of Transmittal. The information set forth
in the sections captioned "Frequently Asked Questions" and "The Exchange
Offer" in the Offer to Exchange is incorporated herein by reference.
(c) The information set forth in the section captioned "Information About
Seagate Technology--Stock and Dividend Information" in the Offer to Exchange
is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) The information set forth in the sections captioned
"Summary Description of the Companies" and "Information About Seagate
Technology" in the Offer to Exchange is incorporated herein by reference.
(e)-(f) During the last five (5) years, neither Seagate Technology nor, to
the best of Seagate Technology's knowledge, any executive officer or director
of Seagate Technology has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment, decree or final
order enjoining future violations of, or, prohibiting or mandating activities
subject to Federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the section captioned "The Exchange
Offer" in the Offer to Exchange and in the sections captioned "Certain
Transactions" and "Executive Compensation" in Seagate Software's Registration
Statement on Form 10 as amended, the sections captioned "Certain Transactions"
and "Executive Compensation" in Seagate Software's Annual Report on Form 10-K
for the year ended July 3, 1998, and the Forms 8-K and the exhibits thereto
filed on October 21, 1998 by each of Seagate Software and Seagate Technology
is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The consideration is shares of Seagate Technology common stock. The
information set forth in the sections captioned "The Exchange Offer--The
Exchange Offer and Exchange Rate" and "Description of Seagate Technology
Capital Stock" in the Offer to Exchange is incorporated herein by reference.
3
<PAGE>
ITEM 5. PURPOSE OF THE EXCHANGE OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g)The information set forth in the section captioned "The Exchange
Offer--Background and Reasons for the Exchange Offer" in the Offer to Exchange
is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b)The information set forth in the sections captioned "Summary
Description of the Companies" and "Information About Seagate Software and the
Information Management Group--Security Ownership of Certain Beneficial Owners
and Management of Seagate Software" in the Offer to Exchange is incorporated
herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the sections captioned "Certain Transactions"
and "Executive Compensation" in Seagate Software's Registration Statement on
Form 10 as amended, the sections captioned "Certain Transactions" and
"Executive Compensation" in Seagate Software's Annual Report on Form 10-K for
the year ended July 3, 1998, and the Forms 8-K and the exhibits thereto filed
on October 21, 1998 by each of Seagate Software and Seagate Technology is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the section captioned "The Exchange Offer--
Fees and Expenses" in the Offer to Exchange is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Exhibit 13.1 to Seagate Technology's Annual
Report on Form 10-K for the year ended July 3, 1998 as filed with the
Securities and Exchange Commission on August 20, 1998 and amended on April 21,
1999 and the information contained in the sections captioned "Summary Selected
Condensed Financial Data", "Seagate Technology Pro Forma Condensed Financial
Statements and "Notes to Seagate Technology Unaudited Pro Forma Condensed
Financial Statements" in the Offer to Exchange is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(c) The information set forth in the section captioned "The Exchange
Offer--Regulatory Approvals Required" in the Offer to Exchange is incorporated
herein by reference.
(d) Not applicable.
(e) Not applicable.
(f) The information set forth in the entire Offer to Exchange, the Letter
of Transmittal and related documents, copies of which are filed with this
Schedule 14D-1 as Exhibits (a)(1), (a)(2), (a)(3) and (a)(4) respectively, is
incorporated herein by reference.
4
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1) Offering Circular/Prospectus dated April 23, 1999 of Seagate
Technology, Inc.
(a)(2) Letter of Transmittal with respect to the Seagate Software common
stock.
(a)(3) Special Exercise Notice with respect to vested options to
purchase Seagate Software common stock.
(a)(4) Special Exercise Notice Instruction Letter with respect to vested
options to purchase Seagate Software common stock.
(a)(5) Form for Delivery Via DWAC Seagate Software Transmittal
Amendment.
(a)(6) Automatic Sale Account Form.
(a)(7) Press Release of Seagate Technology, Inc. dated April 26, 1999.
(b) None.
(c)(1)/1/+ General Services Agreement dated June 28, 1997 between Seagate
Software, Inc. and Seagate Technology, Inc.
(c)(2)/1/ Tax Allocation Agreement dated April 4, 1996 between Seagate
Software, Inc. and Seagate Technology, Inc.
(c)(3)/1/ Intercompany Revolving Loan Agreement dated June 28, 1996 between
Seagate Software, Inc. and Seagate Technology, Inc.
(c)(3)(1)/2/ Amendment No. 1 dated July 4, 1998 to Intercompany Revolving Loan
Agreement between Seagate Software, Inc. and Seagate Technology,
Inc.
(c)(4)/3/ Agreement and Plan of Reorganization dated as of October 5, 1998
by and among VERITAS Holding Corporation, VERITAS Software
Corporation, Seagate Technology, Inc., Seagate Software, Inc. and
Seagate Software Network Storage Management Group, Inc.
(c)(4)(1)/5/ Amended and Restated Agreement and Plan of Reorganization dated
as of April 16, 1999 by and among VERITAS Holding Corporation,
VERITAS Software Corporation, Seagate Technology, Inc., Seagate
Software, Inc. and Seagate Software Network & Storage Management
Group, Inc.
(c)(5)/4/+ Cross License and Original Equipment Manufacturer Agreement dated
as of October 5, 1998 by and among VERITAS Holding Corporation,
VERITAS Software Corporation and Seagate Software Information
Management Group, Inc.
(c)(5)(1)/5/ Amendment No. 1 to Cross-License and OEM Agreement dated as of
April 16, 1999 by and among VERITAS Software Corporation, VERITAS
Holding Corporation and Seagate Software Information Management
Group, Inc.
(c)(6)/4/+ Development and License Agreement dated as of October 5, 1998 by
and among Seagate Technology, Inc., VERITAS Holding Corporation
and VERITAS Software Corporation.
(c)(7)/5/ Form of Stockholder Agreement by and among Seagate Software,
Inc., Seagate Technology, Inc., VERITAS Holding Corporation and
VERITAS Software Corporation.
(c)(8)/4/ Form of Registration Rights Agreement by and among Seagate
Software, Inc. and Seagate Technology, Inc.
(d)(1)/8/ Form of opinion regarding U.S. federal tax matters.
(d)(2)/6/ Form of opinion regarding Canadian tax matters.
(d)(3)/6/ Form of opinion regarding U.K. tax matters.
(d)(4)/7/ Form of opinion regarding tax consequences to optionees.
(e) Prospectus for Seagate Technology, Inc. Common Stock (included in
Exhibit (a)(1)).
(f) None.
</TABLE>
- --------
+ Confidential treatment has been requested for a portion of this exhibit
pursuant to a request for confidential treatment filed with the Securities
and Exchange Commission. Omitted portions have been filed separately with
the Commission.
1. Incorporated by reference to exhibits filed with Seagate Software, Inc.'s
Registration Statement on Form 10 as filed with the Securities and Exchange
Commission on October 3, 1997 and as amended on December 11, 1997.
2. Incorporated by reference to exhibits filed with Seagate Software, Inc.'s
Annual Report on Form 10-K for the year ended July 3, 1998, as filed with
the Securities and Exchange Commission on September 2, 1998.
5
<PAGE>
3. Incorporated by reference to exhibits filed with Seagate Technology's
Current Report on Form 8-K as filed with the Securities and Exchange
Commission on October 21, 1998.
4. Incorporated by reference to exhibits filed with Seagate Technology's
Amendment No. 3 to Registration Statement on Form S-4 (Reg. No. 333-67585)
as filed with the Securities and Exchange Commission on April 19, 1999.
5. Incorporated by reference to exhibits filed with Seagate Technology's
Amendment No. 4 to Registration Statement on Form S-4 (Reg. No. 333-67585)
as filed with the Securities and Exchange Commission on April 21, 1999.
6. Incorporated by reference to exhibits filed with Seagate Technology's
Amendment No. 2 to Registration Statement on Form S-4 (Reg. No. 333-67585)
as filed with the Securities and Exchange Commission on March 22, 1999.
7. Incorporated by reference to exhibits filed with Seagate Technology's
Amendment No. 1 to Registration Statement on Form S-4 (Reg. No. 333-67585)
as filed with the Securities and Exchange Commission on February 1, 1999.
8. Incorporated by reference to exhibits filed with Seagate Technology's
Amendment No. 5 to Registration Statement on Form S-4 (Reg. No. 333-67585)
as filed with the Securities and Exchange Commission on April 23, 1999.
6
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
Dated: April 26, 1999
Seagate Technology, Inc.
By: /s/ Donald L. Waite
-----------------------------------
Donald L. Waite
Executive Vice President, Chief
Administrative
Officer and Assistant Secretary
7
<PAGE>
Exhibit (a)(1)
[LOGO OF SEAGATE APPEARS HERE]
---------------
Offering circular/prospectus
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 June 7, 1999
unless extended
Seagate Technology is offering to exchange shares you hold of Seagate Software
common stock for shares of Seagate Technology common stock. 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 elect to exchange 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.
Seagate Technology common stock is traded on the New York Stock Exchange under
the symbol "SEG." On April 19, 1999, the closing price of Seagate Technology
common stock was $26 13/16. The Seagate Software common stock has no public
market.
If you wish to participate in our exchange offer, you must complete the
transmittal letter included with this document and return it, along with your
stock certificates representing your shares of Seagate Software common stock
that you wish to exchange, to Harris Trust Company of New York no later than
the expiration date indicated above. If you wish to exercise your stock options
for Seagate Software stock and participate in our exchange offer, you must also
complete and return the special exercise instruction letter enclosed with this
document.
Your election to participate in the exchange offer will be irrevocable. You
will only be able to withdraw your election prior to the expiration date of our
offer if we have not yet accepted your Seagate Software shares tendered.
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 20.
---------------
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 April 23, 1999.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Frequently Asked Questions................................................ 1
Summary Description of the Companies...................................... 10
Summary Selected Condensed Financial Data................................. 11
Selected historical financial data of Seagate Technology.................. 11
Seagate Technology summary unaudited pro forma condensed financial data... 13
How the pro forma financial statements were prepared...................... 13
Seagate Technology selected unaudited pro forma condensed financial infor-
mation................................................................... 14
Seagate Technology comparative per share data............................. 14
Accounting for the NSMG combination....................................... 15
Selected historical financial data of Seagate Software.................... 16
Seagate Software selected unaudited pro forma financial data.............. 17
How the pro forma financial statements were prepared...................... 17
Seagate Software selected unaudited pro forma condensed financial informa-
tion..................................................................... 18
Seagate Software comparative per share data............................... 18
Accounting for the NSMG combination....................................... 19
Seagate Technology Risk Factors........................................... 20
Seagate Technology faces risks from the spin-off of Seagate Software's
Network & Storage Management Group....................................... 20
Seagate Technology's financial results may be volatile because our short-
term cost structure is fixed............................................. 21
We may not be profitable if we cannot sell a high volume of products...... 21
Acquisition related accounting charges will delay and reduce our profits.. 21
Our business will suffer if we do not ship new products early in the prod-
uct life cycle before margins decline.................................... 21
Slowdown in demand for computer systems may cause a decline in demand for
our products............................................................. 22
We will not be successful if we do not bring our new products to market
quickly.................................................................. 22
If our customers delay or cancel orders, our revenues will be adversely
affected................................................................. 23
We face intense competition and may not be able to compete effectively.... 23
We face risks from our international operations........................... 24
We may experience Year 2000 computer problems that harm our business...... 24
The I.R.S. could assert that receipt of Seagate Technology Stock by U.S.
holders is taxable....................................................... 25
Our stock price will fluctuate............................................ 25
Notice Regarding Forward-Looking Statements in this Document.............. 26
Where You Can Find More Information....................................... 27
The Exchange Offer........................................................ 29
The exchange offer and the exchange rate.................................. 29
Background and reasons for the exchange offer............................. 29
The expiration date....................................................... 29
Conditions to the exchange offer.......................................... 30
Termination of the exchange offer......................................... 30
Exchange of shares and certificates....................................... 30
Exchange agent for shares and certificates................................ 32
Fractional shares......................................................... 32
Fees and expenses......................................................... 32
Transfer taxes............................................................ 32
Appraisal rights.......................................................... 33
Proxies................................................................... 33
Withdrawal rights......................................................... 33
Regulatory approvals required............................................. 33
Material income tax considerations of exchange of shares.................. 34
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Accounting treatment...................................................... 39
Description of Seagate Technology Capital Stock........................... 40
Comparison of Stockholder Rights.......................................... 41
Stockholder meetings...................................................... 41
Director nominations...................................................... 41
Indemnification........................................................... 41
Information About Seagate Technology...................................... 43
General................................................................... 43
Stock and dividend information............................................ 44
Information about Seagate Software and the Information Management Group... 45
General................................................................... 45
Products.................................................................. 45
Sales and marketing....................................................... 46
Technical support and maintenance......................................... 47
Competition............................................................... 47
Patents and intellectual property rights.................................. 48
Employees................................................................. 49
Facilities................................................................ 49
Legal proceedings......................................................... 49
Market for and dividends paid on Seagate Software common stock............ 50
Security ownership of certain beneficial owners and management of Seagate
Software................................................................. 50
Seagate Technology Unaudited Pro Forma Condensed Financial Statements..... 53
Notes to Seagate Technology Unaudited Pro Forma Condensed Financial
Statements............................................................... 59
Seagate Software Unaudited Pro Forma Condensed Financial Statements....... 67
Notes to Seagate Software Unaudited Pro Forma Condensed Financial
Statements............................................................... 72
Legal Matters............................................................. 81
Experts................................................................... 81
</TABLE>
This document contains trademarks of Seagate Technology and Seagate Software
and may contain trademarks of others.
ii
<PAGE>
Frequently Asked Questions
Questions about our exchange offer
Q: What is being offered?
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.
Q: How will I potentially benefit?
A: You will be able to sell the shares of Seagate Technology common stock that
you receive in our exchange offer on the New York Stock Exchange. No public
market currently exists for Seagate Software's shares.
Q: Why is Seagate Technology making the exchange offer?
A: 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: 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.
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.
- --------------------------------------------------------------------------------
Questions for Seagate Software stockholders
Q: What choices do I have for my shares of Seagate Software stock?
A: You have two choices:
. you may exchange your Seagate Software shares for Seagate Technology
shares by participating in our exchange offer, or
. you may retain your Seagate Software stock.
1
<PAGE>
Q: What taxes will I owe if I participate in the exchange offer?
A: Whether or not you will owe taxes as a result of your participation in our
exchange offer depends on your country of residence.
. If you are a resident of the U.K., your receipt of Seagate Technology
stock in our exchange offer will be tax-free.
. Our tax advisor, Ernst & Young, is of the opinion that the receipt of
Seagate Technology stock in our exchange offer by residents of the U.S.
will more likely than not be tax-free in which case no gain or loss will
be recognized. However, the rules are not entirely clear and there is
some risk that the Internal Revenue Service could disagree. If the
Internal Revenue Service successfully asserted the exchange offer was
taxable to you, you would be treated in the same manner as if you had
sold your Seagate Software stock for cash in an amount equal to the fair
market value, on the date the exchange offer closes, of the Seagate
Technology stock you receive. Thus, you would recognize gain or loss
equal to the difference between the fair market value of the Seagate
Technology stock you receive and your tax basis in the Seagate Software
stock you surrender, in the exchange offer.
. If you are a Canadian resident and you participate in our exchange offer,
you will recognize a capital gain in an amount equal to the difference
between the fair market value of the Seagate Technology shares that you
receive in our exchange offer and the tax basis of the Seagate Software
shares that you surrender in our exchange offer. As a Canadian resident,
however, only three quarters of the capital gain would be subject to
income tax provided certain conditions are met. However, on April 15,
1999, the Canadian Department of Finance issued a press release
containing a proposal that, if enacted into law, may allow Canadian
residents participating in the exchange offer to receive the Seagate
Technology stock on a tax-free basis.
Please see pages 34 through 39 for a more complete explanation of the tax
consequences of participating in our exchange offer.
- --------------------------------------------------------------------------------
Questions for Seagate Software optionholders who will remain employees of
either Seagate Software or Seagate Technology
Q: What choices do I have for the vested portion of my Seagate Software
options?
A: You have three choices:
. you may exercise your vested options and then exchange the Seagate
Software shares for Seagate Technology shares,
. you may exercise your vested options and then hold the Seagate Software
shares, or
. you may retain your Seagate Software options.
2
<PAGE>
Q: What choices do I have for the unvested portion of my Seagate Software
options?
A: None. You will continue to hold your options, and they will continue to vest
so long as you remain an employee.
Q: What taxes will I owe if I exercise my options?
A: Whether or not you will owe taxes depends on the type of options you hold
and your country of residence.
. If you are a resident of the U.K. or Canada or a U.S. holder of stock
options that are not incentive stock options, you will recognize income
equal to the difference between the exercise price and the fair market
value of the Seagate Software stock received on exercise of your option.
If you are a Canadian resident, however, you may be able to take a 25%
offsetting deduction provided certain conditions are met.
. If you are a U.S. holder of incentive stock options, the rules that apply
to you are complex. Although the exercise of your options will be tax-
free for regular tax purposes, for alternative minimum tax purposes, the
difference between the fair market value of the Seagate Software stock
and the option exercise price will be included in alternative minimum
taxable income. If you sell the Seagate Technology stock you receive in
the exchange offer two years after the date you were granted your
incentive stock option and one year after the date you exercised the
option, then any gain will be capital gain. However, if you sell your
stock prior to these dates, the gain up to the fair market value of the
Seagate Software stock at the day of exercise will be ordinary income and
only appreciation subsequent to the exercise date will remain as capital
gain.
Please see pages 34 through 39 for a more complete explanation of the tax
consequences of participating in our exchange offer.
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.
- --------------------------------------------------------------------------------
Questions for Seagate Software optionholders who will become employees of New
VERITAS
Q: What is the NSMG combination?
A: Seagate Software and Seagate Technology have agreed to contribute the
Seagate Software Network & Storage Management Group business to a newly
formed entity, 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
3
<PAGE>
Corporation. We call this the NSMG combination. New VERITAS common stock
will be publicly traded on the Nasdaq National Market.
Q: What choices do I have for the vested portion of my Seagate Software
options?
A: You have three choices:
. you may exercise your vested options and then exchange your Seagate
Software shares for Seagate Technology shares,
. you may exercise them and hold your Seagate Software shares, or
. you may exchange them for options to purchase shares of New VERITAS
common stock. Additional information about the New VERITAS exchange offer
will be mailed to you separately.
Q: Can I continue to hold my vested Seagate Software options?
A: No. You must elect one of the three choices in the answer above, because
your options will terminate 30 days after the NSMG combination closes.
Q: Can I continue to hold the unvested portion of my Seagate Software options?
A: No. You should participate in the New VERITAS exchange offer or you will
lose your unvested options.
Q: What taxes will I owe if I exercise my options?
A: Whether or not you will owe taxes depends on the type of options you hold
and your country of residence.
. If you are a resident of U.K. or Canada or a U.S. holder of stock options
that are not incentive stock options, you will recognize income equal to
the difference between the exercise price and the fair market value of
the Seagate Software stock received on exercise of your option. If you
are a Canadian resident, however, you may be able to take a 25%
offsetting deduction provided certain conditions are met.
. If you are a U.S. holder of incentive stock options, the rules that apply
to you are complex. Although the exercise of your options will be tax-
free for regular tax purposes, for alternative minimum tax purposes, the
difference between the fair market value of the Seagate Software stock
and the option exercise price will be included in alternative minimum
taxable income. If you sell the Seagate Technology stock you receive in
the exchange offer two years after the date you were granted your
incentive stock option and one year after the date you exercised the
option, then any gain will be capital gain. However, if you sell your
stock prior to these dates, the gain up to the fair market value of the
Seagate Software stock at the day of exercise will be ordinary income and
only appreciation subsequent to the exercise date will remain as capital
gain.
Please see pages 34 through 39 for a more complete explanation of the tax
consequences of participating in our exchange offer.
4
<PAGE>
- --------------------------------------------------------------------------------
Questions for Seagate Software optionholders who will not be employed by
Seagate Software, Seagate Technology or New VERITAS.
Q: What choices do I have for the vested portion of my Seagate Software
options?
A: You have two choices:
. you may exercise your vested options and then exchange your Seagate
Software shares for Seagate Technology shares, or
. you may exercise your vested options and hold your Seagate Software
shares.
Q: Can I continue to hold my vested Seagate Software options?
A: No. You will have 30 days after your employment with Seagate Software or
Seagate Technology ends to exercise your options and receive Seagate
Software stock or your options will terminate.
Q: Can I continue to hold the unvested portion of my Seagate Software options?
A: No. Your unvested options expire when your employment ends.
Q: What taxes will I owe if I exercise my options?
A: Whether or not you will owe taxes depends on the type of options you hold
and your country of residence.
. If you are a resident of U.K. or Canada or a U.S. holder of stock options
that are not incentive stock options, you will recognize income equal to
the difference between the exercise price and the fair market value of
the Seagate Software stock received on exercise of your option. If you
are a Canadian resident, however, you may be able to take a 25%
offsetting deduction provided certain conditions are met.
. If you are a U.S. holder of incentive stock options, the rules that apply
to you are complex. Although the exercise of your options will be tax-
free for regular tax purposes, for alternative minimum tax purposes, the
difference between the fair market value of the Seagate Software stock
and the option exercise price will be included in alternative minimum
taxable income. If you sell the Seagate Technology stock you receive in
the exchange offer two years after the date you were granted your
incentive stock option and one year after the date you exercised the
option, then any gain will be capital gain. However, if you sell your
stock prior to these dates, the gain up to the fair market value of the
Seagate Software stock at the day of exercise will be ordinary income and
only appreciation subsequent to the exercise date will remain as capital
gain.
Please see pages 34 through 39 for a more detailed explanation of the tax
consequences of participating in our exchange offer.
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 business day before the close of the NSMG combination.
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 as well
as on other factors including limited financial analyses performed by their
financial advisor, Morgan Stanley & Co., Incorporated. While the final
valuation of Information Management Group business will be determined by the
Seagate
6
<PAGE>
Software board of directors as of six days prior to the closing of the NSMG
combination, it is currently estimated to be approximately $325 million.
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 NSMG combination 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 Seagate Software would receive 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: Will fluctuations in the price of Seagate Technology's or VERITAS' stock
affect the number of shares of Seagate Technology you will receive in the
exchange?
A: Yes, 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 common stock that you will
receive in the exchange. Historically, the market prices of Seagate
Technology's and VERITAS' common stock have varied greatly. For example,
during Seagate Technology's quarter ended April 2, 1999, the highest and
lowest sale prices were $44 1/4 and $25 5/8. During VERITAS' quarter ended
March 31, 1999, the highest and lowest sale prices were $89 1/2 and $58.
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 NSMG combination,
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 $ 30.00
Value of Seagate Software Information
Management Group $325.00 million
Value of New VERITAS shares and options received at an assumed price of
$80.75 per share
Option Proceeds $ 3.07 billion
$103.00 million
Total Seagate Software shares and options
outstanding 67.00 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 $52.
7
<PAGE>
Given these values, the exchange rate would be equal to 1.73 ($52/$30). 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 173 shares of Seagate Technology common stock.
Q: How will I know what the exchange rate is?
A: You can call 877-707-5656 for a current exchange rate. Outside North
America, you must first dial the AT & T Direct Access Code for the country
from which you are calling.
- --------------------------------------------------------------------------------
Questions about the vesting of your Seagate Software options
Q: How will the vesting schedule of my options change?
A: The Seagate Software board of directors has amended the vesting schedule of
your stock options. The changes to your vesting schedule are effective only
if the NSMG combination closes. 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 NSMG combination 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.
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>
New vesting schedule:
Under the new vesting schedule, options vest on the monthly anniversary of
the vesting commencement date, not daily.
<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>
8
<PAGE>
Current vesting schedule:
Under your current vesting schedule, options only vest on the annual
anniversary of the vesting commencement date, not monthly throughout the year.
<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
- ----------------------------------------------------------------------
April 1, 1999 1 year 11 months NA 20 80
- ----------------------------------------------------------------------
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>
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 NSMG
combination closes?
A: If you leave Seagate Software before the NSMG combination closes, your
original vesting schedule will apply.
- --------------------------------------------------------------------------------
If I have additional questions, whom should I contact?
Additional questions can be directed to Bill Rowley in our Investor Relations
Department at telephone number (831) 439-2371 or by email at
bill [email protected].
9
<PAGE>
Summary Description of the Companies
Seagate Technology, Inc.
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
(831) 438-6550
Seagate Technology designs, manufactures and markets products for storage,
retrieval and management of data on computer systems and other systems which
receive, store and transmit data. These products include disc drives and disc
drive components, tape drives and software. Seagate Technology designs,
manufactures and markets a broad line of rigid disc drives. These products are
used in computer systems ranging from desktop personal computers to large,
sophisticated enterprise computers. 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 electronically. Seagate
Technology currently produces backup solutions for desktop personal computers
and midrange servers to complement its line of disc drive products.
Seagate Software, Inc.
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. The 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. The Information Management Group
products permit analysis and interpretation of data in order to make business
decisions. After the closing of the NSMG combination, 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 18 countries worldwide. After the contribution of
its Network & Storage Management Group business to New VERITAS in connection
with the NSMG combination, Seagate Software will have 32 offices and operations
in 17 countries worldwide. Seagate Software is a majority-owned and
consolidated subsidiary of Seagate Technology.
As of March 31, 1999, Seagate Technology held approximately 98.2% of all
outstanding shares of Seagate Software. The remaining shares of Seagate
Software are held by current and former employees, directors and consultants of
Seagate Software, Seagate Technology and their subsidiaries. In addition,
options to purchase 11,136,215 shares of Seagate Software common stock were
outstanding as of March 31, 1999.
10
<PAGE>
Summary Selected Condensed Financial Data
We are providing the following financial information of Seagate Technology and
Seagate Software. Seagate Software is approximately 98.2% 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 six months ended January 2,
1998 and January 1, 1999 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 six months ended January 2, 1998
and January 1, 1999. The financial information for the six months ended January
1, 1999 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 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 Securities and
Exchange Commission. See "Where You Can Find More Information" on page 27.
Selected historical financial data of Seagate Technology
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended Six Months Ended
------------------------------------------- ---------------------
July 3, June 27, June 28, June 30, July 1, January 1, January 2,
1998 1997 1996 1995 1994 1999 1998
------- -------- -------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $6,819 $8,940 $8,588 $7,256 $5,865 $3,354 $3,569
Gross margin............ 989 2,022 1,581 1,373 1,171 749 487
Income (loss) from
operations............. (686) 858 287 459 473 88 (477)
Income (loss) before
extraordinary gain..... (530) 658 213 313 330 74 (423)
Net income (loss)....... (530) 658 213 319 330 74 (423)
Basic income (loss) per
share before
extraordinary gain..... (2.17) 2.82 1.07 1.64 1.76 .30 (1.74)
Basic net income (loss)
per share.............. (2.17) 2.82 1.07 1.67 1.76 .30 (1.74)
Diluted income (loss)
per share before
extraordinary gain..... (2.17) 2.62 0.97 1.44 1.56 .30 (1.74)
Diluted net income
(loss) per share....... (2.17) 2.62 0.97 1.47 1.56 .30 (1.74)
Total assets............ 5,645 6,723 5,240 4,900 4,308 5,830 5,933
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 $2,966 $2,986
Number of shares used in
per share computations:
Basic.................. 243.6 233.6 199.7 190.6 186.9 245.0 243.8
Diluted................ 243.6 257.9 236.1 244.7 235.8 249.1 243.8
</TABLE>
11
<PAGE>
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 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/A 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 six months ended January 1, 1999 include a $78 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 six months ended January 2, 1998 include a $216 million
write-off of in process research and development incurred primarily in
connection with the acquisition of Quinta Corporation, a $205 million
restructuring charge, a $22 million reduction in the $153 million charge
recorded in 1997 as a result of the adverse judgment in the Amstrad PLC
litigation and a $76 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, "Earnings Per Share"
adopted in the second quarter of fiscal 1998.
12
<PAGE>
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 NSMG combination 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 immediately
subsequent to the NSMG combination. 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 NSMG combination, the TeleBackup
combination, 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.
See "Seagate Technology Unaudited Pro Forma Condensed Financial Statements"
beginning on page 53 for a more detailed explanation of this analysis.
How the pro forma financial statements were prepared
We prepared these statements in accordance with U.S. generally accepted
accounting principles. 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 six months ended January 1, 1999, includes recurring adjustments which
assume that the NSMG combination, the TeleBackup combination, and the purchase
of Seagate Software stock by Seagate Technology all 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 and Seagate Technology unaudited pro forma
condensed financial statements.
We prepared the pro forma balance sheet data assuming the NSMG combination, the
TeleBackup combination, and the purchase of Seagate Software stock by Seagate
Technology all took place on January 1, 1999.
13
<PAGE>
Seagate Technology selected unaudited pro forma condensed financial information
(in millions, except per share data)
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
July 3, 1998 January 1, 1999
------------ ---------------
<S> <C> <C>
Pro forma statement of operations data:
Revenue....................................... $6,644 $3,247
Income (loss) from operations................. (702) 61
Net loss...................................... (747) (41)
Net loss per share--basic..................... $(3.01) $(0.16)
Net loss per share--diluted................... $(3.01) $(0.16)
Number of shares used in computing per share
amounts--basic............................... 247.8 249.2
Number of shares used in computing per share
amounts--diluted............................. 247.8 249.2
</TABLE>
<TABLE>
<CAPTION>
As of
January 1, 1999
---------------
<S> <C>
Pro forma balance sheet data:
Working capital.............................................. $2,315
Total assets................................................. 7,326
Retained earnings............................................ 2,099
Stockholders' equity......................................... 3,891
</TABLE>
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 NSMG
combination and the TeleBackup combination based upon the historical financial
statements of Seagate Technology. The data presented below should be read in
conjunction with the Seagate Technology unaudited pro forma condensed financial
statements on page 53 and the historical financial statements of Seagate
Technology and Seagate Software incorporated by reference 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.
The following tables present certain unaudited historical and pro forma per
share data that reflect the completion of the NSMG combination based upon the
historical financial statements of Seagate Technology. The data presented below
should be read in conjunction with the Seagate Technology unaudited pro forma
condensed financial statements on page 53 and the historical financial
statements of Seagate Technology in Seagate Technology's annual report on Form
10-K/A and Seagate Technology's quarterly reports on Form 10-Q and Form 10-Q/A
which are incorporated by reference in this document. The unaudited pro forma
condensed financial data does not necessarily indicate the operating results
that would have been achieved had the NSMG combination occurred at the
beginning of the periods presented and does not indicate future results of
operations or financial position. 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.
14
<PAGE>
Calculation of Seagate Technology historical book value per share
The historical book value per Seagate Technology 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.
Calculation of Seagate Technology pro forma per share data
The pro forma comparative per share data has been calculated assuming option
holders exercise 1,746,828 options to purchase shares of Seagate Software
common stock and that these shares from the exercise of stock options plus
608,665 shares held by existing minority interest shareholders, 2,355,493
shares out of 5,248,516 vested shares and options issued and outstanding, are
exchanged for Seagate Technology stock and assuming 34,606,432 shares of New
VERITAS are issued to Seagate Software in connection with the NSMG combination.
The pro forma book value per share computations include the effect of the in-
process research and development charges and the compensation expense amounting
to $184 million as described below. The pro forma net loss per share does not
reflect these charges since the are non-recurring. These charges will be
reflected in Seagate Technology's consolidated financial statements in the
period the NSMG combination and the purchase of shares by Seagate Technology
are completed.
Accounting for the NSMG combination
Seagate Software will contribute its Network & Storage Management Group
business to New VERITAS in exchange for a 41.85% ownership interest in New
VERITAS. As a result, Seagate Technology, through consolidation of Seagate
Software, will recognize a pro rata gain on the contribution for the difference
between 58.15% of the book value of its investment in the Network & Storage
Management Group business and 58.15% of the fair value of the New VERITAS stock
received. Seagate Technology will record its initial investment in New VERITAS
based on the fair value of the New VERITAS stock received plus the book value
of the remaining 41.85% of the original investment in the Network & Storage
Management Group business.
In-process research and development. Seagate Technology will allocate the
purchase price of the New VERITAS stock received based on the estimated fair
value of the New VERITAS assets acquired. It is estimated that Seagate
Technology will record in-process research and development charges of
approximately $92.1 million in connection with the NSMG combination.
Compensation expense and minority interest. In a separate transaction, Seagate
Technology has offered to exchange shares of Seagate Technology common stock
for all of the outstanding vested shares of Seagate Software common stock not
already owned by Seagate Technology. Any shares acquired that were not vested
for more than six months will be accounted for as the settlement of an earlier
award of stock and will result in compensation expense of approximately $86.7
million. The acquisition of shares vested and held for more than six months
will be accounted for as the acquisition of a minority interest and the
purchase price will be allocated to the underlying assets and liabilities
including in-process research and development of approximately $1.4 million.
The amount allocated to in-process research and development will be charged to
expense in the period in which the shares
15
<PAGE>
are acquired. The accounting for the acquisition of Seagate Software common
stock by Seagate Technology will be recorded by Seagate Software as a capital
contribution from Seagate Technology and as compensation expense, purchased
research and development, and intangible assets.
Seagate Technology--historical
<TABLE>
<CAPTION>
Year Ended Six Months Ended
or as of or as of
July 3, 1998 January 1, 1999
------------ ----------------
<S> <C> <C>
Net income (loss) per share--basic............. $(2.17) $ 0.30
Net income (loss) per share--diluted........... $(2.17) $ 0.30
Book value per common share.................... $12.00 $12.16
</TABLE>
Seagate Technology--pro forma
<TABLE>
<CAPTION>
Year Ended Six Months Ended
or as of or as of
July 3, 1998 January 1, 1999
------------ ----------------
<S> <C> <C>
Net loss per share--basic...................... $(3.01) $(0.16)
Net loss per share--diluted.................... $(3.01) $(0.16)
Book value per common share.................... $15.52 $15.73
</TABLE>
Selected historical financial data of Seagate Software
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
------------------------------------------------- ---------------------
July 3, June 27, June 28, June 30, July 1, January 1, January 2,
1998 1997 1996 1995 1994 1999 1998
-------- -------- --------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $293,226 $216,950 $ 141,586 $ 92,796 $ 30,696 $ 166,930 $135,366
Gross profit............ 242,766 169,161 112,567 70,417 23,556 142,466 110,068
In-process research and
development............ 6,800 2,613 96,958 73,177 -- -- --
Write-down of goodwill,
developed technology
and intangibles........ 1,900 13,091 2,157 -- -- -- 1,900
Restructuring costs .... -- 2,524 9,502 -- -- -- --
Unusual items .......... -- 13,446 -- -- -- -- --
Income (loss) from
operations............. 6,125 (60,296) (137,806) (80,166) (11,068) 16,228 (2,446)
Net income (loss)....... (9,270) (53,963) (129,668) (82,864) (6,884) 8,487 (952)
Net income (loss) per
common share
Basic.................. (56.33) (796.93) -- -- -- 36.11 (7.42)
Diluted................ (56.33) (796.93) -- -- -- 0.14 (7.42)
Total assets............ 138,997 147,331 201,598 101,928 20,854 147,248 138,997
Stockholders' equity.... $ 57,106 $ 65,355 $ 115,602 $ 47,215 $ 6,978 $ 68,597 $ 57,106
Number of shares used in
per share computations
Basic.................. 164,571 67,714 -- -- -- 235,012 128,326
Diluted................ 164,571 67,714 -- -- -- 61,572,394 128,326
</TABLE>
The above information includes the impact of dilutive convertible preferred
stock held by Seagate Technology.
16
<PAGE>
Seagate Software selected unaudited pro forma financial data
We are providing the following information to give you a better picture of what
the results of operations and financial position of Seagate Software might have
looked like had the NSMG combination occurred at an earlier date. In addition,
the pro forma financial information includes the estimated impact of the
purchase of certain shares of Seagate Software by Seagate Technology. 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
NSMG combination, the Seagate Software employee stock option exchange offer and
the Seagate Technology exchange offer 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. See the
Seagate Software unaudited pro forma condensed financial statements on page 67
for a more detailed explanation of this analysis.
How the pro forma financial statements were prepared
We prepared these statements in accordance with U.S. generally accepted
accounting principles. 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, will record certain intangible assets and
compensation expense.
The pro forma statement of operations data for the year ended July 3, 1998 and
the six months ended January 1, 1999, includes recurring adjustments which
assume that the employee stock option exchange offer and the Seagate Technology
exchange offer 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, plus recurring amortization of intangibles and
goodwill associated with the Seagate Technology exchange offer, as described in
the notes to the Seagate Software unaudited pro forma condensed financial
statements.
We prepared the pro forma balance sheet data assuming that the NSMG
combination, the Seagate Software employee stock option exchange offer and the
Seagate Technology exchange offer all took place on January 1, 1999.
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
beginning on page 67, 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.
17
<PAGE>
Seagate Software selected unaudited pro forma condensed financial information
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
July 3, 1998 January 1, 1999
------------ ----------------
<S> <C> <C>
Pro forma statement of operations data:
Total revenues............................... $ 118,180 $ 59,530
Loss from operations......................... (9,524) (11,196)
Net loss..................................... (226,014) (106,819)
Net loss per share--basic.................... $ (88.40) $ (41.78)
Net loss per share--diluted.................. $ (88.40) $ (41.78)
Number of shares used in computing per share
amounts--basic.............................. 2,557 2,557
Number of shares used in computing per share
amounts--diluted............................ 2,557 2,557
</TABLE>
<TABLE>
<CAPTION>
As of January 1, 1999
---------------------
<S> <C>
Pro forma balance sheet data:
Working capital........................................ $ 17,010
Total assets........................................... 1,651,162
Retained earnings...................................... 520,465
Stockholders' equity................................... 996,134
</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 NSMG combination based upon the
historical financial statements of Seagate Technology. The data presented below
should be read in conjunction with the Seagate Technology unaudited pro forma
condensed financial statements on page 53 and the historical financial
statements of Seagate Technology in Seagate Technology's annual report on Form
10-K/A and Seagate Technology's most recent quarterly reports on Form 10-Q and
Form 10-Q/A which are incorporated by reference in this document. The unaudited
pro forma condensed financial data does not necessarily indicate the operating
results that would have been achieved had the NSMG combination occurred at the
beginning of the periods presented, and does not indicate future results of
operations or financial position. 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.
Calculation of Seagate Technology historical book value per share
The historical book value per Seagate Technology 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.
Calculation of Seagate Technology pro forma per share data
The pro forma comparative per share data has been calculated assuming option
holders exercise 1,746,828 options to purchase shares of Seagate Software
common stock and that these shares from the exercise of stock options plus
608,665 shares held by existing minority interest shareholders,
18
<PAGE>
2,355,493 shares out of 5,248,516 vested shares and options issued and
outstanding, are exchanged for Seagate Technology stock and assuming 34,606,432
shares of New VERITAS are issued to Seagate Software in connection with the
NSMG combination.
The pro forma book value per share computations include the effect of the in-
process research and development charges and the compensation expense amounting
to $184 million as described below. The pro forma net loss per share does not
reflect these charges since the are non-recurring. These charges will be
reflected in Seagate Technology's consolidated financial statements in the
period the NSMG combination and the purchase of shares by Seagate Technology
are completed.
Accounting for the NSMG combination
Seagate Software will contribute its Network & Storage Management Group
business to New VERITAS in exchange for a 41.85% ownership interest in New
VERITAS. As a result, Seagate Technology, through consolidation of Seagate
Software, will recognize a pro rata gain on the contribution for the difference
between 58.15% of the book value of its investment in the Network & Storage
Management Group business and 58.15% of the fair value of the New VERITAS stock
received. Seagate Technology will record its initial investment in New VERITAS
based on the fair value of the New VERITAS stock received plus the book value
of the remaining 41.85% of the original investment in the Network & Storage
Management Group business.
In-process research and development. Seagate Technology will allocate the
purchase price of the New VERITAS stock received based on the estimated fair
value of the New VERITAS assets acquired. It is estimated that Seagate
Technology will record in-process research and development charges of
approximately $92.1 million in connection with the NSMG combination.
Compensation expense and minority interest. In a separate transaction, Seagate
Technology has offered to exchange shares of Seagate Technology common stock
for all of the outstanding vested shares of Seagate Software common stock not
already owned by Seagate Technology. Any shares acquired that were not vested
for more than six months will be accounted for as the settlement of an earlier
award of stock and will result in compensation expense of approximately $86.7
million. The acquisition of shares vested and held for more than six months
will be accounted for as the acquisition of a minority interest and the
purchase price will be allocated to the underlying assets and liabilities
including in-process research and development of approximately $1.4 million.
The amount allocated to in-process research and development will be charged to
expense in the period in which the shares are acquired. The accounting for the
acquisition of Seagate Software common stock by Seagate Technology will be
recorded by Seagate Software as a capital contribution from Seagate Technology
and as compensation expense, purchased research and development, and intangible
assets.
19
<PAGE>
Seagate Technology Risk Factors
By participating in the exchange offer, you will be choosing to invest in
Seagate Technology's common stock. An investment in Seagate Technology's common
stock involves a high degree of risk. In addition to the other information
contained in or incorporated by reference into this document, you should
carefully consider the following factors in deciding whether to participate in
the exchange offer. You should also consider the risks regarding Seagate
Software set forth under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Factors Affecting Future
Operating Results" in its most recent Form 10-Q/A that is also incorporated by
reference in this document.
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 NSMG combination 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 page 29.
We face a number of risks prior to and after the closing of the NSMG
combination including:
. our management personnel may be distracted from the day to day operations
by the NSMG combination and may not be able to identify and address
business issues because of the time demands of closing the NSMG
combination,
. Information Management Group employees may be distracted by concerns
about whether we will continue to operate that business or spin it off
and may not meet critical deadlines or succeed in their assigned tasks,
. Network & Storage Management Group customers may delay or cancel orders
due to uncertainty about the spin-off,
. the ongoing original equipment manufacturer relationship with the Network
& Storage Management Group and our tape drive operations may be disrupted
and we may not be able to meet our customers' order deadlines or needs as
a result,
. we have agreed not to compete in certain storage management software
businesses for a specified period of time after the closing of the NSMG
combination and may not be able to benefit from future opportunities in
that market,
. we will not have significant influence over the management of New
VERITAS, although initially we will have two representatives on its board
of directors but our financial statements and results of operations will
reflect 40% of New VERITAS' operations, so our stock price may be
impacted, and
. we will only be permitted to sell our interest in New VERITAS in limited
increments in compliance with certain Securities and Exchange Commission
rules or to bear the expense of filing a registration statement.
20
<PAGE>
Seagate Technology's financial results may be volatile because our short-term
cost structure is fixed
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. For example, our revenue decreased to
$3.354 billion in the first six months of fiscal 1999 from $3.569 billion in
the first six months of fiscal 1998 as a result of increased competition that
resulted in significant price decreases.
Our revenue in any given quarter has been impacted and will continue to be
impacted by the timing of orders from and shipment of our products to major
customers such as Compaq. Because our cost structure is relatively fixed in the
short-term, our revenues in any given quarter are improved if we sell more of
our more recently introduced products that have higher margins.
We may not be profitable if we cannot sell a high volume of products
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. We face the risk that during periods of decreased production, these
high fixed costs could have a material adverse effect on our operating results
and financial condition.
Acquisition related accounting charges will reduce our 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.
Our business will suffer if we do not ship new products early in the product
life cycle before margins decline
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 improved
performance and reliability. 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.
21
<PAGE>
In addition, profit margins on disc drive products rapidly decrease once we
have introduced the products, which further increases the pressure on us to
rapidly develop and introduce additional new products. We face the risk that we
may not be able to bring our new products to market in time to recoup the
expenses we incur developing them and/or make a profit on them. If we fail to
develop new products on time, our customers may select other vendors for their
disc drive requirements. In order to address this risk, we had research and
development expenses of $420 million, $459 million and $585 million in fiscal
1996, 1997 and 1998, respectively, to enable us to develop new products.
In addition,we are developing low cost disc drives to meet the demand for disc
drives that are components of low cost personal computers. We face the risk
that 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 at acceptable
levels to sustain the development efforts for this potentially large market.
Slowdown in demand for computer systems may cause a decline in demand for our
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 our disc drive 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. Causes of the declines
in demand in the past for our products have included the announcement or
introduction of major operating system or semiconductor improvements, such as
Windows 95 or the Pentium II. We believe these announcements and introductions
caused consumers to defer their purchases and made existing inventory obsolete.
We will not be successful if we do not bring our new products to market quickly
Our strategy of vertical 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. We
face the risk that if we do not bring our new products to market at the same
time or before our competitors, customers will not choose our products or we
will be forced to reduce the prices for the late products so much that we do
not make a profit on those products. For example, over the past two years we
have experienced delays in product launches due to delays in production of
certain components as a result of slower than anticipated internal development
and manufacturing scale-up of new designs.
When we use outside suppliers, 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 certain integrated circuits for printed
circuit board assemblies due to lead time requirements or changes in
specifications. As a result, we were not able to bring our products to market
on time and had to sell those products at lower prices due to the availability
of competing products that had already been in the market for some time.
22
<PAGE>
If our customers delay or cancel orders, our revenues will be adversely
affected
We face the risk that when a customer cancels an order, we will not receive
other orders or be able to reduce our costs rapidly enough to avoid incurring
substantial costs without generating revenue. We have experienced this problem
in the past when customers cancelled large orders, because their sales were
negatively affected by the widespread adoption of a new operating system
requiring more disc storage space than anticipated. Typically, our purchase
agreements permit our customers to cancel orders and reschedule delivery dates
without significant penalties. Our distributors and original equipment
manufacturer customers typically furnish us with non-binding indications of
their near-term requirements, with product deliveries based on weekly
confirmations. To the extent actual orders from distributors and original
equipment manufacturers decrease from their non-binding forecasts, such
variances could have a material adverse effect on our business because we rely
on these forecasts, among other factors, to set our cost structure which is
relatively fixed in the short-term.
We face intense competition and may not be able to compete effectively
Even during periods when demand is stable, the data storage industry is
intensely competitive. Historically our competitors have offered new or
existing products at lower prices as a part of a strategy to gain or retain
market share and customers. We expect these practices to occur again in the
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,
. IBM,
. NEC Corporation,
. Samsung Electronics Co. Ltd., and
. Toshiba Corporation.
Integrated multinational manufacturers present formidable competitors because
they have more substantial resources and access to customers without having to
consider the profitability of the disc drive business in pricing its
components.
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 and results of operations. For
example, IBM and Dell Computer recently announced that they had entered an
agreement under which IBM will likely supply a substantial portion of Dell's
disc drive needs. Although Dell is not a material customer of Seagate
Technology, we face risks that IBM and other integrated multinational
23
<PAGE>
manufacturers will enter into similar agreements with a substantial number of
our customers to supply those customers' disc drive requirements as part of a
more expansive agreement.
We may not be able to compete successfully against current or future
competitors. If we fail to compete successfully, our business and operating
results may be materially adversely affected.
We face risks from our international operations
We have 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, Malaysia, Indonesia and Mexico, 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,
. longer payment cycles for sales in foreign countries that have in the
past increased the uncertainty that we will receive the amounts owed to
us by customers,
. difficulties in staffing and managing international manufacturing
operations,
. seasonal reductions in business activity in the summer months in Europe
and certain other countries that could affect our ability to meet demand
elsewhere for products we produce in whole or in part in Europe,
. increases in tariffs and duties, price controls, restrictions on foreign
currencies and trade barriers imposed by foreign countries that could
impair our ability to ship components or finished goods to or from
countries where we have manufacturing facilities or to repatriate our
earnings, and
. political unrest, particularly in areas in which we have manufacturing
facilities such as Indonesia, that may result in disruptions of critical
services such as utilities or make it unsafe for our employees to travel
to and from work.
These factors could have a material adverse effect on our business and
operating results in the future.
We may experience Year 2000 computer problems that harm our 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.
We currently expect that the Year 2000 issues will not pose significant
problems for the products we offer or our operations. However, we face risks
that our products will not be Year 2000 compliant even though we believe them
to be, or we could experience material adverse effects on our business if the
implementation of new systems we deploy to upgrade our internal systems in the
normal course 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.
24
<PAGE>
The I.R.S. could assert that receipt of Seagate Technology Stock by U.S.
holders is taxable
Although our tax advisor, Ernst & Young LLP, has advised us that the exchange
offer is likely to be tax-free to U.S. stockholders, the Internal Revenue
Service could disagree. There are no court decisions or other authorities
bearing directly on a transaction with facts sufficiently similar to the
exchange offer. It is possible that the Internal Revenue Service could
successfully assert that the receipt of Seagate Technology stock could be
taxable to U.S. stockholders. If the IRS were successful in challenging the
tax-free status of the exchange offer, you would recognize gain or loss equal
to the difference between the fair market value of the Seagate Technology stock
you receive, and your tax basis in the Seagate Software stock you surrender, in
the exchange offer.
Our 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, such as
the recent announcements by IBM, Dell and Hewlett Packard,
. quarterly variations in our results of operations as a result of our
fixed short-term cost structure and volatility in the demand for our
products,
. changes in revenue or earnings estimates by the investment community and
speculation in the press or investment community stemming from our past
performance, concerns about demand for our products or announcements by
our competitors,
. general conditions in the data storage industry or the personal computer
industry such as the substantial decline in demand for disc drive
products that occurred during fiscal 1998,
. sales of large blocks of our stock that may lead to investors' concerns
that our performance will falter and leading those investors to flood the
market to liquidate their holdings of our shares, and
. adverse impacts on our operating results if we receive an adverse
judgment or settlement in any of the legal proceedings to which we are a
party, such as the impact on our earnings in fiscal 1997 from the costs
resulting from the settlement of a lawsuit by Amstrad PLC.
In addition, our stock price may be affected by general market conditions and
domestic and international macroeconomic factors unrelated to our performance.
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 as a result of a variety of factors,
some of which were beyond our control, such as economic conditions in Asia.
25
<PAGE>
Notice Regarding Forward-looking Statements in this Document
We have each made forward-looking statements in this document and in documents
that are attached or incorporated by reference that are subject to risks and
uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Seagate Technology, Seagate
Software, the Network & Storage Management Group business or New VERITAS. When
we use words such as "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. You should note that
many factors, some of which are discussed elsewhere in this document, could
affect our future financial results and cause those results to differ
materially from those we anticipate in the forward-looking statements.
For a discussion of the detailed factors we anticipate will influence our
future results, please refer to the "Risk Factors" section beginning on page 20
and to the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of each of Seagate Technology and Seagate Software,
which are contained in their Forms 10-K/A, 10-Q and 10-Q/A on file with the SEC
and available at http://www.sec.gov.
26
<PAGE>
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, as amended
. Proxy Statement dated September 24, 1998, as amended
. Quarterly Report on Form 10-Q for the quarter ended October 2, 1998, as
amended
. Quarterly Report on Form 10-Q for the quarter ended January 1, 1999
. Current Report on Form 8-K dated October 20, 1998
. 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, as amended
. Quarterly Report on Form 10-Q for the quarter ended October 2, 1998, as
amended
. Quarterly Report on Form 10-Q for the quarter ended January 1, 1999, as
amended
. Current Report on Form 8-K dated October 20, 1998
. the description of the Seagate Software common stock contained in
Amendment No. 1 to the Registration Statement on Form 10 dated December
2, 1997
27
<PAGE>
How to Obtain These Documents
You may request a copy of these filings for either Seagate Technology or
Seagate Software, at no cost, by writing or telephoning:
Bill Rowley
Investor Relations
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, California 95066
(831) 439-2371
[email protected]
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.
28
<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 on pages 1 through 9.
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 NSMG combination. New VERITAS common stock
will be publicly traded on the Nasdaq National Market. On the day the NSMG
combination 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 June 7, 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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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 NSMG combination shall have closed. The conditions to the closing of
the NSMG combination are described in the VERITAS agreement and the
VERITAS proxy materials which are on file with the SEC. These conditions
include, but are not limited to, the following:
. the principal terms of the VERITAS agreement and the NSMG combination
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 NSMG combination 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 NSMG combination not be
subject to any proceedings commenced or overtly threatened by the SEC;
and
. any applicable waiting periods for the NSMG combination 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 NSMG combination 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 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 special exercise instruction letter, then you
will have accepted the exchange offer as to the number of shares reflected on
the stock certificates
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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 special exercise instruction letter
and 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. You must choose how to deliver the special exercise
instruction letter to Seagate Technology, and you also 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 and
your special exercise instruction letter to Seagate Technology at the addresses
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, 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. See page 30.
All questions as to the validity, form, eligibility, 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 irregularities in connection with tenders
of shares of Seagate Software common stock must be cured within the time we
determine.
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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 you, unless you otherwise provide 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 our exchange agent. If you have any
questions or requests for additional copies of this document, please direct
them to the exchange agent as follows:
By mail:
Harris Trust Company of New York
Wall Street Station
P.O. Box 1010
New York, NY 10268-1010
Overnight, courier or hand delivery:
Harris Trust Company of New York
88 Pine Street, 19th Floor
New York, NY 10005
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
We will not make any payment to brokers, dealers or others soliciting
acceptances of the exchange offer.
Transfer taxes
You will not be obligated to pay any transfer tax in connection with the tender
of your Seagate Software shares for exchange.
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Appraisal rights
You 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 page 29.
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 the applicable waiting periods expire, 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. We
cannot predict whether it may determine that we are 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 page 29.
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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 completed
prior to or after 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 U.S., Canada and 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 and 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 upon the opinion of Ernst & Young LLP. The
opinion 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.
In the opinion of Ernst & Young LLP, it is more likely than not the exchange
will qualify as a reorganization under Section 368(a) of the U.S. Internal
Revenue Code in which case:
(1) You would not recognize any gain or loss upon the receipt of Seagate
Technology common stock solely in exchange for such Seagate Software
common stock in the exchange offer;
(2) Your aggregate tax basis of the Seagate Technology common stock you
received in the exchange would be the same as the aggregate tax basis
of the Seagate Software common stock you surrendered;
(3) The holding period of the Seagate Technology common stock you receive
in the exchange would 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 surrendered is
held as a capital asset on the date of the exchange; and
(4) Neither Seagate Technology nor Seagate Software would recognize gain or
loss solely as a result of the exchange.
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Neither Seagate Technology nor Seagate Software has requested a ruling from the
Internal Revenue Service in connection with the exchange. Seagate Technology
and Seagate Software have received an opinion from Ernst & Young LLP to the
effect that, for U.S. federal income tax purposes, the exchange offer is likely
to constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. However, there are no court decisions or other
authorities bearing directly on a transaction with facts sufficiently similar
to the exchange offer. The opinion reflects Ernst & Young's best judgement, and
neither binds the Internal Revenue Service nor precludes the Internal Revenue
Service from adopting a contrary position. The 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.
If the Internal Revenue Service successfully asserted that the exchange offer
is taxable, a Seagate Software stockholder would recognize 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 stock received
in the exchange. The gain you would recognize would constitute long-term
capital gain if you held the Seagate Software common stock you surrendered in
the exchange offer for more than a year. In addition, if you acquired the
Seagate Software common stock you surrendered through an incentive stock
option, the option must have been granted more than two years prior to the date
the exchange offer closes in order for you to receive long-term capital gains
treatment. A Seagate Software stockholder's aggregate basis in the Seagate
Technology common stock received in the exchange 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.
You are urged to consult your own tax advisors in light of your personal
circumstances.
Material Canadian income tax consequences of exchange of shares
The following discussion is based upon an opinion of Ernst & Young LLP as to
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 this
date. Revenue Canada or an applicable Canadian provincial taxing authority is
not precluded from successfully adopting a
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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 described below. 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. For example, on April 15, 1999, the Canadian Department of Finance
issued a press release containing a proposal that, if enacted into law, may
allow Canadian residents participating in the Exchange Offer to receive the
Seagate Technology stock on a tax-free basis.
In the opinion of Ernst & Young LLP, based on the Canadian income tax laws as
of the date of Ernst & Young's opinion, 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 you receive 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 you own 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, you owned divided by
the total number of such shares owned.
You are urged to consult your own tax advisors in light of your personal
circumstances.
Material United Kingdom income tax consequences of exchange of shares
The following discussion is based upon an opinion of Ernst & Young as to the
material U.K. 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.
You should be aware that the following discussion does not deal with all U.K.
tax considerations that may be relevant to you as a U.K. resident in light of
your particular circumstances.
The following discussion is based on Ernst & Young's 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
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affect the accuracy of the statements and conclusions set forth herein. These
could be on either a 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, to the
effect that, for U.K. tax purposes, the proposed transaction will fall within
the rules applicable to reorganizations.
The opinion does not bind the Inland Revenue nor preclude the Inland Revenue
from adopting a contrary position. The 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. In the opinion of Ernst & Young, the exchange offer will
fall within the U.K. tax laws for reorganizations with the result that:
(1) You will not recognize any gain or loss upon receipt of Seagate
Technology common stock solely in exchange for your Seagate Software
common stock in the exchange.
(2) Your aggregate tax basis of the Seagate Technology common stock you
receive in the exchange will be the same as the aggregate tax basis of
the Seagate Software common stock you surrendered in exchange.
(3) The holding period of the Seagate Technology common stock you received
in the exchange will include the period for which the Seagate Software
common stock surrendered in exchange therefor was considered to be held
by you as a capital asset on the date of the exchange.
Income Tax. The opinion concludes that the exchange offer constitutes a company
reorganization, in which case, no income tax charge should arise on the
exchange offer.
You are urged to consult your own tax advisors in light of your personal
circumstances.
Material tax consequences to optionees
The following discussion is based upon the opinions of Seagate Software's tax
advisors and 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 are described here. 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 described below. 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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You are urged to consult your own tax advisors prior to the exercise of any
options in light of your personal circumstances.
U.S. Consequences. In the opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, you will not recognize regular taxable income upon
the exercise of an incentive stock option. 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 under Section 55 of the Internal
Revenue Code.
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 incentive stock options' aggregate
exercise price. If you dispose of the shares more than two years from the grant
date of your incentive stock option and more than one year after the exercise
of your incentive stock option, 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, Wilson Sonsini
Goodrich & Rosati, Professional Corporation is of the opinion that 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. 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 at the time of exercise you
were an employee of Seagate Technology, Seagate Software or any of their
respective subsidiaries any income recognized upon exercise of your
nonstatutory stock option will constitute wages for which Seagate Software will
be required to withhold taxes.
Canadian Consequences. This section applies to a Canadian resident employee of
Seagate Software or its Canadian subsidiaries who by virtue of such employment
obtained a stock option to acquire Seagate Software common stock. In the
opinion of Ernst & Young LLP, a Canadian resident employee who exercises a
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, as
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 you also own 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 you owned divided by the total number of such shares owned.
Where you include in your 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 your taxable income for the year of the exercise
provided certain conditions are met. A Canadian resident
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employee who exercises a stock option to acquire Seagate Software common stock
should be entitled to this deduction.
You will be required to pay income tax, Canada Pension Plan premiums or Quebec
Pension Plan premiums on this employment benefit arising from the exercise of
the stock option.
U.K. Consequences.
Options Obtained By Reason Of Employment. In the opinion of Ernst & Young,
where you acquired the options as a director or employee, you 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 you
liable for U.K. capital gains tax.
Options Not Obtained By Reason Of Employment. In the opinion of Ernst & Young,
where you did not acquire the options as a director or employee, the exercise
of your options will not result in either a U.K. income tax or U.K. capital
gains tax liability.
Any gain, which equals the excess of sale proceeds over the exercise price,
arising on the subsequent sale of the shares will make you liable for U.K.
capital gains tax.
Accounting treatment
The exchange of Seagate Technology shares for Seagate Software shares you have
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.
Seagate Technology shares exchanged for Seagate Software shares acquired
through the exercise of employee stock options and you have 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 you paid 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 NSMG combination and the TeleBackup combination
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 March 31, 1999, there were 251,890,067 shares of Seagate Technology
common stock outstanding held of record by 6,825 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 March 31, 1999, 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 generally
increase or decrease the number of shares of such series 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 completed, 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
41
<PAGE>
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.
42
<PAGE>
Information About Seagate Technology
General
Seagate Technology designs, manufactures and markets products for storage,
retrieval and management of data on computer systems and other systems which
receive, store and transmit data. These products include disc drives and disc
drive components, tape drives and software.
Seagate Technology designs, manufactures and markets a broad line of disc
drives, devices which store data in computers in electronic form. These
products are used in computer systems ranging from desktop personal computers
to large, sophisticated enterprise computers. 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. 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. 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. We also assemble certain
of the key components for use in our products. 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 investments in or
acquired other companies. 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 our product line as
a result of our 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 NSMG combination, those optionees of
Seagate Software who will become employees of New VERITAS and our Seagate
Software subsidiary will own an approximately 40% interest on a fully-diluted
basis of New VERITAS.
Seagate Technology's executive offices are located at 920 Disc Drive, Scotts
Valley, California, 95066, and its telephone number is (831) 438-6550.
43
<PAGE>
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 Seagate
Technology'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 March 31,
1999, there were 6,825 stockholders of record of Seagate Technology's common
stock.
<TABLE>
<CAPTION>
High Low
-------- ---------
<S> <C> <C>
Fiscal 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
Fiscal 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
Fiscal 1999:
First Quarter................................................ $27 3/8 $16 1/8
Second Quarter............................................... 34 1/2 19 13/16
Third Quarter................................................ 44 1/4 25 5/8
Fourth Quarter (to April 19, 1999)........................... 31 3/4 26 1/8
</TABLE>
On April 19, 1999, the last sales price of Seagate Technology common stock, as
reported by the New York Stock Exchange, was $26 13/16 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 of the exchange offer. 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 closed.
44
<PAGE>
Information About Seagate Software and the Information Management Group
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 business software 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 to copy, store, retrieve, move,
protect and schedule retrieval and release of electronically stored data.
Seagate Software will contribute the Network & Storage Management Group to New
VERITAS in the NSMG combination.
The Information Management Group's products permit analysis and interpretation
of data in order to make business decisions. An important component of these
products is technology that enables the user to create reports to present that
analysis and interpretation to others. After the closing of the NSMG
combination, 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 18 countries worldwide. After the NSMG
combination, Seagate Software will have 32 offices and operations in 17
countries. Seagate Software is a majority-owned and consolidated subsidiary of
Seagate Technology. As of March 31, 1999, Seagate Technology held approximately
98.2% of all outstanding shares of Seagate Software. The remaining shares of
Seagate Software are held by current and former employees, directors and
consultants of Seagate Software, Seagate Technology and their subsidiaries. In
addition, options to purchase 11,136,215 shares of Seagate Software common
stock were outstanding as of March 31, 1999.
Products
Following the NSMG combination, the Information Management Group will continue
to offer a breadth of business software products:
. 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 software products.
. Seagate Crystal Info(TM)--Provides decision-makers with shared access to
reporting and analysis capabilities, so users get fast access to data
without having to interact with the database. Whether using a Web browser
or Windows, users can schedule, view and analyze reports or create
multiple views of data to expose trends and provide comparative
information. This product contains an enterprise-friendly multi-tier
architecture to lower network traffic and increase user productivity.
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<PAGE>
. 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 multiple news of data to expose trends and
provide comparative information to focus on key business issues and
accurately reflect business processes. These applications allow
enterprises to analyze the increasing volumes of data and guide users to
the information to improve decision making.
The Information Management Group will also continue to offer network and
storage management products by virtue of ongoing agreements with New VERITAS.
The 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, The Information Management
Group does not sell or transfer title to its software products to customers.
The Information Management Group enters into both object-code only and source-
code licenses of its products. Under the 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
The Information Management Group utilizes a direct sales force and certain
indirect sales channels, such as distributors and original equipment
manufacturer relationships, for sales of its selected products to end users.
These distributors and original equipment manufacturer may also sell other
products that are complementary to or compete with those of the Information
Management Group. The 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 original equipment manufacturer will not place a
higher priority on competing products. Agreements with its distributors and
original equipment manufacturer are generally non-exclusive and may be
terminated by either party without cause.
The 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. The
Information Management Group adapts certain products for foreign markets,
including translation and documentation, and the Information Management Group
prepares marketing and sales support programs accordingly. The 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.
The 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
46
<PAGE>
in trade and technical publications, on-line advertising on the World Wide
Web, cooperative marketing with distributors and resellers, participation in
seminars and tradeshows, mailings to end users and other public relations
efforts. The 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 customer, Ingram Micro, accounted for 12.2%, 8.7%, 13.9% and
9.2% of the Information Management Group total revenues in fiscal 1996, 1997
and 1998 and the six months ended January 1, 1999, respectively. Indirect
revenues, which include sales to distributors and original equipment
manufacturers, were 60.2%, 32.2%, 40.1% and 35.0% of total revenues during
fiscal 1996, 1997 and 1998 and the six months ended January 1, 1999,
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 six months ended January 1, 1999,
the Information Management Group generated export revenues from the United
States of approximately $1.1 million, $3.4 million, $8.3 million and $5.5
million, respectively. The Information Management Group's revenues outside of
the Americas were primarily denominated in the U.S. dollar, and accordingly
the 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
The 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 the
Information Management Group's products. Certain technical support groups also
offer seven-day, 24-hour toll-free telephone services. The 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.
The 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 segment of the software market in which the Information Management Group
competes is comprised of numerous competitors and the Information Management
Group expects competition to increase. The 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 software products that assist user to analyze and interpret data to
make business decisions. Many of Information Management Group's current and
prospective competitors have
47
<PAGE>
significantly greater financial, technical and marketing resources than the
Information Management Group. In addition, many prospective customers may have
the internal capability to implement software solutions that assist users to
analyze and interpret data to make business decisions.
The competitive factors affecting the market for the Information Management
Group's 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.
The Information Management Group believes that it currently competes
effectively with respect to these factors. The 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, the 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 the 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, the 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. The Information
Management Group has no U.S. or foreign patents, has one patent application
pending in the U.S., and has no foreign patent applications pending.
The Information Management Group's license agreements have restrictions in
place to protect and defend its intellectual property. The 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, the Information Management Group has an
ongoing trademark registration program in which it registers certain of its
product names, slogans, and logos in the U.S. and in some foreign countries.
48
<PAGE>
Employees
As of January 1, 1999, the Information Management Group employed 887 persons
and, following the closing of the NSMG combination, expects to employ
approximately 1,000 persons. The 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 the Information Management Group's employees are represented by a labor
union or are the subject of a collective bargaining agreement. The Information
Management Group has never experienced a work stoppage and believes that its
employee relations are good.
Facilities
Seagate Software's executive offices are located in Scotts Valley, California.
Principal facilities are located in Florida, California, Canada and the U.K. 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 and its Information Management Group business following the NSMG
combination:
<TABLE>
<CAPTION>
Square
Location Feet
-------- -------
<S> <C>
North America
California
Southern California.............................................. 2,556
Northern California.............................................. 3,364
Colorado.......................................................... 6,306
Mid-Continent..................................................... 7,886
Northeast U.S..................................................... 9,140
Southeast U.S..................................................... 8,632
Other Domestic.................................................... 320
Canada............................................................ 99,840
-------
Total North America.............................................. 138,044
Europe
England........................................................... 30,776
Germany........................................................... 3,594
France............................................................ 5,250
Other Europe...................................................... 7,963
-------
Total Europe..................................................... 47,583
Asia
Australia......................................................... 12,180
Singapore......................................................... 2,125
Other Pacific Rim................................................. 5,675
-------
Total Asia....................................................... 19,980
-------
Total.............................................................. 205,607
=======
</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
49
<PAGE>
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 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 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 March 31, 1999, there were 316 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 information with respect to the beneficial
ownership of Seagate Software's outstanding common stock and preferred stock on
an as-converted basis, sum of which is the common equivalent shares, as of
March 31, 1999 for:
. each person who we know holds more than 5% of Seagate Software's common
equivalent shares,
. Seagate Software's most highly compensated executive officers
individually,
. Seagate Software's directors individually and
. Seagate Software's directors and executive officers as a group.
50
<PAGE>
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. To our knowledge, the persons named in the
table have sole voting and investment power with respect to all shares shown as
beneficially owned by them unless we indicate otherwise below and subject to
community property laws where applicable,
We have calculated percentage ownership based on 55,706,764 common equivalent
shares as of March 31, 1999. We have included in each person's beneficial
ownership that person's options to purchase Seagate Software common stock that
he or she can exercise within 60 days after March 31, 1999. However, we have
not included any other person's options for the purpose of computing percentage
ownership.
To compute the number of common equivalent shares outstanding we have assumed
that Seagate Software's Series A preferred stock is converted on a 1:1 basis to
Seagate Software common stock. We have also assumed that the total number of
shares of Series A preferred stock includes 7,200,000 shares issuable upon the
cancellation of the outstanding share of Seagate Software's special voting
preferred stock, because those shares could be issued at any time upon the
demand Seagate Technology International, a wholly owned subsidiary of Seagate
Technology, that holds the special voting preferred stock.
<TABLE>
<CAPTION>
Number of Percent of
Common Common
Equivalent Equivalent
Stockholder Shares Shares
----------- ---------- ----------
<S> <C> <C>
Seagate Technology,
Inc.................... 54,695,833 98.2%
920 Disc Drive
Scotts Valley, CA 95066
Stephen J. Luczo........ 54,761,833 98.3
Donald L. Waite......... 54,715,833 98.2
Gary B. Filler.......... 54,712,833 98.2
Lawrence Perlman........ 54,712,833 98.2
Ellen E. Chamberlain.... 46,600 *
Terence R. Cunningham... 420,000 *
Gregory B. Kerfoot...... 170,000 *
All Seagate Software
directors and executive
officers
as a group (7
persons)............... 55,452,433 99.5
</TABLE>
- --------
* Less than one percent.
Seagate Technology's beneficial ownership excludes 120,000 shares of Seagate
Software's common stock held by or issuable pursuant to options granted to Mr.
Luczo, Mr. Waite, Mr. Filler and Mr. Perlman over which Seagate Technology does
not possess sole or shared voting or investment control. Therefore Seagate
Technology disclaims beneficial ownership of those shares.
Beneficial ownership for Mr. Luczo, Mr. Waite, Mr. Filler and Mr. Perlman
includes 54,695,833 common equivalent shares beneficially owned by Seagate
Technology to which each of them may be deemed to have shared power to vote or
dispose in his capacity as an officer and/or director of Seagate Technology.
However, each of Mr. Luczo, Mr. Waite, Mr. Filler and Mr. Perlman disclaim
beneficial ownership of those shares.
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<PAGE>
With respect to the beneficial ownership of the following persons, the security
ownership table above includes exercisable options in the following amounts:
<TABLE>
<CAPTION>
Name Options
---- -------
<S> <C>
Stephen J. Luczo................................................... 66,000
Gary B. Filler..................................................... 17,000
Lawrence Perlman................................................... 17,000
Terence R. Cunningham.............................................. 20,000
Ellen E. Chamberlain............................................... 34,600
Gregory B. Kerfoot................................................. 170,000
All directors and officers as a group.............................. 324,600
</TABLE>
Mr. Waite and Mr. Cunningham hold 6,000 and 250,000 shares of Seagate Software
common stock that are subject to repurchase by Seagate Software. Seagate
Software's right to repurchase those shares expires on various dates through
2001.
Based on the number of outstanding shares of Seagate Technology common stock as
of March 31, 1999 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's 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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<PAGE>
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 six months ended January 1, 1999, and
the Unaudited Pro Forma Condensed Balance Sheet as of January 1, 1999. We refer
to these statements collectively as 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 six months ended January 1, 1999, give 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 January 1, 1999. 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 January 1, 1999 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 42% and Seagate Software's basis in the
assets exchanged also reduced by approximately 42%. Because Seagate Software
will own approximately 42% of New VERITAS, on an outstanding share basis prior
to consideration of shares to be issued in the TeleBackup combination, 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' net assets. The results of
New VERITAS will include the results of TeleBackup if the TeleBackup
combination described below is consummated. The Seagate Technology unaudited
pro forma statements have been prepared assuming the TeleBackup combination is
accounted for using the purchase method of accounting.
In addition to the above, New VERITAS plans to complete the TeleBackup
combination 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
53
<PAGE>
personal computer-based computer systems. The Seagate Technology unaudited pro
forma condensed financial statements include the impact of the TeleBackup
combination by New VERITAS through the issuance of 1,555,000 shares of New
VERITAS common stock determined as of March 31, 1999 using the closing price of
VERITAS common stock of $80.75 per share on March 31, 1999. Under the terms of
the TeleBackup combination, the number of shares to be issued will increase if
the average price per share of VERITAS common stock for the ten day period
ending two days before the closing date falls below $45.44 per share.
In addition, TeleBackup's outstanding options at the closing date will be
exchanged for options to purchase New VERITAS shares. As of March 31, 1999,
options to purchase 51,318 shares of New VERITAS common stock would be
exchanged for the outstanding options to purchase TeleBackup common stock. The
value of options was determined by estimating their fair value as of March 31,
1999 using the Black-Scholes option pricing model. This value has been included
as a part of the estimated price.
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 Technology 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 Seagate Software's 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.
Seagate Software's board of directors will make the ultimate decision on the
value of the Information Management Group business. The board of directors'
determination will be based on a number of factors, including the Information
Management Group business' historical and project revenue, earnings and cash
flow, as well as other factors including limited financial analyses performed
by their financial advisor, Morgan Stanley & Co., Incorporated.
Seagate Technology will not repurchase unvested options to purchase common
stock of Seagate Software. Unvested Seagate Software stock options owned by the
Network & Storage Management Groups' employees will be exchanged for unvested
New VERITAS stock options and unvested Seagate Software stock options owned by
the Information Management Group and Seagate Technology employees will remain
as unvested Seagate Software stock options. In addition, immediately prior to
the NSMG combination, the vesting provision of all Seagate Software options
54
<PAGE>
will be accelerated to 1/48th per month retroactive to the date of grant. The
option terms will be unchanged other than for the acceleration. Seagate
Software estimates that options to purchase 1,790,893 shares of Seagate
Software common stock, including options to purchase 885,922 shares held by
Network & Storage Management Group business employees, will be accelerated.
Because the accelerated options are held only by current employees of Seagate
Software, and because options held by Network & Storage Management Group
business employees will be exchanged into options in New VERITAS, no
compensation expense will be recorded by Seagate Software.
As a result of the exchange of Seagate Software shares for Seagate Technology
shares pursuant to the exchange offer, the NSMG combination, and the TeleBackup
combination, Seagate Technology preliminarily estimates that it will record a
pre-tax gain of approximately $1,595 million and expenses related to write-offs
of in-process research and development of approximately $93.5 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 NSMG
combination, the number of shares and average exercise prices per share for
VERITAS and Seagate Software stock outstanding prior to the NSMG combination
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
January 1, 1999, 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 NSMG combination 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 NSMG combination and the TeleBackup combination 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/A for the
year ended July 3, 1998 incorporated by reference into this document.
55
<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 13 5 (6) 32
Restructuring........... 347 347
Unusual items........... (22) (22)
------ ---- ----- --- ------
Total operating
expenses........... 7,505 165 6 7,346
------ ---- ----- --- ------
Income (loss) from
operations............. (686) 10 (6) (702)
Equity in income (loss)
of New VERITAS, net of
amortization of related
intangibles............ -- -- 27 (1) (347)
(366) (2)
(8) (3)
Interest and other,
net.................... (18) (1) (17)
------ ---- ----- --- ------
Income (loss) before
income taxes........... (704) 9 (347) (6) (1,066)
Benefit from (provision
for) income taxes...... 174 (6) 136 (4) 319
3 (5)
------ ---- ----- --- ------
Net income (loss)....... $ (530) $ 3 $(208) $(6) $ (747)
====== ==== ===== === ======
Net income (loss) per
share:*
Basic................. $(2.17) $(3.01)
Diluted............... $(2.17) $(3.01)
Number of shares used in
per share
computations:*
Basic................. 243.6 247.8
Diluted............... 243.6 247.8
</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.
56
<PAGE>
Seagate Technology Unaudited Pro Forma
Condensed Statement of Operations
Six Months Ended January 1, 1999
(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................. $3,354 $107 $ $ $ 3,247
Cost of sales........... 2,605 9 2,596
Marketing and
administrative......... 266 51 215
Product development..... 297 18 279
Amortization of goodwill
and other intangibles.. 20 5 3 (6) 18
Unusual items........... 78 78
------ ---- ---- --- -------
Total operating
expenses........... 3,266 83 3 3,186
------ ---- ---- --- -------
Income (loss) from
operations............. 88 24 (3) 61
Equity in income (loss)
of New VERITAS, net of
amortization of related
intangibles............ -- -- 22 (1) (165)
(183)(2)
(4)(3)
Interest and other,
net.................... 36 36
------ ---- ---- --- -------
Income (loss) before
income taxes........... 124 24 (165) (3) (68)
Benefit from (provision
for) income taxes...... (50) (11) 64 (4) 27
2 (5)
------ ---- ---- --- -------
Net income (loss)....... $ 74 $ 13 $(99) $(3) $ (41)
====== ==== ==== === =======
Net income (loss) per
share:*
Basic................. $ 0.30 $ (0.16)
Diluted............... $ 0.30 $ (0.16)
Number of shares used in
per share
computations:*
Basic................. 245.0 249.2
Diluted............... 249.1 249.2
</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.
57
<PAGE>
Seagate Technology Unaudited Pro Forma
Condensed Balance Sheet
As of January 1, 1999
(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........... $ 926 $ $ $12 (12) $ 938
Short-term
investments........... 1,291 1,291
Accounts receivable,
net................... 832 24 808
Inventories............ 410 1 409
Deferred income taxes.. 221 221
Other current assets... 133 25 108
------ ---- ------ --- ------
Total current assets... 3,813 50 12 3,775
Property, equipment and
leasehold improvements,
net.................... 1,678 11 1,667
Goodwill and other
intangibles, net....... 144 35 25 (11) 134
Equity investment in New
VERITAS................ -- -- 1,555 (7) 1,555
Other assets............ 195 195
------ ---- ------ --- ------
Total assets........... $5,830 $ 96 $1,555 $37 $7,326
====== ==== ====== === ======
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....... $ 610 $ 4 $ $ $ 606
Accrued employee
compensation.......... 211 11 200
Accrued expenses....... 657 9 648
Accrued income taxes... 18 13 5
Current portion of
long-term debt........ 1 1
Deferred revenue....... 6 6 --
------ ---- ------ --- ------
Total current
liabilities........... 1,503 43 -- 1,460
Deferred income taxes... 481 1 613 (7) 2 (11) 1,095
Long-term debt.......... 703 703
Other liabilities....... 177 177
------ ---- ------ --- ------
Total liabilities...... 2,864 44 613 2 3,435
------ ---- ------ --- ------
Stockholders'/Group
Equity:
Common stock........... 3 3
Additional paid-in
capital............... 1,937 111 (11) 2,064
12 (12)
4 (7)
Retained Earnings...... 1,301 1,595 (7) (88) (11) 2,099
(613) (7)
(92) (9)
(4) (8)
Group Equity........... 52 52 (10) --
Accumulated other
comprehensive income.. 1 1
Deferred compensation.. (46) (46)
Treasury Common Stock.. (230) (230)
------ ---- ------ --- ------
Total stockholders'
equity/Group Equity... 2,966 52 942 35 3,891
------ ---- ------ --- ------
Total liabilities and
stockholders'
equity/Group Equity... $5,830 $ 96 $1,555 $37 $7,326
====== ==== ====== === ======
</TABLE>
See accompanying Notes to Seagate Technology Unaudited Pro Forma
Condensed Financial Statements.
58
<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 34.6 million shares of New
VERITAS common stock representing an approximate 42% interest in New VERITAS on
an outstanding share basis, approximately 36% on a fully diluted basis. The
number of shares to be received in the exchange is based on the capitalization
of Seagate Software and VERITAS as of March 31, 1999 and the closing price of
VERITAS common stock of $80.75 per share on March 31, 1999. 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.
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 42% 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 58% of the fair
value of the New VERITAS stock received and approximately 58% 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. 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
59
<PAGE>
Notes to Seagate Technology
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
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. 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 March 31, 1999 using the closing price of VERITAS
common stock of $80.75 on March 31, 1999. The actual value of the TeleBackup
combination 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 combination, the number of shares to be issued will
increase if the average price per share of VERITAS common stock for a ten day
period ending two days before the closing date falls below $45.44 per share.
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:
Contribution of the Network & Storage Management Group Business to New VERITAS
(in thousands)
<TABLE>
<S> <C>
Computation of pro rata gain
Fair value of shares received................................... $2,794,469
Times: Pro rata percentage to be accounted for at fair value ... 58.15%
----------
Adjusted fair value of securities received...................... $1,625,087
----------
Book value of NSMG.............................................. $ 51,654
Times: Pro rata percentage to be accounted for at fair value.... 58.15%
----------
Book value exchanged............................................ $ 30,039
----------
Pro rata gain................................................... $1,595,048
==========
Computation of investment in New VERITAS
Book value of NSMG.............................................. $ 51,654
Times: Pro rata percentage to be accounted for at book value.... 41.85%
----------
Portion of investment in New VERITAS with no step up in basis... $ 21,615
Plus: Adjusted fair value of securities received................ 1,625,087
----------
Investment in New VERITAS....................................... $1,646,702
==========
</TABLE>
60
<PAGE>
Notes to Seagate Technology
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
<TABLE>
<CAPTION>
Annual
Amortization Amortization
Amount Life of Intangibles
---------- ------------ --------------
<S> <C> <C> <C>
Allocation of Investment in VERITAS:
Tangible assets................... $ 75,507
Intangible assets:
Distribution channel............ 8,997 4 years $ 2,249
Developed technology............ 47,286 4 years 11,822
Trademark and workforce......... 16,697 4 years 4,174
In-process research and
development.................... 42,641
Allocation of Investment in the
Network and Storage Management
Group:
Tangible assets................... 16,763
Intangible assets:
Distribution channel............ 66,285 4 years 16,571
Developed technology............ 94,531 4 years 23,633
Trademark and workforce......... 13,977 4 years 3,494
In-process research and
development.................... 49,462
Goodwill.......................... 1,214,556 4 years 303,639
---------- --------
$1,646,702 $365,582
========== ========
Allocation of Investment in
Telebackup:
Tangible assets................... $ 755
Intangible assets:
Distribution channel............ 1,314 4 years $ 329
Developed technology............ 2,711 4 years 678
Trademark and workforce......... 670 4 years 168
In-process research and
development.................... 780
Goodwill........................ 49,158 4 years 12,290
Deferred tax liability.......... (1,294)
---------- --------
$ 54,094 $ 13,465
========== ========
</TABLE>
The equity interest of Seagate Software in the amortization of Telebackup
intangibles will be recorded by Seagate Software net of the related New VERITAS
statutory tax rate of approximately 40 percent.
61
<PAGE>
Notes to Seagate Technology
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
Compensation Expense Accounting
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
Value of Seagate Software common stock per share.................... $ 52.28
Less: Average exercise price of Seagate Software stock options...... 6.70
----------
Compensation expense per stock option............................... 45.55
Times: Seagate Software stock options to be exchanged for Seagate
Technology common stock............................................ 1,714,492
----------
Compensation expense for Seagate Software stock options exercised
and exchanged for Seagate Technology common stock.................. $ 78,095
----------
Seagate software stock held for less than 6 months and exchanged for
Seagate Technology stock........................................... 163,033
----------
Times: Value of Seagate Software common stock per share............. $ 52.28
----------
Compensation expense for Seagate software stock held for less than 6
months and exchanged for Seagate Technology stock.................. $ 8,524
----------
Total Compensation expense.......................................... $ 86,679
==========
</TABLE>
<TABLE>
<CAPTION>
Amount
--------------
<S> <C>
Value for Seagate Software common stock
Market value of VERITAS common stock......................... $ 80.75
Total New VERITAS shares and options to be received in the
transaction............................................... 37,978,849
--------------
Network & Storage Management Group valuation................. $3,066,792,077
Information Management Group valuation as determined by the
board of directors ......................................... 325,000,000
Total proceeds from assumed exercise of Seagate Software
stock options............................................... 102,963,694
--------------
Seagate Software valuation..................................... $3,494,755,771
==============
Divided by: Total Seagate Software shares and options
outstanding at January 1, 1999................................ 66,840,979
==============
Value of Seagate Software common stock......................... $ 52.28
==============
</TABLE>
Seagate Software intends to accelerate vesting on 87,395 shares of Seagate
Software common stock held by certain employees. In connection with the
acceleration, Seagate Software expects to record additional compensation
expense of $3,867,000 in the period such acceleration is granted.
62
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
Acquisition of Minority Interest of Seagate Technology
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Annual
Amortization Amortization
Amount Life of Intangibles
-------- ------------ --------------
<S> <C> <C> <C>
Allocation of minority interest purchase
price to intangible assets of Seagate
Software:
Distribution channel.................. $ 1,133 4 years $ 283
Developed technology.................. 2,134 4 years 534
Trademarks and workforce.............. 461 4 years 115
In-process research and development... 1,386
Goodwill.............................. 21,151 4 years 5,287
Deferred tax liability................ (1,491)
-------- ------
Total............................... $ 24,774 $6,219
======== ======
Value of minority interests:
Options held by Seagate Software
consultants........................... 32,337
Average exercise price of Seagate
Software options...................... $ 6.70
--------
Proceeds from assumed exercise of
Seagate Software options............. $ 217
========
Shares of Seagate Software vested by
employees held for more than
6 months.............................. 445,632
Options held by Seagate Software
consultants........................... 32,337
--------
Shares and options of Seagate
Software............................. 477,969
Value of Seagate Software common stock
per share............................. $ 52.28
--------
Value of Seagate Software common
stock................................ $ 24,990
Less: Proceeds from assumed exercise of
Seagate Software options.............. 217
--------
Minority interest purchase price....... $ 24,774
========
Divided by: Market value of Seagate
Technology common stock............... $ 29.56
--------
Number of Seagate Technology shares
issued for the minority interest...... 838,084
========
</TABLE>
Method for allocating purchase price
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
63
<PAGE>
Notes to Seagate Technology
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
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 (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 original equipment manufacturer
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.
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.
64
<PAGE>
Notes to Seagate Technology
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
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 NSMG combination, and the
TeleBackup combination had all occurred at the beginning of fiscal 1998.
The pro forma weighted average shares outstanding assumes the following (in
millions):
<TABLE>
<CAPTION>
Year Six Months
Ended Ended
July 3, 1998 January 1, 1999
------------ ---------------
<S> <C> <C>
Weighted average historical shares outstanding... 243.6 245.0
Shares assumed issued pursuant to the exchange
offer........................................... 4.2 4.2
----- -----
Total weighted average shares outstanding........ 247.8 249.2
===== =====
</TABLE>
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 NSMG combination and the
TeleBackup combination.
(2) To reflect Seagate Software's interest in the amortization of
intangibles and goodwill resulting from to the NSMG combination.
(3) To reflect Seagate Software's interest in the amortization of
intangibles and goodwill resulting from the TeleBackup combination.
(4) To reflect the change in book/tax basis differences related to the
investment in New VERITAS.
(5) To reflect the provision for income taxes for Seagate Software's
equity in the amortization of intangibles and goodwill related to the
TeleBackup combination.
(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 reflect investment in New VERITAS including step-up in basis of
assets and related deferred tax liability.
65
<PAGE>
Notes to Seagate Technology
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
(8) Contributed capital and compensation expense related to the
acceleration of vesting of shares that would otherwise have expired.
(9) Write-off of in-process research and development resulting from the
NSMG combination.
(10) To eliminate the Network & Storage Management Group's group equity.
(11) To record purchased in-process research and development, compensation
expense, 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.
(12) To record proceeds from vested options assumed exercised prior to
purchase of minority interest of Seagate Software common stock by
Seagate Technology.
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 $5
million and $0.02 per share, respectively. Seagate Technology's pro forma net
loss and net loss per share for the six months ended January 1, 1999 would be
reduced by approximately $2 million and $0.01 per share, respectively. Seagate
Technology's pro forma net revenues for the six months ended January 1, 1999,
total assets, and stockholders' equity would remain unchanged.
66
<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 six months ended January 1, 1999, and the
Seagate Software unaudited pro forma condensed balance sheet as of January 1,
1999. The Seagate Software unaudited pro forma condensed financial statements
give effect to the contribution by Seagate Software of the Network & Storage
Management Group to New VERITAS in exchange for shares of New VERITAS and the
issuance by New VERITAS of stock options to the Network & Storage Management
Group employees who become employees of New VERITAS. The Seagate Software
unaudited pro forma condensed statements of operations for the year ended July
3, 1998, and for the six months ended January 1, 1999, give effect to the
transactions 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 gives effect
to the transactions as if it had taken place on January 1, 1999.
The Seagate Software unaudited pro forma condensed statements of operations
include the historical results for Seagate Software less the historical
financial results of the Network & Storage Management group plus Seagate
Software's approximate 42% equity interest, on an outstanding share basis prior
to consideration for the proposed TeleBackup combination, in the combined pro
forma results of New VERITAS for the same periods as adjusted for the
difference in the carrying amount of Seagate Software's investment and its
equity interest in the underlying net assets of New VERITAS. 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 January 1, 1999 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 42% and Seagate Software's
basis in the assets exchanged also reduced by 42%. Because Seagate Software
will own 42% 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. 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' net assets. The results
of New VERITAS will include the results of TeleBackup if the TeleBackup
combination described elsewhere in this document is consummated. The Seagate
Software unaudited pro forma statements have been prepared assuming the
TeleBackup combination is consummated using the purchase method of accounting.
In addition to the above, in a separate offering, Seagate Technology will offer
to purchase certain outstanding shares of Seagate Software common stock in
exchange for Seagate Technology common
67
<PAGE>
Seagate Software
Unaudited Pro Forma Condensed Financial Statements
stock. The accompanying Seagate Software unaudited pro forma condensed
statements of operations for the year ended July 3, 1998 and the six months
ended January 1, 1999, reflect the purchase of these shares 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 January 1, 1999.
As a result of the contribution of the Network & Storage Management Group to
New VERITAS and the issuance of Seagate Technology common stock pursuant to the
exchange offer, Seagate Software preliminarily estimates that it will record a
pre-tax gain of approximately $1,595 million and expenses related to write-offs
of in-process research and development of approximately $93.5 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 purchase of Seagate
Software shares by Seagate Technology. 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 formal valuation by an independent third party.
The Seagate Software unaudited pro forma condensed balance sheet as of January
1, 1999, 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 NSMG combination
and the TeleBackup combination are consummated.
The Seagate Software unaudited pro forma condensed financial statements have
not given effect to a liquidation event resulting from the disposition of the
Network & Storage Management Group business. Seagate Software's board of
directors and officers and Seagate Technology have agreed that Seagate Software
will continue to operate its Information Management Group business in addition
to holding its interest in New VERITAS. As a result, a liquidation of Seagate
Software would be inconsistent with the operating plan of Seagate Software. In
anticipation of a favorable vote by Seagate Software shareholders to amend the
liquidation provisions so that they will not apply to the NSMG combination,
payments to the Series A preferred shareholders and special voting preferred
stockholders have not been given pro forma effect.
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/A 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.
68
<PAGE>
Seagate Software Unaudited Pro Forma
Condensed Statement of Operations
Year Ended July 3, 1998
(in thousands, except share and 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 7,143 534 (3.f) 6,662
-------- -------- --------- ------- ---------
Total cost of
revenues........... 50,460 23,335 534 27,659
-------- -------- --------- ------- ---------
Gross profit............ 242,766 151,711 (534) 90,521
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.......... 16,201 13,236 5,685 (3.f) 8,650
-------- -------- --------- ------- ---------
Total operating
expenses........... 236,641 142,281 5,685 100,045
-------- -------- --------- ------- ---------
Income (loss) from
operations............. 6,125 9,430 (6,219) (9,524)
Equity in income (loss)
of New VERITAS, net of
amortization of
purchased intangibles.. -- -- 26,924 (3.a) (346,737)
(365,582) (3.b)
(8,079) (3.c)
Interest and other,
net.................... (10) (713) 703
-------- -------- --------- ------- ---------
Income (loss) before
income taxes........... 6,115 8,717 (346,737) (6,219) (355,558)
Benefit from (provision
for) income taxes...... (15,385) (5,861) 135,463 (3.d) 373 (3.g) 129,544
3,232 (3.e)
-------- -------- --------- ------- ---------
Net income (loss)....... $ (9,270) $ 2,856 $(208,042) $(5,846) $(226,014)
======== ======== ========= ======= =========
Net income (loss) per
common share:*
Basic................. $ (56.33) $ (88.40)
Diluted............... $ (56.33) $ (88.40)
Number of shares used in
per share
computations:*
Basic................. 164,571 2,556,745
Diluted............... 164,571 2,556,745
</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.
69
<PAGE>
Seagate Software Unaudited Pro Forma
Condensed Statement of Operations
Six Months Ended January 1, 1999
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------------------
Less:
the Network
& Storage Equity Interest Purchase of
Seagate Management in Operations Minority
Software Group of New VERITAS Interest Pro Forma
---------- ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Licensing............. $ 133,462 $97,671 $ $ $ 35,791
Licensing from Seagate
Technology........... 4,006 3,802 204
Maintenance, support
and other............ 29,462 5,927 23,535
---------- ------- -------- ------- ---------
Total revenues...... 166,930 107,400 59,530
Cost of revenues:
Licensing............. 6,160 5,025 1,135
Licensing from Seagate
Technology........... 274 272 2
Maintenance, support
and other............ 12,317 1,733 10,584
Amortization of
developed
technologies......... 5,713 1,580 267 (3.f) 4,400
---------- ------- -------- ------- ---------
Total cost of
revenues........... 24,464 8,610 267 16,121
---------- ------- -------- ------- ---------
Gross profit............ 142,466 98,790 (267) 43,409
Operating expenses:
Sales and marketing... 75,896 40,975 34,921
Research and
development.......... 26,341 17,903 8,438
General and
administrative....... 17,265 10,446 6,819
Amortization of
goodwill and other
intangibles.......... 6,736 5,152 2,843 (3.f) 4,427
---------- ------- -------- ------- ---------
Total operating
expenses........... 126,238 74,476 2,843 54,605
---------- ------- -------- ------- ---------
Income (loss) from
operations............. 16,228 24,314 (3,110) (11,196)
Equity in income (loss)
of New VERITAS, net of
amortization of
purchased intangibles.. -- -- 21,734 (3.a) (165,097)
(182,791) (3.b)
(4,040) (3.c)
Interest and other,
net.................... 1,137 229 908
---------- ------- -------- ------- ---------
Income before income
taxes.................. 17,365 24,543 (165,097) (3,110) (175,385)
Benefit from (provision
for) income taxes...... (8,878) (11,220) 64,422 (3.d) 186 (3.g) 68,566
1,616 (3.e)
---------- ------- -------- ------- ---------
Net income (loss)....... $ 8,487 $13,323 $(99,059) $(2,924) $(106,819)
========== ======= ======== ======= =========
Net income (loss) per
common share:*
Basic................. $ 36.11 $ (41.78)
Diluted............... $ 0.14 $ (41.78)
Number of shares used in
per share
computations:*
Basic................. 235,012 2,556,745
Diluted............... 61,572,394 2,556,745
</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 Forma Condensed
Financial Statements.
70
<PAGE>
Seagate Software Unaudited Pro Forma
Condensed Balance Sheets
As of January 1, 1999
(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.................. $ 848 $ $ $11,704 (3.q) $ 12,552
Accounts receivable,
net.................. 59,292 23,706 35,586
Inventories........... 1,261 679 582
Loan receivable from
Seagate Technology
and affiliates....... 18,276 21,011 2,735 (3.h) --
Other current assets.. 5,863 4,205 5,945 (3.i) 7,603
--------- ------- ---------- ------- ----------
Total current assets.. 85,540 49,601 8,680 11,704 56,323
Equipment and
leasehold
improvements, net.... 17,031 11,455 5,576
Goodwill and other
intangibles, net..... 44,677 34,891 24,879 (3.o) 34,665
Equity investment in
New Veritas.......... -- -- 1,554,598 (3.j) 1,554,598
--------- ------- ---------- ------- ----------
Total assets........ $ 147,248 $95,947 $1,563,278 $36,583 $1,651,162
========= ======= ========== ======= ==========
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable to
Seagate Technology... $ -- $ -- $ 2,735 (3.h) $ $ 2,735
Accounts payable...... 12,250 4,530 7,720
Accrued employee
compensation......... 17,266 10,886 6,380
Accrued expenses...... 19,438 9,122 10,316
Accrued income taxes.. 6,759 12,704 5,945 (3.i) --
Deferred revenue...... 17,952 5,790 12,162
--------- ------- ---------- ------- ----------
Total current
liabilities........ 73,665 43,032 8,680 39,313
Deferred income
taxes................ 1,021 1,021 612,816 (3.k) 1,491 (3.o) 614,307
Other liabilities..... 280 240 40
--------- ------- ---------- ------- ----------
Total liabilities... 74,966 44,293 621,496 1,491 653,660
--------- ------- ---------- ------- ----------
Common stock subject
to repurchase........ 3,685 -- (2,317) (3.p) 1,368
Stockholders' Equity:
Convertible preferred
stock................ 55 55
Common stock.......... -- --
Additional paid-in 346,650 475,991
capital.............. 111,453 (3.o)
2,317 (3.p)
3,867 (3.l)
11,704 (3.q)
Retained
Earnings/(Accumulated
deficit)............. (277,731) 1,595,048 (3.j) (88,065) (3.o) 520,465
(612,816) (3.k) (3,867) (3.l)
(92,104) (3.m)
Group Equity.......... -- 51,654 51,654 (3.n) --
Accumulated other
comprehensive
income............... (377) (377)
--------- ------- ---------- ------- ----------
Total stockholders'
equity/Group
Equity............. 68,597 51,654 941,782 37,409 996,134
--------- ------- ---------- ------- ----------
Total liabilities
and stockholders'
equity/Group
Equity........... $ 147,248 $95,947 $1,563,278 $36,583 $1,651,162
========= ======= ========== ======= ==========
</TABLE>
See accompanying Notes to Seagate Software Unaudited Pro Forma Condensed
Financial Statements.
71
<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 Business of Seagate Software to New VERITAS in exchange for
the issuance of 34,606,432 shares of New VERITAS common stock representing an
approximate 42% interest in New VERITAS on an outstanding share basis
(approximately 36% on a fully converted basis) prior to consideration for
shares to be issued in the TeleBackup transaction described below. The number
of shares to be received in the exchange is based on the capitalization of
Seagate Software and VERITAS as of March 31, 1999 and the closing price of
VERITAS common stock of $80.75 per share on March 31, 1999. 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 Network & Storage Management Group
business employees who become employees of New VERITAS the opportunity to
exchange their options to purchase Seagate Software common stock into options
to purchase New VERITAS common stock. These pro rata financial statements
assume that all eligible option holders will elect to exchange their options.
Accordingly, based on the exchange ratio and 5,208,466 outstanding options held
by employees of the Network & Storage Management Group as of March 31, 1999,
New VERITAS would issue options to purchase 3,372,417 shares of New VERITAS
stock to employees of the Network & Storage Management Group. The value of the
options was determined based on the difference between the exercise price of
the options and the fair value of the underlying stock. This value has been
included as part of the estimated purchase price.
Because Seagate Software will own 42% 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 will record a gain on the exchange equivalent to the difference
between 58% of the fair value of the New VERITAS stock received and 58% 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. Subsequent to the combination, Seagate Software's operating
results will include 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. 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 January 1, 1999 using the closing price of VERITAS
common stock of $80.75 on March 31, 1999. The actual value of the TeleBackup
combination 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
72
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
combination, the number of shares to be issued will increase if the average
price per share of VERITAS common stock for a ten day period ending two days
before the closing date falls below $45.44 per share. In addition, TeleBackup's
outstanding options at the closing date will be exchanged for options to
purchase New VERITAS shares. As of March 31, 1999, options to purchase 51,318
shares of New VERITAS common stock would be exchanged for the outstanding
options to purchase TeleBackup common stock. The value of options was
determined by estimating their fair value as of March 31, 1999 using the Black-
Scholes option pricing model. This value has been included as a part of the
estimated price.
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 in exchange for Seagate Technology common stock. The
exchange ratio will be determined based on the estimated value of Seagate
Software shares divided by the fair market value of Seagate Technology common
stock. The estimated 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 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.
Seagate Software's board of directors will make the ultimate decision on the
value of the Information Management Group business. The board of directors'
determination will be based on a number of factors, including the Information
Management Group business' historical and project revenue, earnings and cash
flow, as well as other factors including limited financial analyses performed
by their financial advisor, Morgan Stanley & Co., Incorporated.
Seagate Technology will not repurchase unvested options to purchase common
stock of Seagate Software. Unvested Seagate Software stock options owned by the
Network & Storage Management Groups' employees will be exchanged for unvested
New VERITAS stock options and unvested Seagate Software stock options owned by
the Information Management Group and Seagate Technology employees will remain
as unvested Seagate Software stock options. In addition, immediately prior to
the VERITAS acquisition the vesting provision of all Seagate Software options
will be accelerated to 1/48th per month retroactive to the date of grant. The
option terms will be unchanged other than for the acceleration. Seagate
Software estimates that options to purchase
73
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
1,790,893 shares of Seagate Software common stock (including options to
purchase 885,922 shares held by NSMG employees) will be accelerated. Because
the accelerated options are held only by current employees of Seagate Software,
and because options held by NSMG employees will be exchanged into options in
New VERITAS, no compensation expense will be recorded by Seagate Software.
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 condensed 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:
New VERITAS
(in thousands)
<TABLE>
<S> <C>
Computation of pro rata gain
Fair value of shares received................................... $2,794,469
Times: Pro rata percentage to be accounted for at fair value.... 58.15%
----------
Adjusted fair value of securities received...................... $1,625,087
----------
Book Value of NSMG.............................................. $ 51,654
Times: Pro rata percentage to be accounted for at fair value.... 58.15%
----------
Book value exchanged............................................ $ 30,039
----------
Pro rata gain................................................... $1,595,048
==========
Computation of investment in New VERITAS
Book value of NSMG.............................................. $ 51,654
Times: Pro rata percentage to be accounted for at fair value.... 41.85%
----------
Portion of investment in New VERITAS with no step up in basis... $ 21,615
Plus: Adjusted fair value of securities received................ 1,625,087
----------
Investment in New VERITAS....................................... $1,646,702
==========
</TABLE>
74
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
<TABLE>
<CAPTION>
Annual
Amortization Amortization
Amount Life of Intangibles
---------- ------------ --------------
<S> <C> <C> <C>
Allocation of Investment in New
VERITAS:
Tangible assets................... $ 75,507
Intangible assets:
Distribution channel............ 8,997 4 years $ 2,249
Developed technology............ 47,286 4 years 11,822
Trademark and workforce......... 16,697 4 years 4,174
In-process research and
development.................... 42,641
Allocation of Investment in the
Network and Storage Management
Group:
Tangible assets................... 16,763
Intangible assets:
Distribution channel............ 66,285 4 years 16,571
Developed technology............ 94,531 4 years 23,633
Trademark and workforce......... 13,977 4 years 3,494
In-process research and
development.................... 49,462
Goodwill.......................... 1,214,556 4 years 303,639
---------- --------
$1,646,702 $365,582
========== ========
Allocation of Investment in
Telebackup:
Tangible assets................... $ 755
Intangible assets:
Distribution channel............ 1,314 4 years $ 329
Developed technology............ 2,711 4 years 678
Trademark and workforce......... 670 4 years 168
In-process research and
development.................... 780
Goodwill........................ 49,158 4 years 12,290
Deferred tax liability.......... (1,294)
---------- --------
$ 54,094 $ 13,465
========== ========
</TABLE>
The equity interest of Seagate Software in the amortization of Telebackup
intangibles will be recorded by Seagate Software net of the related New VERITAS
statutory tax rate of approximately 40%.
75
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
Acquisition of Minority Interest of Seagate Software
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Annual
Amortization Amortization
Amount Life of Intangibles
-------- ------------ --------------
<S> <C> <C> <C>
Allocation of minority interest purchase
price to intangible assets of Seagate
Software:
Distribution channel.................. $ 1,133 4 years $ 283
Developed technology.................. 2,134 4 years 534
Trademarks and workforce.............. 461 4 years 115
In-process research and development... 1,386
Goodwill.............................. 21,151 4 years 5,287
Deferred tax liability................ (1,491)
-------- ------
Total............................... $ 24,774 $6,219
======== ======
Value of minority interests:
Options held by Seagate Software
consultants........................... 32,337
Average exercise price of Seagate
Software options...................... $ 6.70
--------
Proceeds from assumed exercise of
Seagate Software options............. $ 217
========
Shares of Seagate Software vested by
employees held for more than
6 months.............................. 445,632
Options held by Seagate Software
consultants........................... 32,337
--------
Shares and options of Seagate
Software............................. 477,969
Value of Seagate Software common stock
per share............................. $ 52.28
--------
Value of Seagate Software common
stock................................ $ 24,990
Less: Proceeds from assumed exercise of
Seagate Software options.............. 217
--------
Minority interest purchase price....... $ 24,774
========
Divided by: Market value of Seagate
Technology common stock............... $ 29.56
--------
Number of Seagate Technology shares
issued for the minority interest...... 838,084
========
</TABLE>
76
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
Compensation Expense Accounting
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Amount
--------------
<S> <C>
Value of Seagate Software common stock per share............... $ 52.28
Less: Average exercise price of Seagate Software stock
options....................................................... 6.70
--------------
Compensation expense per stock option.......................... $ 45.55
Times: Seagate Software stock options to be exchanged for
Seagate Technology common stock............................... 1,714,492
--------------
Compensation expense for Seagate Software stock options
exercised and exchanged for Seagate Technology common stock... $ 78,095
--------------
Seagate Software stock held for less than 6 months and
exchanged for Seagate Technology stock........................ 163,033
--------------
Times: Value of Seagate Software common stock per share........ $ 52.28
--------------
Compensation expense for Seagate Software stock held for less
than 6 months and exchanged for Seagate Technology stock...... $ 8,524
--------------
Total Compensation expense..................................... $ 86,679
==============
<CAPTION>
Amount
--------------
<S> <C>
Value for Seagate Software common stock
Market value of VERITAS common stock......................... $ 80.75
Total New VERITAS shares and options to be received in the
transaction............................................... 37,978,849
--------------
Network & Storage Management Group valuation................. $3,066,792,077
Information Management Group valuation as determined by the
board of directors.......................................... $ 325,000,000
Total proceeds from assumed exercise of Seagate Software
stock options............................................... $ 102,963,694
--------------
Seagate Software valuation..................................... $3,494,755,771
==============
Divided by: Total Seagate Software shares and options
outstanding at January 1, 1999................................ 66,840,979
==============
Value of Seagate Software common stock......................... $ 52.28
==============
</TABLE>
Seagate Software intends to accelerate vesting on 87,395 shares of Seagate
Software common stock held by certain employees. In connection with the
acceleration, Seagate Software expects to record additional compensation
expense of $3,867,000 in the period such acceleration is granted.
77
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
Method for allocating purchase price
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 of 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 channels and original equipment manufacturer
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.
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
78
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
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 NSMG combination, the TeleBackup combination, 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........................................... 1,746,828
Outstanding common stock held by current employees estimated
to
be purchased by Seagate Technology........................... 608,665
Outstanding common stock held by former employees all
purchased
by Seagate Technology........................................ 138,753
Outstanding common stock currently held by Seagate
Technology................................................... 62,500
---------
Total common shares outstanding............................. 2,556,746
=========
</TABLE>
3. Pro forma adjustments
The Seagate Software unaudited pro forma statements give effect to the
following pro forma adjustments:
(a) 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 NSMG combination and
TeleBackup combination.
(b) To reflect the amortization of intangibles and goodwill related to the
NSMG combination.
(c) To reflect the impact on Seagate Software's equity in the amortization
of intangibles and goodwill related to the TeleBackup acquisition by
New VERITAS.
(d) To reflect the change in book/tax basis differences related to the
investment in New VERITAS.
(e) To reflect the provision of income taxes for Seagate Software's equity
in the amortization of intangibles and goodwill related to the
TeleBackup combination.
79
<PAGE>
Notes to Seagate Software
Unaudited Pro Forma
Condensed Financial Statements--(Continued)
(f) To reflect the amortization of developed technology and intangibles
and goodwill associated with the purchase of Seagate Software common
stock 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.
(g) To reflect the reduction of deferred taxes associated with intangible
assets related to the acquisition of Seagate Software shares by
Seagate Technology.
(h) To reclassify a loan receivable from Seagate Technology and affiliates
to a loan payable to Seagate Technology and affiliates.
(i) To reclassify the debit balance in accrued income taxes payable to
other current assets.
(j) To record the step-up in basis for the investment in New VERITAS.
(k) Deferred income tax liability provided on recognition of pro rata gain.
(l) Contributed capital and compensation expense related to the
acceleration of vesting of shares that would otherwise have expired.
(m) Write-off of in-process research and development related to the NSMG
combination.
(n) To eliminate group equity from the Network & Storage Management Group.
(o) To record purchased in-process research and development, compensation
expense, intangibles and goodwill, deferred taxes and a capital
contribution associated with the purchase of Seagate Software common
stock by Seagate Technology.
(p) To record the purchase of Seagate Software common stock by Seagate
Technology.
(q) To record proceeds from vested options assumed exercised prior to
purchase of minority interest of Seagate Software common stock by
Seagate Technology.
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
Software will include only the equity in the combined operating results of
VERITAS and the Network & Storage Management Group business. By excluding
TeleBackup from the pro forma results, pro forma net loss and net loss per
share for fiscal 1998 would be reduced by approximately $4.8 million and
$1.90 per share, respectively. Pro forma net loss and net loss per share for
the six months ended January 1, 1999 would be reduced by approximately $2.4
million and $0.95 per share, respectively. 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 incorporated by
reference in Seagate Technology's Annual Report (Form 10-K/A) 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 appearing in Seagate
Software's Annual Report (Form 10-K/A) 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>
Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO TENDER CERTIFICATE(S) REPRESENTING
SHARES OF COMMON STOCK OF
SEAGATE SOFTWARE, INC.
All Seagate Software stockholders (including those exercising Seagate
Software stock options by way of the Special Exercise Notice) who wish to
participate in the Seagate Technology Exchange Offer (i.e. exchange their
shares of Seagate Software for shares of Seagate Technology common stock) as
outlined in the enclosed Seagate Technology Offering Circular/Prospectus, must
complete this Letter of Transmittal.
Upon completion send the Letter of Transmittal, along with any applicable
stock certificates in the enclosed blue envelope to:
HARRIS TRUST COMPANY OF NEW YORK, EXCHANGE AGENT
<TABLE>
<CAPTION>
By Hand
By Mail: Or By Overnight Courier:
<S> <C>
Harris Trust Company of New York Harris Trust Company of New York
P. O. Box 1023 Receive Window
New York, New York 10268-1023 Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
You must complete the following section in order to inform the exchange
agent of the number of shares you wish to tender in the Seagate Technology
Exchange Offer. You may tender any or all shares that you currently own, or
that you would be due to receive as a result of exercising your vested options
using the enclosed Special Exercise Notice.
The first two columns are used to provide information about the stock
certificate(s) or stock option grant(s) affected. The third column is used to
identify how many shares from each certificate or grant you wish to tender for
exchange. This information is necessary as you are under no obligation to
exchange all shares from a certificate or grant. If you are uncertain of the
number of shares you are entitled to receive after shares are withheld to
cover the exercise price and any applicable taxes, and you wish to tender for
exchange the maximum number of shares available, you may write "maximum" in
the third column.
<TABLE>
<CAPTION>
Name(s) and
Address(es)
of Seagate Software, Inc.
Registered Certificate(s) or Option Grant(s) Surrendered
Owner(s) (Attach additional signed schedule if
(Please necessary)
provide) (See Instruction 1)
- -----------------------------------------------------------
Maximum Number
of Shares Number of
Certificate Represented by Shares per
Name: No(s). or Certificate(s) or Certificate or
Option Grant Stock Option Grant to be
Address: No(s). Grant(s) Exchanged
---------------------------------------------
<S> <C> <C> <C>
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Total Shares
</TABLE>
The Offer will expire at 12:00 midnight, New York City time on
June 7, 1999, unless the Offer is extended.
DO NOT SEND STOCK CERTIFICATES TO SEAGATE SOFTWARE, INC.
For Information call: (212) 701-7624
Delivery of this instrument to an address other than as set forth above
does not constitute a valid delivery.
PLEASE READ AND FOLLOW THE ACCOMPANYING INSTRUCTIONS
<PAGE>
Ladies and Gentlemen:
In accordance with the Offering Circular/Prospectus dated as of April 23,
1999 (the Offering Circular) relating to the offer to exchange shares of
common stock of Seagate Software, Inc., par value $0.01 per share (the Seagate
Software Common Stock) for shares of common stock of Seagate Technology, Inc.,
par value $0.01 per share (the Seagate Technology Common Stock), the
undersigned hereby surrenders to you, as Exchange Agent, the certificate(s)
described above representing Seagate Software Common Stock, each such share to
be exchanged for Seagate Technology Common Stock in accordance with the
exchange rate described in the Offering Circular. The exchange of Seagate
Software Common Stock for Seagate Technology Common Stock, as described in the
Offering Circular, is hereinafter referred to as the "Exchange Offer."
The undersigned holder acknowledges that in order to exercise vested
options to purchase shares of Seagate Software Common Stock and tender such
shares in the Exchange Offer, the undersigned must read and follow Instruction
2 of the accompanying instructions.
The undersigned hereby acknowledges that if any percentage of the Seagate
Software Common Stock hereby surrendered by the undersigned is subject to a
right of repurchase in favor of Seagate Software, then the same percentage of
Seagate Technology Common Stock to be received by the undersigned in the
Exchange Offer will remain subject to a right of repurchase in favor of
Seagate Software. The stock certificates that represent Seagate Technology
Common Stock subject to repurchase by Seagate Software will be held by Seagate
Software and such right to repurchase will lapse in accordance with the stock
purchase agreement between the undersigned and Seagate Software. If you are
surrendering shares of Seagate Software Common Stock that are subject to a
right of repurchase in favor of Seagate Software, you must complete and return
this Letter of Transmittal to Seagate Software at the address listed in
Instruction 2 to this Letter of Transmittal.
The undersigned hereby surrenders to Seagate Technology all right, title,
and interest in and to the Seagate Software Common Stock hereby surrendered
and irrevocably constitutes and appoints Harris Trust Company of New York (the
Exchange Agent) as the lawful attorney-in-fact of the undersigned, with full
power of substitution, to deliver such Seagate Software Common Stock, together
with all accompanying evidence of authority, to Seagate Technology and to
effect the cancellation of such Seagate Software Common Stock on the books of
Seagate Software. The undersigned represents that the undersigned has full
power and authority to surrender such Seagate Software Common Stock and that
the undersigned holds good and marketable title to such Seagate Software
Common Stock, free and clear of all liens, charges, encumbrances, and adverse
claims. The undersigned, upon request, will execute any additional documents
necessary to complete the surrender of such Seagate Software Common Stock.
2
<PAGE>
NOTE: DO NOT SIGN STOCK CERTIFICATE(S) UNLESS YOU ARE COMPLETING SPECIAL
ISSUANCE OR DELIVERY INSTRUCTIONS BELOW
[_] If any of the certificates representing Seagate Software Common Stock
that you own have been lost or destroyed, check this box and see
instruction 10.
Please fill out the remainder of this Letter of Transmittal and indicate
here the number of shares of Seagate Software Common Stock represented by the
lost or destroyed certificates. (Number of Shares)
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 5)
Fill in ONLY if Seagate
Fill in ONLY if Seagate Technology Stock Certificate is to
Technology Stock Certificate is to be delivered to someone other than
be issued in a name other than the the undersigned or to the
name appearing above: undersigned at an address other
than that shown above.
Register and issue the Seagate
Technology Stock Certificate in
the name of:
Deliver certificate(s) and
check(s) to:
Name: _____________________________ Name: _____________________________
___________________________________ (Please Print First, Middle & Last
(Please Print First, Middle & Last Name)
Name)
Address: __________________________
Address: __________________________ (Number and Street)
(Number and Street)
___________________________________
___________________________________ (City, State & Zip Code)
(City, State & Zip Code)
___________________________________
(Taxpayer Identification or Social
Security Number)
The undersigned acknowledges and understands that no fractional shares of
Seagate Technology Common Stock will be issued as a result of the Exchange
Offer and that the number of shares of Seagate Technology Common Stock to be
received by the undersigned in the Exchange Offer will be rounded down to the
nearest whole number of shares.
All authority conferred herein or agreed to be conferred shall survive the
death or incapacity of the above signatory and any obligation of the signatory
shall be binding upon the heirs, personal representatives, successors and
assigns of the signatory.
Please issue a certificate representing the Seagate Technology Common Stock
(the Seagate Technology Stock Certificate) issuable in exchange for the
surrendered Seagate Software Common Stock, in the name(s) shown in the first
box appearing above and deliver such Seagate Technology Stock Certificate and
check by mail to the address(es) indicated in that box, UNLESS contrary
instructions are given in the Special Issuance Instructions and/or Special
Delivery Instructions boxes above.
3
<PAGE>
NOTE: ALL STOCKHOLDERS MUST SIGN IN THE SPACE PROVIDED BELOW.
___________________________________ ___________________________________
(Signature(s) of Stockholder(s)) (Signature(s) of Stockholder(s))
Dated: _____________________ , 199
(Must be signed by the registered Holder(s) exactly as name(s) appear(s) on
stock certificate(s) or by person(s) authorized to become registered
Holder(s) by certificates and documents transmitted herewith. If signature
is by attorneys-in-fact, executors, administrators, trustees, guardians,
agents, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. See
Instruction 4 attached hereto.)
Name(s): __________________________
___________________________________
(Please Print)
Capacity: _________________________
Address: __________________________
Telephone Number: _________________
(Taxpayer Identification or
Social Security Number): __________
PLEASE NOTE THAT UNDER CERTAIN CIRCUMSTANCES
SIGNATURE(S) MUST BE GUARANTEED
(See Instruction 5)
Signature(s) Guaranteed: __________
By: _______________________________
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with members in an approved signature guaranty medallion program)
pursuant to the Securities and Exchange Commission Rule 17Ad-15.
4
<PAGE>
U.S. Taxpayors Only
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR ___________________
Form W-9 TAXPAYER IDENTIFICATION NUMBER Taxpayer
(See Instruction 9) (TIN) IN THE BOX AT THE RIGHT Identification
AND CERTIFY BY SIGNING AND Number,
Department of the DATING BELOW. Social Security
Treasury Number or
Identification Number Employer
(TIN) Identification
Number
Payor's Request for ------------------------------------------------------
Taxpayer Part 2--Check this box if you are NOT subject to
Identification Number withholding under the provisions of Section
(TIN) 3406(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject
to backup withholding as a result of failure to re-
port all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to backup withholding.
------------------------------------------------------
CERTIFICATION--UNDER THE LAWS OF PER- Part 3--
JURY, I CERTIFY THAT THE INFORMATION Awaiting
PROVIDED ON THIS FORM IS TRUE, COR- TIN
RECT, AND COMPLETE
SIGNATURE __________________ DATE __________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and that either (a) I have mailed or
delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office, or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number within sixty (60) days, 31% of all reportable payments
made to me thereafter will be withheld until I provide a number.
__________________________________________ ___________________________
Signature Date
5
<PAGE>
INSTRUCTIONS
Forming part of the Terms and Conditions of the Letter of Transmittal
1. Use of the Letter of Transmittal. The Letter of Transmittal, duly
completed and signed, together with all the surrendered certificates of
Seagate Software Common Stock and any other document required by these
instructions, should be sent by mail or delivered by hand or overnight courier
to the Exchange Agent at the appropriate address set forth on the front of the
Letter of Transmittal. Your completed Letter of Transmittal, along with your
certificates representing shares of Seagate Software Common Stock, must be
received by the Exchange Agent prior to 12:00 midnight, New York City time, on
June 7, 1999. THE METHOD OF DELIVERY IS AT THE ELECTION AND RISK OF THE
STOCKHOLDER, BUT IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. A return envelope is enclosed for
your convenience. If the certificates are delivered by hand or overnight
courier, respectively, delivery must be made to Harris Bank and Trust Company
of New York, to the appropriate address set forth on page 1 of this Letter of
Transmittal.
2. Exercise of Options. Each holder of a vested option to purchase a share
of Seagate Software Common Stock (each a "Seagate Software Option") may
exercise such vested option and participate in the Exchange Offer as a
stockholder of Seagate Software. In order to participate in the Exchange
Offer, the holder of a Seagate Software Option must: (i) complete this Letter
of Transmittal, (ii) follow the instructions contained in the Special Exercise
Instruction Letter (Attachment A), and (iii) send the completed Letter of
Transmittal and the completed Special Exercise Notice included with your
package of documents to: Seagate Software, Inc., 915 Disc Drive, Scotts
Valley, California 95066, attention: Roberta Cohen for receipt prior to 12:00
midnight New York City time on June 7, 1999. A pre-addressed envelope is
provided. Upon receipt of the above-referenced documents, Seagate Software
will authorize the exchange of your Seagate Software Options for Seagate
Technology Common Stock by countersigning the Option Exercise and Exchange
Notice and sending it along with other necessary documents to the Exchange
Agent.
3. Electronic Delivery of Seagate Technology Shares. If you would like to
have the shares of Seagate Technology Common Stock that you will receive in
the Exchange Offer electronically transmitted to your brokerage account, you
must complete the Form For Delivery Via DWAC attached hereto as Attachment B
and send the completed form to the Exchange Agent along with your completed
Letter of Transmittal. Please note that if the form is not fully and
accurately completed, the shares of Seagate Technology Common Stock that you
will receive in the Exchange Offer will be sent to you directly.
4. Signatures. The signatures on the Letter of Transmittal must correspond
with the name(s) as written on the face of the surrendered Seagate Software
Common Stock. In the case of joint tenants, all should sign. If the
surrendered certificates representing Seagate Software Common Stock are
registered in different forms of the name of any person signing the Letter of
Transmittal (e.g., John Smith on one certificate and J. Smith on another), it
will be necessary for such person either to sign the Letter of Transmittal in
each way in which the certificates are registered or to sign as many Letters
of Transmittal as there are different registrations. When signing as agent,
attorney, administrator, executor, guardian, trustee, or in any other
fiduciary or representative capacity, or as an officer of a corporation on
behalf of the corporation, please give full title as such. If the surrendered
certificates have been transferred or assigned, the Letter of Transmittal
should be signed by the transferee or assignee, who should comply with
Instruction 5, and not by the transferor.
5. Issuance of a Seagate Technology Stock Certificate in Different Name. If
the Seagate Technology Stock Certificate is to be issued in a name other than
as shown as the registered owner of the surrendered certificates (for example,
if the stock certificates have been transferred or assigned and the transfer
has not been registered on the books of Seagate Software), please complete the
Special Issuance Instructions box on the Letter of Transmittal and comply with
the following:
a. Endorsement and Guarantee. The surrendered Seagate Software Common
Stock must be properly endorsed (or accompanied by appropriate stock powers
properly executed by the registered holder of such certificate(s)) to the
person in whose name the Seagate Technology Stock Certificate is to be
registered. The
6
<PAGE>
signature(s) of the registered holder(s) on the endorsement or stock powers
must correspond with the name(s) as written upon the face of the Seagate
Software Common Stock in every particular way and must be guaranteed by an
eligible guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with members in an approved signature
guaranty medallion program) pursuant to the Securities and Exchange
Commission Rule 17Ad-15.
b. Transfer Taxes; Legality of Transfer. In the event that any transfer
or other taxes become payable by reason of issuance of the Seagate
Technology Stock Certificate in any name other than that of the registered
holder(s), satisfactory evidence that such tax has been paid, or of
exemption therefrom, must be affixed to or accompany the surrendered
Seagate Software Common Stock. In the event of any transfer of ownership of
Seagate Software Common Stock, Seagate Technology may require as a
condition to such transfer and the issuance of Seagate Technology Stock
Certificates, an opinion of counsel as to the legality of such transfer
and/or such other information concerning the legality of the transfer as
Seagate Technology may request.
c. Correction of, or Change in Name. For a correction of name, or for a
change in name which does not involve a change of ownership, proceed as
follows: for a change in name by marriage, the surrendered Seagate Software
Common Stock should be endorsed, e.g., Mary Doe, now by marriage Mary
Jones, with the endorsement signature guaranteed as described in
Instruction 3(a). For a correction in name, the surrendered Seagate
Software Common Stock should be endorsed, e.g., James E. Brown, incorrectly
inscribed as J.E. Brown, with the endorsement signature guaranteed as
described in Instruction 5(a).
6. Supporting Evidence. In case any Letter of Transmittal, Option Exercise
and Exchange Notice, Electronic Delivery Form, certificate endorsement or
stock power is executed by an agent, attorney, administrator, executor,
guardian, trustee, or anyone in any other fiduciary or representative
capacity, or by an officer of a corporation on behalf of the corporation,
there should be submitted with the Letter of Transmittal and surrendered
certificates documentary evidence of appointment and authority to act in such
capacity (including court orders and corporate resolutions where necessary),
as well as evidence of the authority of the person making such execution to
assign, sell or transfer shares. Such documentary evidence of authority must
be in form satisfactory to the Exchange Agent.
7. Form of Seagate Technology Stock Certificate. You will receive only one
Seagate Technology Stock Certificate for the shares of Seagate Technology
Common Stock to which you are entitled. If you want your shares represented by
more than one Seagate Technology Stock Certificate, please make such request
in writing and comply with all applicable requirements set forth in the Letter
of Transmittal and these instructions.
8. Consequences of Failure to Return Letter of Transmittal or Failure to
Surrender Seagate Software Common Stock Certificates Prior to the Expiration
Date. A Seagate Technology Stock Certificate will be sent only to persons who
prior to the Expiration Date (as defined in the Offering Circular) deliver the
Letter of Transmittal, properly completed and executed, to the Exchange Agent,
together with stock certificates representing all of the Seagate Software
Common Stock held by such person that they wish to exchange for Seagate
Technology Stock and such other documents required by these instructions.
Until such Seagate Software Common Stock is properly surrendered, holders of
such shares shall not be deemed to have accepted Seagate Technology's Offer to
Purchase.
9. Substitute Form W-9. Each United States stockholder of Seagate Software
(Stockholder) is required to provide the Exchange Agent with a correct
Taxpayer Identification Number (TIN), generally the Stockholder's social
security or federal employer's identification number, on substitute Form W-9.
Failure to provide the information on the form may subject you to 31% Federal
Income Tax withholding on the cash payment, if any, received in the Exchange
Offer and/or a $50 penalty imposed by the Internal Revenue Service. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained.
7
<PAGE>
Certain Stockholders, including, among others, all corporations and certain
foreign individuals, are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that Stockholder must submit a statement, signed under penalty of
perjury, to the Exchange Agent attesting to the individual's exempt status.
To prevent backup withholding, each U.S. Stockholder is required to notify
the Exchange Agent of his or her correct taxpayer identification number by
completing the Substitute Form W-9, certifying that the taxpayer
identification number provided thereon is correct (or that such Stockholder is
awaiting a taxpayer identification number) and that (1) the Stockholder has
not been notified by the Internal Revenue Service that he or she is subject to
backup withholding as a result of failure to report all interest or dividends
or (2) the Internal Revenue Service has notified the Stockholder that he or
she is no longer subject to backup withholding.
10. Lost, Destroyed or Stolen Stock Certificates. If certificates
representing Seagate Software Common Stock have been lost, destroyed or
stolen, please notify the Exchange Agent.
11. Inquiries. All inquiries with respect to the surrender of Seagate
Software Common Stock in exchange for a Seagate Technology Stock Certificate
should be made directly to Harris Trust Company of New York at (212) 701-7624
or to Roberta Cohen at Seagate Software at (831) 439-2860.
8
<PAGE>
Exhibit (a)(3)
[SEAGATE SOFTWARE LOGO]
SEAGATE SOFTWARE, INC.
1996 STOCK OPTION PLAN
SPECIAL EXERCISE NOTICE
FOR THE SEAGATE TECHNOLOGY, INC. STOCK EXCHANGE OFFER
Seagate Software, Inc.
Attn: Stock Plan Administration
P.O. Box 66360
Scotts Valley, CA 95067-0360
Complete this document if you wish to exercise any or all of your vested
Seagate Software stock options in conjunction with the Seagate Technology
Exchange Offer. Please see the Special Exercise Instruction Letter for details.
Send the completed document (including applicable attachments), to Seagate
Software Inc. c/o Roberta Cohen at 915 Disc Drive, Scotts Valley, California
95066 in the enclosed addressed envelope.
If you wish to subsequently exchange your Seagate Software shares for shares of
Seagate Technology, as per the Seagate Technology exchange offer, you must also
complete the enclosed Letter of Transmittal and include it with this document.
It is important that you read this document in its entirety, and sign and date
it in the space provided on page 5.
If you wish to exercise options from more than one stock option grant you must
copy and complete a separate Special Exercise Notice for each grant.
1. Exercise of Option. Effective as of June 7, 1999, the undersigned
("Optionee") hereby elects to exercise Optionee's option to purchase shares of
the Common Stock (the "Shares") of Seagate Software, Inc. (the "Company") under
and pursuant to the 1996 Stock Option Plan, including all amendments thereto
(the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement
dated , 19 (the "Option Agreement").
2. Payment Methods. Optionee selects the following method to pay the
exercise price:
[_] Check payable to Seagate Software, Inc. (in U.S. Dollars)
[_] Net Exercise
[_] Automatic Sale--you must fill out Attachment C (Automatic Sale
Account Form) and the Letter of Transmittal
[_] Tender of Seagate Software shares exercised at a previous date
<PAGE>
3. Tax Withholding Methods--Do not complete this section if you elected
"Automatic Sale" as your Payment Method, or if you are subject to Canadian
income tax. Optionees with tax obligations in the U.K., the U.S. (with
nonstatutory stock options), France, Germany, Italy, Netherlands, Spain, Sweden
and Switzerland, and other optionees that owe taxes upon exercise of their
options select one of the following tax withholding method.
[_] Check payable to Seagate Software, Inc. (in U.S. Dollars)
[_] Stock withholding for taxes
4. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
5. Rights as Stockholder. Until the stock certificate evidencing the Shares
is issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to the optioned stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) a stock certificate promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a stockholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the
Right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Agreement, and Optionee shall forthwith cause the certificate(s)
evidencing the Shares so purchased to be surrendered to the Company for
transfer or cancellation.
6. Company's Right of First Refusal. Before any Shares held by Optionee or
any transferee (either being sometimes referred to herein as the "Holder") may
be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver
to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for
which the Holder proposes to transfer the Shares (the "Offered Price"), and
the Holder shall offer the Shares at the Offered Price to the Company or
its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of
the Proposed Transferees, at the purchase price determined in accordance
with subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for the Shares
purchased by the Company or its assignee(s) under this Section shall be the
Offered Price. If the Offered Price
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<PAGE>
includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option
of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the
Company (or, in the case of repurchase by an assignee, to the assignee), or
by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such
sale or other transfer is consummated within 120 days after the date of the
Notice and provided further that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section shall
continue to apply to the Shares in the hands of such Proposed Transferee.
If the Shares described in the Notice are not transferred to the Proposed
Transferee within such period, a new Notice shall be given to the Company,
and the Company and/or its assignees shall again be offered the Right of
First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of
the Shares during the Optionee's lifetime or on the Optionee's death by
will or intestacy to the Optionee's immediate family or a trust for the
benefit of the Optionee's immediate family shall be exempt from the
provisions of this Section. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister.
In such case, the transferee or other recipient shall receive and hold the
Shares so transferred subject to the provisions of this Section, and there
shall be no further transfer of such Shares except in accordance with the
terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
7. Canadian Stock Option Agreement Amendment. By signing this Exercise
Notice, any Optionees who are subject to Canadian income tax will have amended
their stock options to provide such Optionee with a right to exchange the
common stock of Seagate Software, Inc. that such Optionee will receive upon the
exercise of his or her vested Seagate Software stock options for common stock
of Seagate Technology, Inc. in the Exchange Offer (as described in the Offering
Circular/Prospectus accompanying this Exercise Notice). This amendment is
intended to provide such Optionee with the opportunity to obtain cash for the
common stock of Seagate Software, Inc. that Optionee receives upon this
exercise of Optionee's Option, since Seagate Software, Inc. is a private
company whereas the common stock of Seagate Technology, Inc. is publicly
traded.
8. Tax Consultation. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
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<PAGE>
9. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares together with any other legends that may be required by the Company
or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii)
to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall
have been so transferred.
10. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
11. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
12. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of California excluding that body of law
pertaining to conflicts of law. Should any provision of this Agreement be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.
13. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by
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<PAGE>
certified mail, with postage and fees prepaid, addressed to the other party at
its address as shown below beneath its signature, or to such other address as
such party may designate in writing from time to time to the other party.
14. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
15. Delivery of Payment. Optionee herewith delivers to the Company the full
exercise price for the Shares.
16. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee.
Submitted by: Accepted by:
OPTIONEE: Seagate Software, Inc.
- ------------------------------------- By:
(Print Name) ----------------------------------
- ------------------------------------- Its:
(Signature) ----------------------------------
Address: Address:
Seagate Software, Inc.
- ------------------------------------- Attn: Stock Plan Administration
915 Disc Drive
P.O. Box 67427
- ------------------------------------- Scotts Valley, CA 95067-7427
- -------------------------------------
(Work Phone Number)
- -------------------------------------
(Home Phone Number)
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<PAGE>
Exhibit (a)(4)
[LOGO OF SEAGATE SOFTWARE]
ATTACHMENT A
April 23, 1999
Special Exercise Instruction Letter
Read this document carefully if you wish to exercise any or all of your vested
Seagate Software stock options in conjunction with the Seagate Technology
Exchange Offer. After you have read this letter and determined the number of
options you would like to exercise, please fill out the attached Special
Exercise Notice.
If you wish to exercise options from more than one stock option grant, you must
copy and complete a separate Special Exercise Notice for each grant.
Dear Seagate Software Optionee:
As part of the Seagate Technology Exchange Offer (the "STI Exchange Offer"),
Seagate Technology Inc. ("STI") is offering you the chance to exercise any or
all of your vested Seagate Software ("SSI", or the "Company") options so that
you can participate in the STI Exchange Offer.
Attached is a Special Exercise Notice that you should use if you exercise
any or all of your options in connection with the STI Exchange Offer. The
Special Exercise Notice is different from your regular exercise notice, because
it provides you with several special, one-time methods to pay the exercise
price of your stock options and, in some cases, any related taxes. The details
of these choices are outlined below.
You may choose to exercise all, or any portion of your vested Seagate Software
options using the Special Exercise Notice (refer to the Personal Seagate
Software Stock Option Profile, mailed to you under separate cover, to determine
the number of options you have eligible for the STI Exchange Offer). If, after
exercising your stock options, you wish to exchange any, or all of your Seagate
Software stock options for shares of STI, as per the STI Exchange Offer, you
must also complete the enclosed Letter of Transmittal and submit it with the
Special Exercise Notice in the envelope provided.
There is space on the Letter of Transmittal to include shares from more than
one stock option grant--you need only complete one Letter of Transmittal.
You must return these documents to Seagate Software by 12:00 midnight New
York City time, June 7, 1999 in order to take advantage of these special
payment methods, and to participate in the
<PAGE>
STI Exchange Offer with respect to your Seagate Software stock options. The
terms of the STI Exchange Offer are more fully explained in the Offering
Circular/Prospectus you have received in this package.
1. Exercising Your Options by Paying Cash
You may pay the exercise price of any or all of your options by enclosing
the Special Exercise Notice along with a check (in U.S. $) made out to Seagate
Software Inc. for the total exercise price of the options you wish to exercise.
2. Net Exercise
In connection with the STI Exchange Offer, the Company offers you the
opportunity to exercise any or all of the vested portion of your stock options
without paying any cash. This is called a Net Exercise. This section will
explain how the Net Exercise works and the effect of choosing to exercise your
options through a Net Exercise.
The Net Exercise lets you pay the exercise price of the vested portion of
your vested stock options by canceling a portion of the vested stock options
you are exercising. Therefore, you are not required to pay any cash to exercise
your options when you use the Net Exercise feature. Instead, you will receive
fewer shares, because a portion of the shares you could have received are
canceled to pay the exercise price. The fair market value of Seagate Software
shares determined on the sixth business day before the close of the Veritas
transaction (as described in the Offering Circular/Prospectus) will be used to
calculate how many shares will be cancelled in order to cover the total
exercise price. The following example outlines the mechanics of the Net
Exercise:
Example. An optionee, John Smith, has an option to purchase 100 shares of
the Company's Common Stock with an exercise price of $2 per share. The options
are fully vested. The fair market value of the Company's Common Stock on the
date John exercises his option is $10. John decides to exercise this option for
the 100 shares by means of a "net exercise." The Company determines how many of
the 100 shares must be canceled to exercise the remaining shares. In this case,
the Company would cancel 20 shares, leaving John with 80 shares of Seagate
Software eligible for the STI Exchange Offer.
The math is as follows: The total exercise price of John's 100 shares is
$200. This is determined by multiplying the 100 shares by the $2 per share
exercise price. The number of shares needed to pay the exercise price is 20.
This is determined by dividing the $200 total exercise price by the $10 fair
market value per share. Thus, the Company cancels 20 shares and John receives
80 shares.
You may use the Net Exercise feature for all or any portion of your vested
stock options. On the Special Exercise Notice, simply enter the total number of
vested stock options you would like to exercise and check the box for Net
Exercise under "Payment Methods."
If you elect to do a Net Exercise, you will have amended your option.
However, unless you are a U.S. resident and have an incentive stock option (an
"ISO"), the amendment should not have any detrimental effect on your option.
U.K. and Canadian residents will not suffer any detrimental effect to their
options by doing the Net Exercise. Seagate Software is not aware of the
consequences of a Net Exercise for any other countries.
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<PAGE>
U.S. Optionees with ISOs. For optionees who reside in the United States and
have incentive stock options there is a serious disadvantage to exercising your
incentive stock options through a Net Exercise. You will disqualify your
incentive stock option and thereafter have a non-qualified stock option. Upon
exercise, a non-qualified stock option will cause you to recognize ordinary
income subject to withholding. You will have to pay the withholding upon the
exercise of the option shares you Net Exercise in this exchange and for all
future option exercises regardless of how you exercise your option. If you do
not do the Net Exercise and thereby you keep your incentive stock option, you
will not have any withholding.
The Net Exercise feature is only available for the STI Exchange Offer. It will
not be available for any future exercises of your stock options.
3. Automatic Sale
If you choose the Automatic Sale feature, you will not have to pay cash to
exercise your Seagate Software stock options. As well, your Seagate Software
shares will automatically be converted to Shares of Seagate Technology as per
the Seagate Technology Exchange Offer and sold on your behalf by the Victor
Group at Salomon Smith Barney (the "Broker").
With the Automatic Sale, the Company will loan you the exercise price for
your options, and will receive payment from the broker after the sale of your
Seagate Technology shares.
Under the Automatic Sale, your options will be considered exercised on the
last day of the STI Exchange Offer. The Seagate Software shares you receive
upon exercise of your option will be converted in the STI Exchange Offer into
STI shares and the STI shares will be sold by the Broker on June 9, 1999. After
deducting its commission of U.S. $0.05 per share, the Broker remits to the
Company the required funds to pay for the exercise price and any required tax
obligations for optionees in countries where the tax withholding option is
available and the Company is required to withhold (see below for a discussion
of taxes). You will receive a check from the Broker for the rest of the
proceeds from the sale of your STI shares.
To exercise your options through the Automatic Sale, you must check the
appropriate box under "Payment Methods" on the Special Exercise Notice, and
complete the "Automatic Sale Account Form" (Attachment C) attached to the
Special Exercise Notice. The "Automatic Sale Account Form" will enable the
Broker to open an account or utilize an existing account in order for you to
participate in the Automatic Sale feature.
While no shares of Seagate Technology Inc. will be forwarded to you or your
designate if you elect to participate in the Automatic Sale, it is imperative
that you complete the enclosed Letter of Transmittal, and forward it with the
Special Exercise Notice and Attachment C to Seagate Software in the enclosed
envelope.
4. Payment with Seagate Software Stock You Own
You may pay the exercise price of your options with shares of Seagate
Software you already own. Simply check the appropriate box on the Special
Exercise Notice, and send the number of shares that would equal or exceed the
total exercise price of the options you want to exercise.
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<PAGE>
To find out the value of a Seagate Software share at the time you would
exercise, please refer to the calculations in the Offering Circular/Prospectus
for an estimate. You may call toll free 877-707-5656 beginning April 30, 1999
for information regarding the final value. Because the actual value of the
Seagate Software shares will not be definitely known until the sixth business
day prior to the close of the Veritas transaction, you may have to send in
extra shares which will be refunded to you when the value of the Seagate
Software shares is determined. U.S. optionees with ISOs should be aware that
submitting shares received by exercising ISOs may cause taxable income.
You should consult your own tax adviser regarding the tax implications of using
this method to exercise your options.
Taxes
For a detailed discussion of the potential tax consequences of exercising your
options, refer to the Seagate Technology Offering Circular/Prospectus included
in this package.
In addition to indicating the method by which you wish to exercise your
options, certain option holders must complete the section of the Special
Exercise Notice headed "Tax Withholding Method". See below for details.
Canada Optionees
If you are a Canadian optionee, and elect to exercise your options using the
Automatic Sale, tax will be withheld at a flat tax rate of 30% of the gross
proceeds from the exercise of your options, and subsequent sale of your shares
of Seagate Technology stock. This tax withholding will be done automatically;
therefore, you do not need to complete the "Tax Withholding Method" section of
the Special Exercise Notice.
Your individual tax obligation may differ significantly from the 30% flat rate.
You will be responsible to revenue Canada for ensuring that any additional tax
obligations are met.
If your tax obligation will be less than 30% based on your personal tax
circumstances (which may be impacted by contributions you plan to make to a
Registered Retirement Savings Plan) you have two options to claim any
applicable tax credit: 1) you can wait, and claim it in your regular annual tax
return, or 2) you may request that revenue Canada reduce your tax obligation in
advance. If you wish to take advantage of option 2, you must complete a Form L-
18 and return it to Revenue Canada. If approved, Seagate Software will
reimburse your withholding tax in the amount indicated by revenue Canada.
If, as a Canadian optionee, you elect to exercise your options using any
method other than the Automatic Sale, no taxes will be withheld. You will be
responsible for ensuring that your tax obligations are met, and do not need to
complete the "Tax Withholding Method" section of the Special Exercise Notice.
-4-
<PAGE>
Canadian optionees should note that if they exercise any options in
connection with the STI Exchange Offer, their option agreements will be amended
to allow them to participate in the STI Exchange Offer (see Section 7 of the
Exercise Notice). There are no disadvantages of this amendment to Canadian
optionees and this amendment should preserve the beneficial tax treatment upon
sale of the Seagate Technology shares.
U.S. Optionees
U.S. residents with nonstatutory stock options will have tax payment
obligations upon exercising their options, and must complete the "Tax
Withholding Method" Section of the Special Exercise Notice.
If you are subject to U.S. taxation and you have an incentive stock option,
then there will be no withholding on the exercise of your ISOs, so you do not
need to complete this section of the Exercise Notice.
U.K. Optionees
U.K. residents will have tax payment obligations upon exercising their
options granted after November 1996 and must complete the "Tax Withholding
Method" Section of the Special Exercise Notice. Your taxes will be calculated
at 40% on the difference between your exercise price and the fair market value
of Seagate Software shares. The ordinary income amount and taxes will be
applied to your payroll earnings within the month following the close of the
transaction. Any adjustment needed to the 40% withheld due to your personal tax
circumstances will be adjusted through payroll and reflected in a subsequent
paycheck.
If you were granted your stock options prior to December 1996, you are
responsible for reporting the income related to the options on your personal
income tax returns and remitting the related income taxes. Therefore, you
should not complete the "Tax Withholding Method" section of the Special
Exercise Notice.
Optionees in Countries Other Than Canada, U.S. or the U.K.
The tax information for the following countries is based on interpretations
of the existing authorities. Seagate Software did not receive an opinion from
its counsel on these tax consequences, and urges you to consult with your own
tax advisor prior to the exercise of any options.
Australia Optionees
Unless a previous election was made in the year of grant in the employee's
tax return, income will be recognized at the time of exercise. Employees are
responsible for reporting the income related to the options on their personal
income tax returns and remitting the related income and medicare taxes.
Therefore, you should not complete the "Tax Withholding Method" section of the
Special Exercise Notice.
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<PAGE>
France Optionees
France residents will have social security and social contribution payment
obligations upon exercising their options and must complete the "Tax
Withholding Method" Section of the Exercise Notice. Your taxes will be
calculated at 22% on the difference between your exercise price and the fair
market value of Seagate Software. The ordinary income amount and taxes will be
applied to your payroll earnings within the month following the close of the
transaction. Any adjustment needed to the 22% withheld due to your personal tax
circumstances will be adjusted through payroll and reflected in a subsequent
paycheck.
Germany Optionees
Germany residents will have tax and potentially social security payment
obligations upon exercising their options and must complete the "Tax
Withholding Method" Section of the Exercise Notice. Your taxes will be
calculated at 53% on the difference between your exercise price and the fair
market value of Seagate Software shares. The ordinary income amount and taxes
will be applied to your payroll earnings within the month following the close
of the transaction. Any adjustment needed to the 53% withheld due to your
personal tax circumstances will be adjusted through payroll and reflected in a
subsequent paycheck.
Spain Optionees
Spain residents will have tax payment obligations upon exercising their
options and must complete the "Tax Withholding Method" Section of the Exercise
Notice. Your taxes will be calculated at 48% on the difference between your
exercise price and the fair market value of Seagate Software shares. The
ordinary income amount and taxes will be applied to your payroll earnings
within the month following the close of the transaction. Any adjustment needed
due to the 48% withheld due to your personal tax circumstances will be adjusted
through payroll and reflected in a subsequent paycheck.
Singapore and Japan Optionees
Residents of Singapore and Japan will recognize income at the time of
exercise. Optionees are responsible for remitting the related income taxes.
Therefore, you should not complete the "Tax Withholding Method" section of the
Special Exercise Notice.
Sweden Optionees
Sweden residents will have tax payment obligations upon exercising their
options and must complete the "Tax Withholding Method" Section of the Exercise
Notice. Your taxes will be calculated at 55% on the difference between your
exercise price and the fair market value of Seagate Software shares. The
ordinary income amount and taxes will be applied to your payroll earnings
within the month following the close of the transaction. Any adjustment needed
due to the 55% withheld due to your personal tax circumstances will be adjusted
through payroll and reflected in a subsequent paycheck.
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<PAGE>
Switzerland Optionees
Switzerland residents will have tax payment obligations upon exercising
their options and must complete the "Tax Withholding Method" Section of the
Exercise Notice. Your taxes will be calculated at 15% on the difference between
your exercise price and the fair market value of Seagate Software shares. The
ordinary income amount and taxes will be applied to your payroll earnings
within the month following the close of the transaction. Any adjustment needed
due to the 15% withheld due to your personal tax circumstances will be adjusted
through payroll and reflected in a subsequent paycheck.
Other
Residents of Italy and the Netherlands, will have tax obligations upon
exercising their options, and must complete the "Tax Withholding Method"
section of the Special Exercise Notice.
Optionees in countries other than those discussed above should complete the
"Tax Withholding Method" section of the Special Exercise Notice if they
normally have to pay taxes upon exercising their options.
Tax Withholding Choices
If , as described above, you must complete the "Tax Withholding Method",
section of the Special Exercise Notice, you must either enclose a check for an
amount that will cover your tax obligations or elect for the Company to
withhold the correct amount of shares or money. If you elect to do an
"Automatic Sale" do not enclose a check, or complete the "Tax Withholding
Method" section of the Special Exercise Notice, as the Company will
automatically withhold for optionees in countries where the tax withholding
option is available (as discussed above).
The tax withholding program allows you to pay any required tax withholding
obligation with shares you receive from the exercise of your stock options. The
following example outlines the mechanics of the tax withholding program:
Example: An optionee, John Smith, has an option to purchase 100 shares of
the Company's Common Stock with an exercise price of $2 per share. The options
are fully vested. The fair market value of the Company's Common Stock on the
date John exercises his option is $10. The exercise of the option will cause
John to owe $40 of income tax, which the Company must collect. The $40 of
income tax divided by the $10 fair market value per share of the Common Stock
equals four shares. John can request that the Company withhold four shares of
the stock he receives upon the exercise of his option to satisfy his tax
withholding obligation. The Company will then pay $40 cash to the proper tax
authorities. John will have the remaining 96 shares from the exercise of his
option to submit in the STI Exchange Offer if he so chooses.
To participate in the tax withholding program, simply check the appropriate box
on the Special Exercise Notice under "Tax Withholding Method." The Company will
calculate the amount of tax that must be collected, and deduct the correct
number of Seagate Software shares from those you receive upon exercising your
options.
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<PAGE>
SSI's Right of First Refusal
SSI has a right of first refusal should you desire to sell your shares of
SSI common stock. This means that before you sell your stock to a third party,
you must notify SSI of your intention to sell and the price and number of
shares you intend to sell. SSI then has the opportunity (but not the
obligation) to purchase your shares at the price you would have sold them to
the third party. For purposes of the STI Exchange Offer, SSI waives its right
of first refusal. If you participate in the STI Exchange Offer, SSI will not
have a right of first refusal in your STI shares.
When Will My Options Be Exercised?
To keep this complicated process as simple as possible, all options will be
exercised at the end of business on the last day of the STI Exchange Offer
(about five days after the close of the Veritas Transaction). The fair market
value of Seagate Software shares will be the same as used for the STI Exchange
Offer and the Veritas transaction (determined on the sixth business day before
the close of the Veritas transaction). Refer to the Offering
Circular/Prospectus included with this package for further details on how this
fair market value will be determined.
Summary
To exercise your options and participate in the STI Exchange Offer, you must
fill out the attached Special Exercise Notice. To complete the Special Exercise
Notice, you must first determine how many of your vested options you would like
to exercise and second determine how you would like to pay the exercise price
of those options. You may pay the exercise price by submitting a check (in U.S.
dollars only), checking the box for a Net Exercise (as described above),
checking the box for an Automatic Sale (as described above), or submitting
enough Seagate Software shares (as described above).
For U.S. residents who have non-qualified stock options, residents of the
United Kingdom and residents of any other countries where you must pay taxes
upon the exercise of your stock options, you must also either submit a check
for the required tax payments, check the box for the tax withholding (to have
some of your shares withheld to pay any required taxes), or elect to do an
Automatic Sale in which case the money for the taxes you owe will be deducted
from the proceeds of the sale of your STI stock.
After you complete the attached Special Exercise Notice, and any required
attachments (i.e. the Automatic Sale Account Form), you must send the Special
Exercise Notice in the enclosed envelope. If you wish to subsequently exchange
any or all of your Seagate Software shares for shares of STI, as per the STI
Exchange Offer, you must complete the Letter of Transmittal enclosed in this
package, and include it with the Special Exercise Notice. The Special Exercise
Notice instructs us how to exercise your options and the Letter of Transmittal
instructs us to inform the exchange agent to exchange the Seagate Software
stock for Seagate Technology stock.
Questions
Should you have any questions regarding the exercise of your options, please
contact Roberta Cohen at Phone (831) 439-2860, or by email at
[email protected].
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<PAGE>
Exhibit (a)(5)
ATTACHMENT B
FORM FOR
DELIVERY VIA DWAC
SEAGATE SOFTWARE TRANSMITTAL AMENDMENT
If you have questions in regard to the completion of this form, please
contact Roberta Cohen at (831) 439-2860.
By Mail: By Overnight Courier:
Harris Trust Company of California Harris Trust Company of New York
C/O Harris Trust Company of New Receive Window, Wall Street Plaza
York 88 Pine Street, 19th Floor
Wall Street Station New York, New York 10005
P.O. Box 1023
New York, NY 10268-1023
If you wish to have your stock transmitted electronically to your broker,
this form must be completed in full and sent with your stock certificate(s) and
the enclosed Letter of Transmittal, which should also be completed in full.
Seagate Software Shares: __________________________ CUSIP # 811804 10 3
Brokerage Firm:____________________________________
Broker's DTC #:____________________________________
Brokerage Account #:_______________________________
Broker Name:_______________________________________
Broker Phone #:____________________________________
_________________________________ _______________________________
Stockholder Signature(s) Stockholder Signature(s)
_________________________________ _______________________________
Print Name Print Name
Dated: __________________________
By my signature(s) above, I acknowledge and understand that if I elect to
have my shares transferred electronically to my broker that I am responsible
for notifying my broker directly via a copy of these delivery instructions.
Important Message to all Brokers:
Contact at Harris Trust Company of California: Margie Morales
Phone Number: (312) 461-2675
These shares will be available via DWAC on June 9, 1999.
Brokers please initiate the pick up of these shares by 3:00 p.m. Eastern
Standard Time
Cc: ____________________________________________________________________________
(Shareholder must FAX these instructions to your broker)
<PAGE>
Exhibit (a)(6)
Attachment C
Victor Group at
Salomon Smith Barney AUTOMATIC SALE
ACCOUNT FORM
Account Number: -------------------------------
Existing Account?--- Yes, if yes please indicate account number above
--- No, leave account number blank
NAME: ------------------------------------------------------
ADDRESS: ------------------------------------------------------
PHONE: Home: ------------ Work: ------------ Fax:
------------
EMPLOYER: ------------------------------------------------------
Social Security Number or Country of Citizenship:
-------------------------
Date of Birth:
-------------------
PLEASE INITIAL ONE OF THE FOLLOWING AND SIGN WHERE INDICATED:
W9 ------- Certification of U.S. Social Security Number CP10169
Certification: Under penalty of perjury, I certify that (1) The number
shown on this form is my correct tax/taxpayer identification number and (2)
I am not subject to IRS backup withholding because: (a) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of failure to report all interest or dividends, or
(b) the IRS has notified me that I am no longer subject to backup
withholding, or (c) I am exempt from backing withholding.
OR
W8 ------- Certification of Foreign Status CPI0028
Certification: Under penalty of perjury, I certify that: For interest
payments, I am not a US Citizen or resident (or I am filing for a foreign
corporation, partnership, estate, or trust): AND for broker transactions or
barter exchanges, I am an exempt foreign person.
DISCLOSURE NOTICE: CPI6000
Bank issued certificates of deposit purchased through Salomon Smith Barney
and The Salomon Smith Barney Insured Deposit Account sweep feature are
insured by the FDIC (see disclosure for details). All other investments or
insurance or insurance products sold through Salomon Smith Barney are not
insured by the FDIC, are not a deposit or other obligation of a depository
institution, and are subject to investment risk, including the possible
loss of the principle amount invested.
Optionee Signature:
--------------------------- Date: -------------------
for internal use: for internal use:
FC Signature----------------------- MGR Approval -------------
CPI000I/31496
<PAGE>
Exhibit (a)(7)
[For Release]
April 26, 1999
SEAGATE TECHNOLOGY
ANNOUNCES
COMMENCEMENT OF EXCHANGE OFFER FOR
SEAGATE SOFTWARE COMMON STOCK
SEAGATE TECHNOLOGY, INC. (NYSE:SEG) today announced that its registration
statement on Form S-4 has been declared effective by the SEC and is commencing
its exchange offer for all outstanding shares of common stock of Seagate
Software, Inc., a majority-owned subsidiary of Seagate Technology. The offer is
being made in connection with an agreement for the merger of VERITAS Software
Corporation (Nasdaq:VRTS) with the Network and Storage Management Group (NSMG)
of Seagate Software. The agreement was announced on October 5, 1998 and is
subject to the approval of stockholders of VERITAS Software Corporation and
Seagate Software, Inc. and other customary conditions. The merger transaction is
expected to be completed on May, 28 1999.
The exchange rate for Seagate Technology's exchange offer will be based on the
average closing price of Seagate Technology common stock for five trading days
ending on the sixth business day prior to the VERITAS-NSMG combination and the
average fair market value of Seagate Software for the same five trading days.
The exchange rate and the exchange offer are detailed in Schedule 14D-1 filed
by Seagate Technology with the Securities and Exchange Commission today.
The exchange offer, which is currently scheduled to expire at 12:00 midnight,
New York City time on June 7,1999 unless extended, is subject to the completion
of the VERITAS-NSMG transaction and other customary conditions.
For further information, contact:
Bill Rowley
Director of Investor Relations
Seagate Technology, Inc.
Voice: (831) 439-2371
Fax: (831) 438-2631
Email: [email protected]
