<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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QUANTUM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-2665054
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
500 MCCARTHY BOULEVARD
MILPITAS, CALIFORNIA 95035
(408) 894-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MICHAEL A. BROWN
PRESIDENT AND CEO
500 MCCARTHY BOULEVARD
MILPITAS, CALIFORNIA 95035
(408) 894-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
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<S> <C> <C>
STEVEN E. BOCHNER, ESQ. ANDREW KRYDER, ESQ. CHRISTOPHER L. KAUFMAN, ESQ.
JOHN A. FORE, ESQ. VICE PRESIDENT, FINANCE ROBERT S. MICHITARIAN, ESQ.
JEFFREY A. HERBST, ESQ. AND CORPORATE GENERAL COUNSEL LATHAM & WATKINS
GILBERT M. LABRUCHERIE, JR., ESQ. 500 MCCARTHY BOULEVARD 505 MONTGOMERY STREET, SUITE 1900
WILSON SONSINI GOODRICH & ROSATI MILPITAS, CALIFORNIA 95035 SAN FRANCISCO, CA 94111
PROFESSIONAL CORPORATION (415) 391-0600
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC UNDER THIS
REGISTRATION STATEMENT: as soon as practicable after this registration statement
becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE REGISTRATION FEE(3)
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Common Stock, $0.01 par value...... 5,110,690 $26.375 $134,794,449 $40,847
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</TABLE>
(1) Represents the maximum number of shares issuable to Salomon Brothers Inc
upon conversion of Debentures held or to be purchased by it pursuant to the
standby arrangements described herein.
(2) Represents the closing price of the Registrant's Common Stock on the Nasdaq
Stock Market on December 17, 1996.
(3) Computed in accordance with Rule 457 under the Securities Act of 1933 solely
for purposes of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
DATED DECEMBER 20, 1996
PROSPECTUS
5,110,690 SHARES
LOGO
QUANTUM CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
This prospectus relates to the issuance of a maximum of 5,110,690 shares of
Common Stock, $0.01 par value (the "Common Stock"), of Quantum Corporation, a
Delaware corporation ("Quantum" or the "Company"), either (i) upon conversion of
the Company's outstanding 6 3/8% Convertible Subordinated Debentures due April
1, 2002 (the "Debentures"), or (ii) to Salomon Brothers Inc (the "Purchaser")
under the standby arrangements described herein, and the resale by the Purchaser
of such Common Stock. The Debentures and the Common Stock are quoted on the
Nasdaq Stock Market under the symbols QNTMG and QNTM, respectively.
The Company has called all the Debentures for redemption on January 19, 1997
(the "Redemption Date") at a redemption price of $1,038.25 per $1,000 principal
amount of Debentures, plus accrued interest of $19.13 from October 1, 1996 to
the Redemption Date, for a total of $1,057.38 for each $1,000 principal amount
of Debentures (the "Redemption Price"). The Debentures are convertible prior to
5:00 p.m., Chicago, Illinois time, on January 17, 1997 (the last trading day
preceding the Redemption Date) (the "Conversion Expiration Date"), at a
conversion rate of 55.10 shares of Common Stock (equivalent to a conversion
price of approximately $18.15 per share) for each $1,000 principal amount of
Debentures. On December 18, 1996, the last reported sale price of the Common
Stock on the Nasdaq Stock Market was $27.875 per share.
So long as the market price of the Common Stock is at least $19.20 per share, a
holder of the Debentures who converts will receive Common Stock with a market
value plus cash in lieu of any fractional share greater than the amount of cash
the holder would otherwise be entitled to receive upon redemption. Holders of
Debentures are urged to obtain current market quotations for the Company's
Common Stock.
The convertability of the Debentures will expire at 5:00 p.m., Chicago, Illinois
time, on January 17, 1997.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE RISK FACTORS
COMMENCING AT PAGE 5.
In the event that less than all of the Debentures are surrendered for conversion
prior to the Conversion Expiration Date, the Company has made arrangements for
the Purchaser to purchase from the Company such number of shares of Common Stock
as would have been issuable upon conversion of the Debentures that have not been
surrendered for conversion prior to 5:00 p.m., Chicago, Illinois time, on
January 17, 1997. The purchase price per share of such shares of Common Stock
will be $19.20, and the proceeds of sale will be used by the Company to effect
redemption of the Debentures not converted. In addition, the Purchaser has
agreed in certain circumstances to remit to the Company 50% of the excess, if
any, of the aggregate net proceeds received on sale of such shares of Common
Stock over the aggregate price paid to the Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prior to and after the Redemption Date, the Purchaser may offer to the public
Common Stock, including shares acquired through the purchase and conversion of
the Debentures, at prices set from time to time by the Purchaser. It is intended
that each such price when set will not exceed the greater of the last sale or
current asked price per share of the Common Stock on the Nasdaq Stock Market
plus the amount of any concession to dealers, and it is intended that an
offering price set on any calendar day will not be increased more than once
during such day. As a result, and subject to the preceding paragraph, the
Purchaser may realize profits or losses independent of the compensation referred
to under "Standby Arrangements."
The Purchaser may also make sales to dealers at prices which represent
concessions from the prices at which such shares are then being offered to the
public. Any shares of Common Stock so offered are offered subject to receipt and
acceptance by the Purchaser, to prior sale and to the Purchaser's right to
reject any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of the Common Stock acquired by the
Purchaser from the Company will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company.
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SALOMON BROTHERS INC
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The date of this Prospectus is December 20, 1996.
<PAGE> 3
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE SHARES BY ANY PERSON IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER,
SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission" or the "SEC"). Such
reports, proxy statements and other information can be inspected and copied at
the offices of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the following regional offices of
the Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such reports, proxy statements and other information
concerning the Company may be inspected at the office of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. The Common Stock and the Debentures of the Company are traded on the
Nasdaq Stock Market.
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments, exhibits and schedules thereto) on Form S-3
under the Securities Act with respect to the Shares offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made. Statements
made in this Prospectus as to the contents of any document referred to are not
necessarily complete. With respect to each such document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Copies of the Registration
Statement and the exhibits and schedules thereto may be inspected, without
charge, at the offices of the Commission, or obtained from the Public Reference
section of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549. The
SEC maintains a website that contains reports, proxy and other information
regarding Quantum. The address of the website is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996;
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 29, 1996;
(d) The Company's Registration Statement on Form 8-A filed on August 1,
1983, as may be amended from time to time, relating to the description
of the Company's Common Stock; and
(e) The Company's Registration Statement on Form 8-A filed on August 5,
1988 relating to the Company's Preferred Share purchase rights.
<PAGE> 4
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement incorporated herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement and any statement contained herein shall
be deemed to be modified or superseded for all purposes to the extent that a
statement contained in any subsequently filed document which is deemed to be
incorporated by reference modifies or supersedes such statement.
The Company will provide without charge to such person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents should be directed
to Investor Relations, Quantum Corporation, at the Company's executive offices
located at 500 McCarthy Boulevard, Milpitas, California 95035, telephone (408)
894-4000.
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2
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THE COMPANY
The following contains certain forward-looking statements and potential
investors should carefully review the "Risk Factors" commencing on page 5 with
respect to such forward-looking statements.
Quantum designs, develops and markets mass storage products, including
high-performance, high quality hard disk drives, recording heads and tape
drives. The Company combines its engineering and design expertise with the high
volume hard disk drive manufacturing capabilities of its exclusive manufacturing
partner, Matsushita Kotubuki Electronics Industries, Ltd. ("MKE") of Japan, to
produce high quality hard disk drives designed to meet the storage requirements
of workstations, servers, disk arrays, entry-level to high-end desktop PCs and
minicomputers. In addition, the Company utilizes its own design and
manufacturing operations for its linear tape drive products as well as for
recording heads which are used in the Company's disk drive products. The
Company's customers include leading OEMs such as Acer, Apple, Compaq, Dell,
Digital, Hewlett-Packard, IBM, NEC, Silicon Graphics and Sun Microsystems.
The Company's strategy is to offer a diversified product portfolio which
features leading edge technology and high quality manufacturing for a broad
range of market applications. The Company is currently structured into the
following four main operating divisions:
DESKTOP AND PORTABLE STORAGE GROUP (DPSG). The Desktop and Portable
Storage Group designs, develops and markets hard disk drives primarily
designed to meet the storage needs of desktop systems. The Company's DPSG
products are designed for entry-level to high-end desktop PCs for use in
both home and business environments.
WORKSTATION AND SYSTEMS STORAGE GROUP (WSSG). The Workstation and
Systems Storage Group designs, develops and markets the Company's most
technologically advanced hard disk drives for the demanding storage needs
of servers, workstations, storage subsystems, high-end desktop systems and
minicomputers. The Company's WSSG products are designed for storage-
intensive applications such as graphics, disk arrays, desktop publishing
systems, multimedia computing systems and networked data bases and file
servers.
SPECIALTY STORAGE PRODUCTS GROUP (SSPG). The Specialty Storage
Products Group designs, develops, manufactures and markets linear tape
drives and solid state disk drives. The tape drives use advanced linear
recording technology and a highly accurate tape guide system to perform
data backup for mid-range and high-end computer systems. The solid state
disk drives have the high execution speeds required for applications such
as imaging, multimedia, video-on-demand, on-line transaction processing,
material requirements planning and scientific modeling.
RECORDING HEADS GROUP (RHG). The Recording Heads Group designs,
develops and manufactures magnetoresistive ("MR") recording heads used in
the Company's products. The Company believes that MR head technology, which
provides higher capacity per disk than thin film inductive heads, will
replace thin film inductive heads as the leading recording head technology.
The Company does not currently market thin film inductive or MR heads to
other companies. The Company's expectations regarding MR head technology
constitute forward-looking information and actual results could vary for
the reasons described in "Risk Factors -- MR Recording Heads Development
and Manufacturing."
Quantum operates in an industry characterized by rapid technological
change. The Company is currently concentrating its product development efforts
on broadening its existing disk and tape drive product lines through the
introduction of new products, including new high-capacity hard disk drive
products to be manufactured by MKE for WSSG as well as new products targeted
specifically for the increasing storage needs of the consumer market served by
DPSG. The Company is also focusing its efforts on applying its MR head
technology to new generations of disk drives.
3
<PAGE> 6
Over the past twelve years, Quantum has established a strong business
relationship with MKE, and the Company now relies on MKE's advanced, highly
automated hard disk drive manufacturing process which emphasizes consistency and
repeatability. In fiscal 1997, the Company transitioned the manufacturing of its
high-capacity hard disk drive products to MKE, and MKE has only recently begun
volume production of the Company's high-capacity products. As a result of this
transition, MKE now has the exclusive right to manufacture all of the Company's
hard disk drive products. The Company believes that its strategy of outsourcing
manufacturing to MKE gives it a competitive advantage in product quality, time
to volume production and lower capital requirements. However, the Company's
expectations regarding its relationship with MKE constitute forward-looking
information, and actual results could vary for the reasons set forth in "Risk
Factors -- Transition of High-Capacity Manufacturing Operations to MKE,"
" -- Dependence on MKE Relationship."
The Company was incorporated as a California corporation in February 1980,
and reincorporated as a Delaware corporation in April 1987.
4
<PAGE> 7
RISK FACTORS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Actual results could differ materially from those projected in the
forward-looking statements as a result of certain of the risk factors set forth
below and elsewhere in this Prospectus. In addition to the other information
contained and incorporated by reference in this Prospectus the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby:
FLUCTUATION IN RESULTS OF OPERATIONS. The Company's results of operations
are subject to fluctuations from period to period. In this regard, the demand
for the Company's hard disk drive products depends on the demand for the
computer systems manufactured by its customers, which is affected by computer
system product cycles and by prevailing economic conditions. Growth in demand
for computer systems, especially in the personal computer ("PC") market segment,
where the Company derives a significant amount of its disk drive sales, has
historically been subject to significant fluctuations. Such fluctuations in end
user demand have in the past, and may in the future, result in the deferral or
cancellation of orders for the Company's products, each of which would have a
material adverse effect on the Company. During the past several years, there has
been significant growth in the demand for PCs, a portion of which represented
sales of PCs for use in the home. However, many analysts predict that future
growth may be at a slower rate than the rate experienced in recent years.
In the first and second quarters of fiscal 1997, the Company experienced
weak demand for its mix of drive products for the PC market and this resulted in
pricing pressure on the Company's products and had an adverse impact on revenue
and earnings for the first six months of fiscal 1997. The Company lost some
desktop business to competitors with strong 1.6 gigabyte desktop programs at
different price points. In response to the declining demand, the Company reduced
its drive build plan at MKE through the second quarter of fiscal 1997. There can
be no assurance that this decline in demand is temporary, and the Company could
experience additional decreases in demand for its products in the near future.
Any such additional slowdowns in demand could have a material adverse effect on
the Company.
The hard disk drive industry has also been subject, from time to time, to
seasonal fluctuations in demand. Because shipments have tended to be highest in
the third month of each quarter, the Company is taking steps to improve the
linearity of shipments throughout the quarter. If the linearity of shipments
does not improve, any failure by the Company to complete shipments in the final
month of the quarter could adversely affect the Company's operating results for
the quarter.
TRANSITION OF HIGH-CAPACITY MANUFACTURING OPERATIONS TO MKE. Since the
Company's acquisition of Digital's high-capacity disk drive operations in late
1994, the Company experienced significant difficulties in integrating these
operations into its high-capacity business. These difficulties included problems
involving both the development and manufacturing of its high-capacity products
and resulted in, among other things, significant delays in meeting the
qualification standards imposed by certain major customers of the Company's
high-capacity disk drive products. As part of its strategy to address these
problems, in fiscal 1996, the Company decided to transition its high-capacity
disk drive product manufacturing to MKE. As a result, in the fourth quarter of
fiscal 1996 the Company incurred a charge of $209 million associated with the
closure of the Company's two high-capacity disk drive manufacturing facilities
in Milpitas, California and Penang, Malaysia. These two facilities were closed
during the quarter ended September 29, 1996.
Several risks are associated with the Company's transition of its
high-capacity manufacturing operations to MKE. Although the Company has had a
continuous manufacturing relationship with MKE since 1984, the Company's
high-capacity products are more complex to manufacture than its desktop
products. Prior to the transition, MKE had not previously manufactured any
significant amount of the
5
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Company's high-capacity products and there can be no assurance that the
Company's previous difficulties with its high-capacity products will be resolved
or that new problems will not arise as a result of the transition of this
manufacturing to MKE. Any failure of the Company to successfully manage this
transition would have a material adverse effect on the Company.
DEPENDENCE ON MKE RELATIONSHIP. The Company is dependent upon MKE for the
manufacture of its disk drive products. During fiscal 1996 and the first two
quarters of fiscal 1997, approximately 75% and 77%, respectively, of the
Company's sales were derived from products manufactured by MKE. The transition
of the manufacturing of the Company's high-capacity product manufacturing to MKE
has resulted in an increased dependence on MKE. The Company's relationship with
MKE is therefore critical to the Company's business and financial performance.
The Company's dependence on MKE entails, among others, the following
principal risks:
Quality and Delivery. The Company relies on MKE's ability to bring
new products rapidly to volume production at low cost, to meet the
Company's stringent quality requirements and to respond quickly to changing
product delivery schedules from the Company. This requires, among other
things, close and continuous collaboration between the Company and MKE in
all phases of design, engineering, and production. The Company's business
and financial results would be adversely affected if products manufactured
by MKE fail to satisfy the Company's quality requirements or if MKE is
unable to meet the Company's delivery commitments. In the event MKE is
unable to satisfy Quantum's production requirements, the Company would not
have an alternative manufacturing source to meet the demand without
substantial delay and disruption of the Company's operations. As a result,
the Company would be materially adversely affected.
Extension of Relationship. The Company's relationship with MKE, which
has been continuous since 1984, is currently governed by a master agreement
that, unless extended, will expire in December 1997. The failure of the
parties to extend their relationship on terms favorable to the Company
would have a material adverse effect on the Company.
Volume and Pricing. MKE's production schedule is based on the
Company's forecasts of its product purchase requirements and the Company
has only limited rights to modify short-term purchase orders issued to MKE.
Further, the demand in the desktop business is inherently volatile and
there is no assurance that the Company's forecasts are accurate. In
addition, the Company periodically renegotiates pricing arrangements with
MKE. The failure of the Company to accurately forecast its requirements,
which could lead to inventory shortages or surpluses, or the failure to
reach pricing agreements reasonable to the Company would have a material
adverse effect on the Company.
Manufacturing Capacity and Capital Commitment. The Company believes
that MKE's current and committed manufacturing capacity should be adequate
to meet the Company's requirements at least through the end of fiscal 1997.
The Company's future growth will require, however, that MKE continue to
devote substantial financial resources to property, plant and equipment and
working capital to support manufacture of the Company's products, as to
which there can be no assurance. In the event that MKE is unable or
unwilling to meet the Company's manufacturing requirements, there can be no
assurance that the Company would be able to obtain an alternate source of
supply. Any such failure to obtain an alternative source would have a
material adverse effect on the Company.
DEPENDENCE ON SUPPLIERS OF COMPONENTS AND SUB-ASSEMBLIES; COMPONENT
SHORTAGES. The Company and its manufacturing partner, MKE, are dependent upon
qualified suppliers for components and sub-assemblies, including recording
heads, media and integrated circuits, which are essential to the manufacture of
the Company's products. In connection with certain products, the Company and MKE
qualify only a single source for certain components and sub-assemblies, which
can magnify the risk of shortages. Component shortages have constrained the
Company's sales growth in the past, and the Company believes that the industry
will periodically experience component shortages. If such shortages occur, or if
the Company experiences quality problems with component suppliers, shipments of
products
6
<PAGE> 9
could be significantly delayed or costs significantly increased, which would
have a material adverse effect on the Company.
RAPID TECHNOLOGICAL CHANGE; NEW PRODUCT DEVELOPMENT AND
QUALIFICATION. Quantum operates in an industry characterized by increasingly
rapid technological changes and short product life cycles. For these and other
reasons, including competitive pressures, gross margins on specific products can
decrease rapidly. Any delay in introduction of more advanced and more
cost-effective products can result in significantly lower sales and gross
margins. The Company's future is therefore dependent on its ability to
anticipate what the customers will demand and to develop the new products to
meet this demand. The Company must also qualify these new products with its
customers, successfully introduce these products to the market on a timely basis
and commence volume production to meet customer demands. Due to these factors,
the Company expects that sales of new products will continue to account for a
significant portion of its future sales and that sales of older products will
decline accordingly. However, there can be no assurance that such new products
will achieve or sustain market acceptance and failure to achieve acceptance
could have a material adverse effect on the Company.
The Company is currently in the process of qualifying two of its new
high-capacity products. The customer qualification process for disk drive
products, particularly high-capacity products, can be lengthy and complex, and
the Company has in the past experienced difficulties in obtaining qualifications
of its high-capacity products from certain customers. In addition, the Company
transitioned the manufacturing of its high capacity products to MKE during the
first half of fiscal 1997, and MKE has only recently begun volume production of
such high-capacity products. In the event that the Company is unable to obtain
customer qualifications for these new products in a timely manner, or at all, or
in the event MKE is unable to manufacture such products in volume, the Company
would be materially adversely affected.
There can be no assurance that the Company will be successful in the
development and marketing of these and other new products and components that
seek to respond to technological change or evolving industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products and
components, or that the Company's new products and components will adequately
meet the requirements of the marketplace and achieve market acceptance. In
addition, technological advances in magnetic, optical or other technologies, or
the development of new technologies, could result in the introduction of
competitive products with superior performance to and substantially lower prices
than the Company's products. Further, the Company's new products and components
are subject to significant technical risks. If the Company experiences delays in
the commencement of commercial shipments of new products or components, the
Company could experience delays or loss of product sales. If the Company is
unable, for technological or other reasons, to develop and introduce new
products in a timely manner in response to changing market conditions or
customer requirements, the Company would be materially adversely affected.
MR RECORDING HEADS DEVELOPMENT AND MANUFACTURING. The Company is currently
engaged in a substantial effort to advance the development of its MR recording
heads. The Company believes that MR head technology, which enables higher
capacity per disk than conventional thin film inductive heads, will replace
inductive heads as the leading recording head technology. Although the Company
currently obtains the majority of its MR heads from outside sources, the Company
believes that by establishing its own supply of MR heads it can lower the risk
of supply shortages of MR heads that may occur in the future as a result of
increased requirements for disk drive products which utilize MR recording heads.
However, MR technology is relatively complex and, to date, the Company's
manufacturing yields for its MR heads have been relatively low as compared to
the Company's manufacturing yields for its thin film inductive heads. In the
event that yields do not improve, the Company will continue to occur losses
associated with its MR heads manufacturing operations, which losses would
negatively affect the Company's operating results. In addition, since there are
limited alternative sources of supply for MR recording heads, and there can be
no assurance that the Company will be able to locate and obtain adequate supply
from such alternative sources, the Company would be materially adversely
affected in the event that its yields for MR heads do not improve.
7
<PAGE> 10
CUSTOMER CONCENTRATION. As is typical in the information storage industry,
the Company's customer base is concentrated with a small number of computer
systems manufacturers. In general, the customers are not obligated to purchase
any minimum volume of the Company's products, and the Company's relationships
with its customers are generally terminable at will by the customers.
Sales of the Company's desktop products, which comprise a significant
majority of its overall sales, were concentrated with several key customers
during the six months ended September 29, 1996, and the fiscal year ended March
31, 1996. Sales to the top five customers of the Company represented 40% of
total sales for the first six months of fiscal 1997 and 44% of sales for the
1996 fiscal year. For the first six months of fiscal 1997, sales to Compaq were
approximately 11% of total sales. Apple's share of the Company's sales, which
was 11% in fiscal 1996, has declined to approximately 7% in the first six months
of fiscal 1997. In addition, the Company is unable to predict whether or not
there will be any significant change in demand for any of its customers'
products in the future. In the event that any such changes result in decreased
demand for the Company's products, whether by loss or delays in orders, the
Company could be materially adversely affected.
INTENSELY COMPETITIVE INDUSTRY. The information storage products industry
in general, and the disk drive industry in particular, is characterized by
intense competition which results in rapid price erosion, short product life
cycles, and continuous introduction of new, more cost-effective products
offering increased levels of capacity and performance. In this regard, the
Company intends to introduce new products during the latter half of fiscal 1997,
and there can be no assurance that it will be successful. If this does not
occur, the Company would be materially and adversely affected. The hard disk
drive industry also tends to experience periods of excess product inventory and
intense price competition. If price competition intensifies, the Company may be
forced to lower prices further than expected, which could materially adversely
affect the Company.
Quantum faces direct competition from a number of companies, including
Seagate, Western Digital, IBM, (which recently announced increased investment in
its storage business), Maxtor and Exabyte. In the event that the Company is
unable to compete effectively with these or any other companies, the Company
would be materially adversely affected.
Desktop Storage Products. In the market for desktop products, Quantum
competes primarily with Seagate, Western Digital, and Maxtor. Quantum and
its competitors have developed and are developing a number of products
targeted at particular segments of this market, such as home PC buyers, and
factors such as time to market can have a significant effect on the success
of any particular product. The desktop market is characterized by more
competitors and shorter product life cycles than the hard disk drive market
in general.
Workstation and System Storage Products. The Company faces
competition in the high-capacity disk drive market primarily from Seagate
and IBM. Seagate has the largest share of the market for high-capacity disk
drives. Although the same competitive factors identified above as being
generally applicable to the overall disk drive industry apply to
high-capacity disk drives, the Company believes that the performance and
quality of its products are more important to the users in this market than
to users in the desktop market. The Company's success in the high-capacity
market during the foreseeable future is dependent on the successful
development, timely introduction and market acceptance of key new products,
as to which there can be no assurance.
Specialty Storage Products. In the market for tape drives, the
Company competes with a large number of companies, which have tape drive
product offerings, including Exabyte. The Company targets a market segment
which requires a mission critical backup system and the Company competes in
this segment based upon the reliability and durability of its tape drives.
Although the Company has experienced market acceptance of its tape drive
products, the market could become significantly more competitive at any
time during the remainder of fiscal 1997 or beyond. As a result, the
Company could experience increased price competition. If price competition
occurs, the Company may be forced to lower prices, in which case the
Company could be materially adversely affected.
8
<PAGE> 11
Finally, the Company's customers could commence the manufacture of disk and
tape drives for their own use or for sale to others. Any such loss of customers
could have a material adverse effect on the Company.
RISKS ASSOCIATED WITH FOREIGN MANUFACTURING. Many of the Company's
products are currently manufactured outside the United States. As a result, the
Company is subject to certain risks associated with contracting with foreign
manufacturers, including obtaining requisite United States and foreign
governmental permits and approvals, currency exchange fluctuations, currency
restrictions, political instability, labor problems, trade restrictions and
changes in tariff and freight rates.
INTELLECTUAL PROPERTY MATTERS. The hard disk drive industry has been
characterized by significant litigation relating to patent and other
intellectual property rights. From time to time, the Company is approached by
companies and individuals alleging Quantum's need for a license under patented
technology that Quantum assertedly uses. If required, there can be no assurance
that licenses to any such technology could be obtained or obtained on
commercially reasonable terms. Adverse resolution of any intellectual property
litigation could subject the Company to substantial liabilities and require it
to refrain from manufacturing certain products. In addition, the costs of
engaging in such litigation may be substantial, regardless of the outcome.
LITIGATION. The Company and certain of its current and former officers and
directors have been named as defendants in two class action lawsuits, one filed
on August 28, 1996 in the Superior Court of Santa Clara County, California, and
one filed on August 30, 1996 in the U.S. District Court for the Northern
District of California. The plaintiff in both class actions purports to
represent a class of all persons who purchased the Company's common stock
between February 26, 1996 and June 13, 1996. The complaints allege that the
defendants violated various federal securities laws and California statutes by
concealing and/or misrepresenting material adverse information about the Company
and that individual defendants sold shares of the Company's stock based upon
material nonpublic information. On October 23, 1996, the Company filed a
demurrer requesting dismissal of the state action, and on November 21, 1996, the
Company moved for a determination that the action not be permitted to proceed as
a class action. There has been no decision on either motion to date. In the
federal action, the defendants have not yet responded to the complaint.
Certain of the Company's current and former officers and directors have
also been named as defendants in a derivative lawsuit, which was filed on
November 8, 1996 in the Superior Court of Santa Clara County, California. The
derivative complaint is based on factual allegations substantially similar to
those alleged in the class action lawsuits. The complaint alleges that the
defendants violated the California Corporations Code and state common law by
concealing and/or misrepresenting material adverse information about the Company
and by selling shares of the Company's stock based upon material nonpublic
information. The complaint has not been served on the defendants.
The Company believes that the pending actions are without merit and intends
to defend against them vigorously. Nevertheless, litigation is subject to
inherent uncertainties and thus there can be no assurance that these suits will
be resolved favorably to the Company or will not have a material adverse effect
on the Company.
FUTURE CAPITAL NEEDS. The information storage business is
capital-intensive and competitive. Although the Company has recently
transitioned the manufacturing of all of its hard disk drive products to MKE,
the Company believes that in order to remain competitive in the information
storage business, it will need significant additional financial resources over
the next several years for capital expenditures, working capital and research
and development. The Company believes that it will be able to fund these capital
requirements at least through fiscal 1997. However, if the Company decides to
increase its capital expenditures further or sooner than presently contemplated,
or if results of operations do not meet the Company's expectations, the Company
will require additional debt or equity financing. There can be no assurance that
such additional funds will be available to the Company or will be available on
favorable terms. In addition, the Company may require additional capital for
other purposes not presently contemplated. If the Company is unable to obtain
sufficient capital, it could be required to curtail its
9
<PAGE> 12
capital equipment and research and development expenditures, which could
adversely affect the Company.
VOLATILITY OF STOCK PRICE. The market price of the Company's common stock
has been, and may continue to be, extremely volatile. Factors such as new
product announcements by the Company or its competitors, quarterly fluctuations
in the operating results of the Company, its competitors and other technology
companies and general conditions in the computer market may have a significant
impact on the market price of the common stock. In particular, if the Company
were to report operating results that did not meet the expectations of research
analysts, the market price of the common stock could be materially adversely
affected.
10
<PAGE> 13
USE OF PROCEEDS
There will be no proceeds to the Company from the issuance of the Common
Stock upon conversion of Debentures by the holders thereof. The net proceeds
from the sale of any Common Stock to the Purchaser pursuant to the standby
arrangements described herein will be used to effect redemption of any
Debentures not tendered for conversion. Any excess net proceeds resulting from
the Purchaser remitting certain amounts to the Company pursuant to the standby
arrangements described herein will be added to working capital and used for
general business purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed and traded on the Nasdaq Stock Market under the
symbol QNTM. The following table sets forth, for the periods indicated, the high
and low closing sales prices per share of the Common Stock, as reported on the
Nasdaq Stock Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal year ended March 31, 1994:
First quarter.................................................. $141/2 $101/2
Second quarter................................................. 131/2 91/2
Third quarter.................................................. 143/4 97/8
Fourth quarter................................................. 191/4 141/8
Fiscal year ended March 31, 1995:
First quarter.................................................. $183/16 $113/4
Second quarter................................................. 175/8 1213/16
Third quarter.................................................. 163/4 137/8
Fourth quarter................................................. 1513/16 137/8
Fiscal year ended March 31, 1996:
First quarter.................................................. $265/16 $15
Second quarter................................................. 279/16 207/8
Third quarter.................................................. 207/8 161/8
Fourth quarter................................................. 197/8 165/8
Fiscal year ended March 31, 1997:
First quarter.................................................. 26 141/8
Second quarter................................................. 183/8 11
Third quarter (through December 18, 1996)...................... 293/4 175/16
</TABLE>
On December 18, 1996 the last reported sale price of the Common Stock was
$27.875 per share, as reported on the Nasdaq National Market.
The Company has never paid cash dividends on its Common Stock, and the
Company's credit agreement dated October 3, 1994, as amended, currently
prohibits the Company from paying dividends while the debt is outstanding. The
Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends in the foreseeable future.
11
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 29, 1996, as adjusted to give effect to the assumed conversion of all
outstanding Debentures into shares of Common Stock.
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
Subordinated debt:
6 3/8% convertible subordinated debentures(2)................. $ 97,350 $ 0
5% convertible subordinated notes............................. 241,350 241,350
Long-term debt, excluding current portion....................... 388,365 388,365
Shareholders' equity:
Preferred stock, $0.01 par value; 4,000,000 shares authorized;
none issued and outstanding, actual, and as adjusted....... -- --
Common stock, $0.01 par value, 150,000,000 shares authorized;
actual: 57,792,108 shares issued and outstanding; as
adjusted: 63,156,093 shares issued and outstanding(3)...... 578 632
Capital in excess of par value................................ 325,609 422,235
Retained earnings............................................. 286,293 286,293
------- -------
Total shareholders' equity................................. 612,480 709,160
------- -------
Total capitalization....................................... $1,339,545 $1,338,875
======= =======
</TABLE>
- ---------------
(1) As adjusted information also includes an increase to capital reflecting
interest accrued to the Redemption Date, a decrease to capital reflecting
previously unamortized costs associated with issuance of the Debentures; and
a decrease to capital reflecting costs of the transactions contemplated
hereby.
(2) Between September 29, 1996 and December 18, 1996, 253,292 shares of Common
Stock were issued upon conversion of $4,597,000 principal amount of
Debentures. Such activity is also reflected in the "as adjusted"
information.
(3) Does not include 9,515,996 shares of Common Stock issuable upon exercise of
outstanding options as of September 29, 1996.
12
<PAGE> 15
REDEMPTION OF DEBENTURES AND EXPIRATION OF
CONVERSION PRIVILEGE
The Company has called all its outstanding Debentures for redemption on the
Redemption Date pursuant to the terms of the Indenture dated as of April 1, 1992
(the "Indenture"), between the Company and LaSalle National Bank, as Trustee
(the "Trustee"). As a result of the call for redemption, holders of the
Debentures are entitled to receive from the Company upon redemption the sum of
$1,038.25 plus accrued interest of $19.13 from October 1, 1996 to the Redemption
Date for each $1,000 principal amount of Debentures. The total amount payable
upon redemption for each $1,000 principal amount of Debentures is thus $1,057.38
(the "Redemption Price"). After the Redemption Date, the Debentures will be
deemed to be no longer outstanding, and all rights of the holders of the
Debentures will cease, except the right to receive the Redemption Price without
interest, upon surrender of the Debentures to the Trustee.
ALTERNATIVES AVAILABLE TO HOLDERS OF DEBENTURES
Holders of the Debentures have the following alternatives, each of which
should be carefully considered:
1. Conversion of Debentures into Common Stock. Until 5:00 p.m., Chicago,
Illinois time, on January 17, 1997, which is one trading day prior to the
Redemption Date (the "Conversion Date"), the Debentures are convertible at the
option of the holder, in part or in whole, into 55.10 fully paid and
nonassessable shares (equivalent to an effective conversion price of
approximately $18.15 per share of the Company's Common Stock), for each $1,000
principal amount of Debentures. In the event such conversion would result in a
fractional share of Common Stock, an amount equivalent to the value of the
fractional share will be paid in cash by the Company. Such amount will be
determined on the basis of the last reported sales price as reported by the
Nasdaq Stock Market on the day the Debentures are converted. On the basis of the
closing price of the Common Stock as reported on the Nasdaq Stock Market on
December 18, 1996 of $27.875, 55.10 shares had a market value (including cash in
lieu of the fractional share) equivalent to $1,535.91. No payment or adjustment
will be made on conversion for interest accrued on the Debentures surrendered
for the conversion. Accordingly, any holder surrendering Debentures for
conversion will not receive any interest with respect to such Debentures accrued
since October 1, 1996.
SO LONG AS THE MARKET PRICE OF THE COMMON STOCK IS AT LEAST $19.20 PER
SHARE, A HOLDER OF THE DEBENTURES WHO CONVERTS WILL RECEIVE COMMON STOCK WITH A
MARKET VALUE, PLUS CASH IN LIEU OF ANY FRACTIONAL SHARE, EQUAL TO OR GREATER
THAN THE AMOUNT OF CASH THE HOLDER WOULD OTHERWISE BE ENTITLED TO RECEIVE UPON
REDEMPTION. SEE "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS." HOLDERS OF
DEBENTURES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.
THE CONVERSION RIGHT EXPIRES AT 5:00 P.M. CHICAGO, ILLINOIS TIME, ON THE
CONVERSION DATE. FROM AND AFTER THAT DATE AND TIME, HOLDERS OF DEBENTURES WILL
BE ENTITLED ONLY TO THE REDEMPTION PAYMENT. IT SHOULD BE NOTED, HOWEVER, THAT
THE PRICE OF THE COMMON STOCK RECEIVED UPON CONVERSION WILL FLUCTUATE IN THE
MARKET. NO ASSURANCE IS GIVEN AS TO THE PRICE OF THE COMMON STOCK AT ANY FUTURE
TIME, AND THE HOLDERS SHOULD EXPECT TO INCUR VARIOUS EXPENSES OF SALE IF THE
COMMON STOCK RECEIVED UPON CONVERSION OF THE DEBENTURES IS SOLD.
2. Redemption of Debentures on January 19, 1997. Any Debentures that have
not been converted into Common Stock on or prior to 5:00 p.m., Chicago, Illinois
time, on the Conversion Date, will be redeemed on the Redemption Date. Upon
redemption a holder will receive $1,057.38 per $1,000 principal amount of
Debentures. On and after the Redemption Date, interest will cease to accrue and
holders of Debentures will not have any rights as such holders other than the
right to receive payment of the Redemption Payment, without interest, upon
surrender of their Debentures. Under the Indenture, because the Redemption Date
is not a business day, the first day that any payments need be made on
Debentures submitted for redemption is January 21, 1997 (the first business day
following the Redemption Date); however, no additional interest will accrue as a
result of such delayed payment.
3. Sale of Debentures Through Ordinary Brokerage Transactions. Sales of
Debentures may be made through open market brokerage transactions and, if made
sufficiently in advance of the Conversion Date, buyers thereof may convert
Debentures into Common Stock in the manner described below. After
13
<PAGE> 16
5:00 p.m., Chicago, Illinois time, on the Conversion Date, no holder of
Debentures will be entitled to convert Debentures into Common Stock. This is
expected to have an adverse impact on the market for Debentures. Holders of
Debentures who wish to make sales should consult with their own brokers
concerning if and when their Debentures should be sold.
MANNER OF CONVERSION
To convert Debentures into Common Stock, the holder thereof must surrender
such Debentures, endorsed or assigned to the Company or in blank, prior to 5:00
p.m., Chicago, Illinois time, on the Conversion Date to the Company or its
offices maintained for that purpose at LaSalle National Bank, 135 S. LaSalle
St., Corporate Trust Operations, Suite 1811, Chicago, Illinois 60603,
accompanied by written notice (a form of which is set forth on the reverse of
the Debenture certificate) to the Company that the holder elects to convert such
Debentures, or if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted. Each Debenture surrendered for
conversion must, unless the shares issuable on the conversion are to be issued
in the same name as the name in which such Debenture is registered, be
accompanied by instruments of transfer, in form satisfactory to the Company and
the Trustee, duly executed by the holder or his or her duly authorized attorney.
The notice that must be given to the Company may be provided by surrendering
Debentures accompanied by the Letter of Transmittal provided to all record
holders of the Debentures. As promptly as practicable after the surrender of
such Debenture, as aforesaid, the Company will issue and deliver at the office
of the Trustee to such holder, or on such holder's written order, a certificate
or certificates for the number of full shares of Common Stock issuable upon the
conversion of such Debenture and a check for the amount payable in lieu of any
fractional share. Holders are also entitled to convert fewer than all Debentures
they hold provided that any conversions are for principal amounts of Debentures
in integral multiples of $1,000, in accordance with the terms of the Indenture.
No payment or adjustment will be made on conversion for interest accrued on the
Debentures surrendered for conversion.
The Debentures may be converted into Common Stock only by delivery of
Debentures, accompanied by the notice as described above, to the Company prior
to 5:00 p.m., Chicago, Illinois time, on the Conversion Date. SINCE IT IS THE
TIME OF RECEIPT, NOT THE TIME OF MAILING, THAT DETERMINES WHETHER DEBENTURES
HAVE BEEN PROPERLY TENDERED FOR CONVERSION, SUFFICIENT TIME SHOULD BE ALLOWED
FOR DEBENTURES SENT BY MAIL TO BE RECEIVED BY THE TRUSTEE PRIOR TO 5:00 P.M.,
CHICAGO, ILLINOIS TIME, ON THE CONVERSION DATE.
ANY DEBENTURES THAT HAVE NOT BEEN PROPERLY PRESENTED TO THE COMPANY FOR
CONVERSION PRIOR TO 5:00 P.M., CHICAGO, ILLINOIS TIME, ON THE CONVERSION DATE
WILL BE AUTOMATICALLY REDEEMED AS SET FORTH ABOVE.
MANNER OF REDEMPTION
To receive the Redemption Price specified above for any Debentures being
redeemed, the holder thereof must surrender such Debentures to LaSalle National
Bank, at the address stated above.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is for general information and is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), the applicable regulations promulgated thereunder, and published
administrative and judicial decisions, all as they exist at the date of this
Prospectus. Changes in the law could affect the federal income tax consequences
discussed herein below.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who are
not citizens or residents of the United States) may be subject to special rules
not discussed below. EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF THE SALE OR CONVERSION
14
<PAGE> 17
OF THE DEBENTURES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES IN APPLICABLE TAX LAWS.
For federal income tax purposes the conversion of Debentures into Common
Stock will not result in a taxable gain or loss with respect to the Common Stock
received, except that gain or loss must be recognized with respect to cash
received in lieu of fractional shares upon conversion. The amount of such gain
or loss will be equal to the amount of cash received less the basis attributable
to such fractional shares and will be capital gain or loss if the Debentures are
capital assets in the hands of the holder. A holder's basis for the Common Stock
received upon conversion of Debentures will be equal to the basis of the
Debentures surrendered reduced by the portion of the basis allocated to any
fractional share. Assuming that the Debentures are capital assets in the
holder's hands, the holding period for the Common Stock will include the holding
period for those Debentures.
A sale of Debentures or surrender of Debentures for redemption will be a
taxable transaction on which gain or loss, if any, will be recognized. The gain
or loss will ordinarily be a capital gain or loss, provided the Debentures are a
capital asset in the hands of the holder. The gain or loss recognized upon sale
of Debentures or surrender thereof for redemption will be the difference between
the holder's basis in the Debentures and the sale price or Redemption Price, as
the case may be, received in respect thereof, exclusive of accrued interest
which will be taxable as ordinary income. If a holder purchased the Debentures
for an amount below the stated redemption price at maturity, a portion of the
gain may be treated as ordinary interest income as a result of the market
discount provisions of the Internal Revenue Code. To the extent the Debentures
converted are subject to accrued market discount not previously included in the
income of the holder, the amount of the accrued market discount will carry over
to the Common Stock acquired on conversion and will be taxed as ordinary income
upon the subsequent disposition of the Common Stock.
The federal income tax discussion set forth above is included for general
information only. Holders should consult their tax advisors to determine
particular tax consequences to them (including the application and effect of
market discount and backup withholding rules, state and local income and other
tax laws) prior to any conversion, sale or surrender for redemption of the
Debentures. Holders who do not provide a Taxpayer Identification Number or who
provide an incorrect Taxpayer Identification Number on the substitute W-9
provided in the Letter of Transmittal provided with this Prospectus may be
subject to a 31% backup withholding tax and other penalties.
STANDBY ARRANGEMENTS
Upon the terms and subject to the conditions contained in the Standby
Agreement, dated December 20, 1996, between the Company and the Purchaser (the
"Standby Agreement"), the Purchaser has agreed to purchase from the Company such
number of whole shares of Common Stock (the "Purchased Shares") as would have
been issuable upon conversion of Debentures that have not been surrendered for
conversion prior to the close of business on the Conversion Date. The purchase
price of such shares of Common Stock will be $19.20 per share, an amount
equivalent to $1,057.38 per $1,000 principal amount of Debentures. The Purchaser
may also purchase Debentures in the open market or otherwise prior to the
Redemption Date. The Purchaser has agreed to convert into Common Stock all
Debentures so purchased.
The Purchaser has agreed to pay to the Company 50% of the excess, if any,
of the aggregate proceeds received on sale of the Purchased Shares (net of
selling concessions, transfer taxes and other expenses of sale) over the
aggregate purchase price paid therefor.
The Company has been advised by the Purchaser that it proposes to offer any
shares of Common Stock purchased from the Company or acquired on conversion of
purchased Debentures for resale as set forth on the cover page of this
Prospectus. The Purchaser may also make sales of such shares to certain
securities dealers at prices which may reflect concessions from the prices at
which such shares are being offered to the public. The amount of such
concessions may be determined from time to time.
15
<PAGE> 18
Pursuant to the terms of the Standby Agreement and as compensation for the
commitment of the Purchaser thereunder, the Company has agreed to pay the
Purchaser the sum of $974,047 plus an additional sum for certain Compensable
Shares (as defined below). The additional sum will be paid as follows: (i) no
additional sum will be paid if the total number of Compensable Shares is less
than or equal to 255,534; (ii) if the total number of Compensable Shares is
greater than 255,534 but less than 766,603, the additional sum will equal $0.58
per share for all Compensable Shares; and (iii) if the total number of
Compensable Shares equals or exceeds 766,603, the additional sum will equal
$0.77 for all Compensable Shares. Compensable Shares consist of Purchased
Shares, plus any Shares of Common Stock which are issued to the Purchaser upon
the conversion of the Debentures, which are resold by the Purchaser for less
than $19.20 per share. The Company has also agreed to pay certain out-of-pocket
expenses of the Purchaser and to pay Blue Sky fees and expenses.
Pursuant to the Standby Agreement, the Company has agreed that it will not,
without the written consent of the Purchaser, sell, contract to sell or
otherwise dispose of any shares of Common Stock, with certain exceptions, for a
period commencing on the date of this Prospectus and ending 60 days after the
Redemption Date, provided that if the Purchaser does not acquire 255,534
Purchased Shares pursuant to the Standby Agreement, the Company will no longer
be bound by such restriction.
The Company has agreed to indemnify the Purchaser against certain
liabilities, including liabilities under the Securities Act.
The Purchaser may assist in the solicitation of conversions by holders of
the Debentures, but will receive no additional compensation therefor.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Certain legal matters will be passed upon
for the Purchaser by Latham & Watkins, San Francisco, California.
EXPERTS
The consolidated financial statements of Quantum Corporation, appearing in
Quantum Corporation's Annual Report (Form 10-K) for the year ended March 31,
1996, 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.
16
<PAGE> 19
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE PURCHASER. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY BY ANY PERSON OR IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 1
Incorporation of Certain Documents By
Reference........................... 1
The Company........................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 11
Price Range of Common Stock and
Dividend Policy..................... 11
Capitalization........................ 12
Redemption of Debentures and
Expiration of Conversion
Privilege........................... 13
Certain Federal Income Tax
Considerations...................... 14
Standby Arrangements.................. 15
Legal Matters......................... 16
Experts............................... 16
</TABLE>
5,110,690 SHARES
QUANTUM CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
LOGO
- ---------------------------------------------------
SALOMON BROTHERS INC
- ---------------------------------------------------------------
PROSPECTUS
DATED DECEMBER 20, 1996
<PAGE> 20
QUANTUM CORPORATION
REGISTRATION STATEMENT ON FORM S-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14 OTHER EXPENSES OF REGISTRATION AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than standby
fees, payable in connection with the sale of the Common Stock being registered
hereby. All amounts are estimates except the SEC registration fee and the Nasdaq
Stock Market application fee.
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY
COMPANY
------------
<S> <C>
SEC registration fee................................................... $ 40,847
Printing............................................................... 50,000
Legal fees and expenses................................................ 150,000
Accounting fees and expenses........................................... 70,000
Blue sky fees and expenses............................................. 10,000
Conversion Agent and Trustee fees...................................... 5,000
Miscellaneous.......................................................... 21,863
-------
Total................................................................ $347,710
=======
</TABLE>
ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a
corporation to grant indemnity to directors and officers in terms sufficiently
broad to permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act. Section 11 of the Registrant's Restated Certificate of Incorporation
provides for indemnification of its directors against the Registrant or its
Stockholders to the maximum extent permitted by the Delaware General Corporation
Law for monetary damages for breach of fiduciary duty as a director. Article VI
of the Company's Bylaws, as amended, permits the Company to indemnify directors,
officers, employees and agents to the maximum extent permitted by the Delaware
General Corporation Law. In addition, the Registrant has entered into
Indemnification Agreements with its officers and directors. The Standby
Agreement (Exhibit 1.1) also provides for cross-indemnification among the
Company and the Purchaser with respect to certain matters, including matters
arising under the Securities Act.
ITEM 16 EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
1.1 Form of Standby Agreement
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, as to
legality of securities being registered.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1 Power of Attorney (contained on Page II-3).
</TABLE>
II-1
<PAGE> 21
ITEM 17 UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that the undertakings set forth in paragraph (i) and
(ii) above shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated
by reference in this Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Purchaser at
the closing, as specified in the Standby Agreement, certificates in such
denomination and registered in such names as required by the Purchaser to permit
prompt delivery to each purchaser.
II-2
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milpitas, State of California, on this 20th day of
December, 1996.
QUANTUM CORPORATION
/s/ MICHAEL A. BROWN
--------------------------------------
Michael A. Brown
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each such person whose signature
appears below constitutes and appoints, jointly and severally, Michael A. Brown
and Andrew Kryder his attorneys-in-fact, each with the power of substitution,
for him in any and all capacities, to sign any amendments to this Registration
Statement on Form S-3 (including post-effective amendments), and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ MICHAEL A. BROWN President, Chief Executive December 20, 1996
- ---------------------------------------- Officer and Director
Michael A. Brown (Principal Executive
Officer)
/s/ RICHARD L. CLEMMER Executive Vice President, December 20, 1996
- ---------------------------------------- Finance and Chief Financial
Richard L. Clemmer Officer (Principal Financial
Officer and Principal
Accounting Officer)
/s/ EDWARD M. ESBER Director December 20, 1996
- ----------------------------------------
Edward M. Esber
/s/ DAVID A. BROWN Director December 20, 1996
- ----------------------------------------
David A. Brown
/s/ STEPHEN M. BERKLEY Director December 20, 1996
- ----------------------------------------
Stephen M. Berkley
/s/ ROBERT J. CASALE Director December 20, 1996
- ----------------------------------------
Robert J. Casale
/s/ STEVEN C. WHEELWRIGHT Director December 20, 1996
- ----------------------------------------
Steven C. Wheelwright
</TABLE>
II-3
<PAGE> 23
QUANTUM CORPORATION
REGISTRATION STATEMENT ON FORM S-3
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Standby Agreement............................................................
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, as to legality
of securities being registered.......................................................
23.1 Consent of Ernst & Young LLP, independent auditors...................................
23.2 Consent of Counsel (contained in Exhibit 5.1 above)..................................
24.1 Power of Attorney (see page II-3)....................................................
</TABLE>
<PAGE> 1
EXHIBIT 1.1
QUANTUM CORPORATION
6-3/8% Convertible Subordinated Debentures
STANDBY AGREEMENT
New York, New York
December 20, 1996
SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Quantum Corporation, a Delaware corporation (the "Company"), intends
to call for redemption on January 19, 1997 (the "Redemption Date"), all of its
outstanding 6-3/8% Convertible Subordinated Debentures due April 1, 2002 (the
"Debentures") at a redemption price of $1,038.25 per $1,000 principal amount of
Debentures, plus accrued interest of $19.13 from October 1, 1996 to the
Redemption Date, for a total redemption price of $1057.38 per $1,000 principal
amount of Debentures (the "Redemption Price"). The Debentures are convertible
into shares of common stock, $.01 par value per share (the "Common Stock"), of
the Company at any time prior to 5:00 p.m., Chicago, Illinois time, on January
17, 1997 (the trading day immediately preceding the Redemption Date) (the
"Conversion Date").
In order to ensure that the Company will have available sufficient
funds to redeem any Debentures not converted on or prior to the Conversion Date,
the Company desires to make arrangements pursuant to which you (the "Purchaser")
will, on the Redemption Date or, if the Redemption Date is not a business day,
the next business day thereafter, purchase shares of Common Stock that would
have been issuable upon the conversion of the Debentures that have not been
surrendered for conversion prior to 5:00 p.m., Chicago, Illinois time, on the
Conversion Date.
1. Representations and Warranties. The Company represents
and warrants to the Purchaser as set forth below in this Section 1. Certain
terms used in this Section 1 are defined in Section 1(g) hereof.
(a) The Company meets the requirements for use of Form S-3
under the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations promulgated thereunder, and has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (file number
333-______) on such Form, including a related preliminary prospectus, for the
registration under the Act of the issuance by the Company of the shares of
Common Stock issuable upon conversion by the Purchaser of Debentures and the
sale by the Purchaser of any shares of Common Stock that may be acquired by it
as contemplated by this Standby Agreement (this "Standby Agreement" or this
"Agreement"). The Company may have filed one or more amendments, including the
related preliminary
<PAGE> 2
prospectus, each of which previously has been provided to you. The Company will
next file with the Commission one of the following: (i) prior to effectiveness
of such Registration Statement, a further amendment to such Registration
Statement, including the form of final prospectus, (ii) a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4), or (iii) a final prospectus in
accordance with Rules 415 and 424(b)(2) or (5). In the case of clause (ii), the
Company has included in such registration statement, as amended at the Effective
Date, all information (other than Rule 430A Information) required by the Act and
the rules thereunder or to be included in the Prospectus with respect to the
Common Stock registered pursuant to the Registration Statement and the offering
thereof. As filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together with all other
such required information, with respect to the Common Stock registered pursuant
to the Registration Statement and the offering thereof and, except to the extent
the Purchaser shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the Execution Time
or, to the extent not completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior to the
Execution Time, will be included or made therein. If the Registration Statement
contains the undertaking specified by Regulation S-K Item 512(a), the
Registration Statement, at the Execution Time, meets the requirements set forth
in Rule 415(a)(1)(x).
(b) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in accordance with
Rule 424(b), on the Conversion Date, on the Redemption Date and on the Closing
Date, the Prospectus (and any supplements thereto) will, comply in all material
respects with the applicable requirements of the Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the respective rules and
regulations thereunder; on the Effective Date, the Registration Statement did
not or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and on
the date of any filing pursuant to Rule 424(b), on the Conversion Date, on the
Redemption Date and on the Closing Date, the Prospectus (together with any
supplement thereto) will not, include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
the information contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the Purchaser
through the Purchaser specifically for inclusion in the Registration Statement
or the Prospectus (or any supplement thereto).
(c) The Debentures are convertible into Common Stock at a
rate of 55.10 shares of Common Stock per $1,000 principal amount of Debentures.
At the Execution Time, there were outstanding $92,753,000 aggregate principal
amount of Debentures and the Company has duly authorized the redemption of all
outstanding Debentures on the Redemption Date at the Redemption Price; by the
close of business on the business day following the date of execution hereof,
all the Debentures shall have been duly called for redemption in accordance with
the indenture, dated as of April 1, 1992 (the "Indenture"), between the Company
and LaSalle National Bank, as Trustee (the "Trustee"); and the right to convert
the Debentures into shares of Common Stock will, as a result of such call,
expire at 5:00 p.m., Chicago, Illinois time, on the Conversion Date. A copy of
the form of notice or redemption and the related letter of transmittal
(collectively, the "Notice of Redemption") has been heretofore delivered to you.
The Indenture and the Debentures have been duly authorized, executed and
delivered by the Company and constitute legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms.
2
<PAGE> 3
(d) The Company has neither taken nor will take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or that might reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company to facilitate the
conversion of the Debentures.
(e) The Company has neither paid nor given, nor will pay or
give, directly or indirectly, any commission or other remuneration for
soliciting the conversion of Debentures into Common Stock and cash.
(f) Neither the issue and sale of the Securities (as defined
in Section 2(b) hereof), nor the consummation of any other of the transactions
herein contemplated, nor fulfillment of the terms hereof will conflict with,
result in a breach or violation of, or constitute a default under any law or the
charter or by-laws of the Company or the terms of any material indenture or
other material agreement or instrument to which the Company or any of its
subsidiaries is a party or bound or any material judgment, order or decree
applicable to the Company or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator having jurisdiction
over the Company or any of its subsidiaries.
(g) The terms that follow, when used in this Agreement, shall
have the meanings indicated. The term "business day" shall have the meaning
ascribed to such term in the Indenture. The term "Effective Date" shall mean
each date that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective and each date after the date
hereof on which a document incorporated by reference in to the Registration
Statement is filed. "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "Preliminary
Prospectus" shall mean any preliminary prospectus referred to in Section 1(a)
above and any preliminary prospectus included in the Registration Statement at
the Effective Date that omits Rule 430A Information. "Prospectus" shall mean the
prospectus relating to the Securities (as hereinafter defined) that is first
filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant
to Rule 424(b) is required, shall mean the form of final prospectus relating to
the Securities included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to in
Section 1(a) above, including incorporated documents, exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto becomes effective prior to the
Closing Date (as hereinafter defined), shall also mean such registration
statement as so amended; such term shall include any Rule 430A Information
deemed to be included therein at the Effective Date as provided by Rule 430A.
"Rule 415," "Rule 424," "Rule 430A" and "Regulation S-K" refer to such rules or
regulations under the Act. "Rule 430A Information" means information with
respect to the Securities and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule 430A. Any
reference herein to the Registration Statement, a Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 that were filed under the
Exchange Act on or before the Effective Date of the Registration Statement or
the issue date of such Preliminary Prospectus or the Prospectus, as the case may
be; and any reference herein to the terms "amend," "amendment" or "supplement"
with respect to the Registration Statement, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the filing of any document
under the Exchange Act after the Effective Date of the Registration Statement,
or the issue date of any Preliminary Prospectus or the Prospectus, as the case
may be, deemed to be incorporated therein by reference.
3
<PAGE> 4
2. Purchase of Securities. Subject to the terms and
conditions and in reliance upon the representations and warranties herein set
forth:
(a) The Purchaser agrees to surrender for conversion into
Common Stock prior to 5:00 p.m., Chicago, Illinois time, on the Conversion Date
all Debentures purchased by the Purchaser pursuant to Section 4 hereof or
otherwise held by the Purchaser. The shares of Common Stock issued to the
Purchaser upon the conversion of Debentures are referred to as the "Conversion
Securities."
(b) If any Debentures have not been surrendered for
conversion prior to 5:00 p.m., Chicago, Illinois time on the Conversion Date,
the Company shall sell to the Purchaser, and the Purchaser shall purchase from
the Company, at a purchase price of $19.20 per share, such whole number of
shares of Common Stock as would have been issuable upon conversion of all
Debentures not surrendered for conversion. The shares of Common Stock to be
purchased pursuant to this Section 2(b) are referred to as the "Purchased
Securities" and, together with the Conversion Securities, the "Securities."
(c) It is understood that the Purchaser intends to resell the
Purchased Securities from time to time at prices prevailing in the open market.
On or prior to the fifteenth day after the Redemption Date, shall remit to the
Company 50% of the excess, if any, of the aggregate proceeds received by the
Purchaser from the sale of such Purchased Securities (net of selling
concessions, transfer taxes and other expenses of sale) over an amount equal to
$19.20 multiplied by the number of Purchased Securities sold by the Purchaser.
Upon completion of the sale of the Securities, the Purchaser shall furnish to
the Company a statement setting forth the aggregate proceeds received on the
sale thereof and the applicable selling concessions, transfer taxes and other
expenses of sale. For purposes of the foregoing determination, any Securities
not sold by or for the account of the Purchaser prior to the close of business
on the tenth day after the Redemption Date shall be deemed to have been sold on
such tenth day for an amount equal to the last reported sale price of the Common
Stock on such day. Nothing contained herein shall limit the right of the
Purchaser, in its discretion, to determine the price or prices at which, or the
time or times when, any Securities shall be sold, whether or not prior to the
Redemption Date and whether or not for long or short account.
(d) The Company shall inform the Purchaser no later than 5:30
p.m. Chicago, Illinois time, on the Conversion Date, of the number and amount of
Purchased Securities. At or before 10:00 a.m. Chicago, Illinois time on the
Redemption Date or, if the Redemption Date is not a business day, the next
business day thereafter, the Purchaser shall transmit payment for the Purchased
Securities to or upon the order of the Company by wire transfer to an account or
accounts designated in writing by the Company, payable in same-day funds.
Whereupon delivery of the Purchased Securities shall be made to the Purchaser.
The Purchaser shall not be responsible for any delay in receipt of any such
wire transfer, provided that such wire transfer is effected as set forth in
this Section 2(d), and provided, further, that this sentence shall not in any
way be construed as relieving the Purchaser from its obligation to make payment
to the Company of any amounts required to be paid pursuant to this Section 2,
but instead is intended only to express the agreement of the parties that the
Purchaser shall not have any responsibility or liability for any temporary
delays in receipt of such funds resulting from delays in processing of wire
transfers in the United States federal wire transfer system. The date and
time of payment and delivery of the Purchased Securities is herein call the
"Closing Date." The Closing Date and time may be postponed by agreement between
the Purchaser and the Company.
3. Compensation. As compensation for the commitment of the
Purchaser hereunder, the Company will pay to the Purchaser an amount equal to
the sum of (i) $974,047 plus (ii) if the aggregate number of Compensable
Shares exceeds 255,534 shares but does not exceed 766,603 shares, an
additional $0.58 per Compensable Share for the aggregate number of all
Compensable Shares
4
<PAGE> 5
or, if the aggregate number of Compensable Shares exceeds 766,603 shares, an
additional $0.77 per Compensable Share for the aggregate number of all
Compensable Shares. The term "Compensable Shares" means, collectively, Purchased
Securities plus any Conversion Securities that are acquired by the Purchaser or
that the Purchaser obtained the right to acquire on a date when the last
reported sale price of the Common Stock on the Nasdaq Stock Market was less than
$19.20 per share.
Such compensation shall be paid to the Purchaser by wire transfer to
an account designated in writing by the Purchaser, payable in same-day funds on
(A) if the Purchaser is required to purchase any Purchased Securities, the
Closing Date, or (B) otherwise, as soon as practicable after the Conversion Date
(but in no event later than two business days thereafter).
4. Additional Purchases. The Purchaser may purchase Debentures, in
the open market or otherwise, in such amounts and at such prices as the
Purchaser may deem advisable. All Debentures so purchased will be converted by
the Purchaser into Common Stock in accordance with Section 2(a) hereof. The
Common Stock acquired by the Purchaser upon conversion of any Debentures
acquired pursuant to this Section 4 may be sold at any time or from time to time
by the Purchaser. It is understood that, for the purpose of stabilizing the
price of the Common Stock or otherwise, the Purchaser may undertake transactions
involving the Common Stock and the Debentures, in the open market or otherwise,
for long or short account, on such terms it may deem advisable and it may
overallot in arranging sales.
5. Agreements. The Company agrees with the Purchaser that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the offering
of the Securities, the Company will not file any amendment of the Registration
Statement or supplement to the Prospectus unless the Company has furnished you a
copy for your review prior to filing and will not file any such proposed
amendment or supplement to which you reasonably object. Subject to the foregoing
sentence, if the Registration Statement has become or becomes effective pursuant
to Rule 430A, or filing of the Prospectus is otherwise required under Rule
424(b), the Company will cause the Prospectus, properly completed, and any
supplement thereto to be filed with the Commission pursuant to the applicable
paragraph of Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to the Purchaser of such timely filing. The Company will
promptly advise the Purchaser (i) when the Registration Statement, if not
effective at the Execution Time, and any amendment thereto, shall have become
effective, (ii) when the Prospectus, and any supplement thereto, shall have been
filed (if required) with the Commission pursuant to Rule 424(b), (iii) when,
prior to termination of the offering of the Securities, any amendment to the
Registration Statement shall have been filed or become effective, (iv) of any
request by the Commission for any amendment of the Registration Statement or
supplement to the Prospectus or for any additional information, (v) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances under which they
were made not misleading, or if it
5
<PAGE> 6
shall be necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Act or the Exchange Act or the respective rules
thereunder, the Company promptly will (i) prepare and file with the Commission,
subject to the second sentence of Section 5(a) hereof, an amendment or
supplement that will correct such statement or omission or effect such
compliance and (ii) supply any supplemented Prospectus to you in such quantities
as you may reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Purchaser an earnings statement or
statements of the Company and its subsidiaries that will satisfy the provisions
of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Purchaser and counsel for
the Purchaser, without charge, signed copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus by a
Purchaser or dealer may be required by the Act, as many copies of each
Preliminary Prospectus and the Prospectus and any supplement thereto as the
Purchaser may reasonably request. The Company will pay the expenses of printing
or other production of all documents relating to the transactions contemplated
hereby. The Company will pay all transfer taxes as may be imposed on the
Purchaser in connection with its purchase of Debentures pursuant thereto. The
Company will also pay all reasonable out-of-pocket expenses of the Purchaser,
excluding the fees and disbursements of Purchaser's counsel except as provided
below.
(e) The Company will arrange for the qualification of the
Securities for sale under the laws of such jurisdictions as the Purchaser may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities (up to a year from the date hereof) and will
pay all costs and expenses in connection therewith, including the fees and
disbursements of the Purchaser's counsel in relation thereto; provided, however,
that the Company will not be obligated to file any general consent to service of
process or to qualify as a foreign corporation in any jurisdiction in which it
is not so qualified.
(f) The Company will mail or cause to be mailed not later
than the business day following the date of execution hereof the Notice of
Redemption by first class mail to the registered holders of the Debentures on
such date, which mailing will conform to the requirements of the Indenture.
(g) The Company will direct the Trustee to advise the
Purchaser daily of the Debentures surrendered for redemption or for conversion
on the preceding day.
(h) The Company will not take any action the effect of which
would be to require an adjustment in the conversion price of the Debentures.
(i) The Company will not, prior to the Conversion Date and
for a period of 90 days following the Redemption Date, without the prior written
consent of the Purchaser, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce, or file for the registration of, the
offering of, any other shares of Common Stock or any securities convertible
into, or exchangeable for, shares of Common Stock; provided, however, that (i)
the Company may issue and sell or register Common Stock pursuant to any employee
stock option plan, stock ownership plan or dividend reinvestment plan of the
Company in effect at the Execution Time and (ii) the Company may issue Common
Stock issuable upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time; provided, further, that such restriction
shall not apply if the Purchaser does not acquire more than 5% Purchased
Securities.
6
<PAGE> 7
(j) The Company will cause its officers and directors to not,
prior to the Closing Date, without the prior written consent of the Purchaser,
offer, sell, or contract to sell, or otherwise dispose of, directly or
indirectly, or announce, or file for the registration of, the offering of, and
any other shares of Common Stock or any securities convertible into, or
exchangeable for shares of Common Stock.
(k) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business With Cuba, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department Banking and Finance (the "Department"), whichever
date is later, or if the information reported in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or affiliate
located in Cuba changes in any material way, the Company will provide the
Department notice of such business or change, as appropriate, in a form
acceptable to the Department.
6. Conditions to the Obligations of the Purchaser. The obligations
of the Purchaser hereunder to purchase any Purchased Securities shall be subject
to the accuracy in all material respects of the representations and warranties
on the part of the Company contained herein as of the Execution Time, each
Effective Date occurring after the Execution Time, the Conversion Date, and the
Redemption Date and the Closing Date, to the accuracy of the statements of the
Company made in any certificates pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Purchaser agrees in writing to a later
time, the Registration Statement will become effective not later than 6:00 p.m.,
New York City time, on the business day next succeeding the date hereof; if
filing of the Prospectus, or any supplement thereto, is required pursuant to
Rule 424(b), the Prospectus, and any such supplement, will be filed in the
manner and within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
threatened.
(b) On the date of this Agreement and on the Closing Date,
the Company shall have furnished to the Purchaser the opinion of Wilson Sonsini
Goodrich & Rosati, P.C., counsel for the Company, addressed to the Purchaser to
the effect that:
(i) The Company is duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus.
(ii) The Company's authorized capital stock as of
September 29, 1996 is as set forth in the Prospectus; the capital stock of
the Company conforms to the descriptions thereof in the Prospectus; and
the statements in the Prospectus under the heading "Redemption of
Debentures and Expiration of Conversion Privilege" fairly summarize in all
material respects the legal matters therein described.
(iii) The Securities have been duly and validly
authorized and, when issued and delivered upon conversion of any
Debentures in accordance with the Indenture or to the Purchaser against
payment therefor pursuant to the Standby Agreement, will be fully paid,
nonassessable and free of preemptive rights; the Securities have been duly
authorized for listing,
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<PAGE> 8
subject to official notice of issuance, on the Nasdaq Stock Market; and
the form of the certificate for the Common Stock is in valid and
sufficient form.
(iv) The Standby Agreement has been duly authorized,
executed and delivered by the Company.
(v) Upon the Company's taking the actions enumerated in
such counsel's opinion, all the Debentures will have been duly called for
redemption by the close of business on the Redemption Date and the right
to convert the Debentures into shares of Common Stock will expire at the
close of business on the Conversion Date.
(vi) No consent, approval, authorization or order of any
California, New York or federal court or governmental agency or body is
required on the part of the Company for the redemption or conversion of
the Debentures or the consummation of the transactions contemplated by the
Standby Agreement, except such as have been obtained under the Act and
such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Purchaser (as to which such counsel need express no opinion).
(vii) Neither the issue and sale by the Company of the
Securities, nor the consummation by the Company of any other of the
transactions contemplated under the Standby Agreement nor the fulfillment
of the terms of the Standby Agreement by the Company will conflict with,
result in a breach or violation of, or constitute a default under, any
California, New York or federal law or the Delaware General Corporation
Law (the "DGCL"), or the Certificate of Incorporation or Bylaws of the
Company or the terms the Indenture, the Debentures, or the Company's
Credit Agreement dated October 3, 1994, as amended, or any judgment, order
or decree known to such counsel to be applicable to the Company or any of
its subsidiaries of any California, New York or federal court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its subsidiaries (each, an
"Entity") or of any Delaware Entity applying the DGCL.
(viii) The Registration Statement has become effective
under the Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); to such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement has
been issued under the Act and no proceedings for that purpose have been
instituted or threatened; and the Registration Statement and the
Prospectus (other than the financial statements and other financial and
statistical information contained therein as to which such counsel need
not express an opinion) comply as to form in all material respects with
the applicable requirements of the Act and the Exchange Act and the
respective rules thereunder.
(ix) To such counsel's knowledge, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body, or any arbitrator involving the Company or any
of its subsidiaries of a character required to be disclosed in the
Registration Statement that is not adequately disclosed in the Prospectus.
In addition, such counsel shall state that they have
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the Company,
and representatives of the Purchaser, at which the contents of the Registration
Statement and
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<PAGE> 9
Prospectus and related matters were discussed and, although, except as set forth
in paragraph (i) above, such counsel need not pass upon, and need not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus and need not make any
independent check or verification thereof, during the course of such
participation, no facts came to the attention of such counsel that lead them to
believe that, as of the Effective Date, the Registration Statement contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that, as of its date, the Prospectus contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading; it being understood that such counsel need not express a belief
with respect to the financial statements, schedules and notes thereto and other
financial and statistical data included in the Registration Statement or the
Prospectus.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
United States, the DGCL, the State of California or the State of New York (it
being understood that such counsel's opinion as to matters of laws of the State
New York shall be limited to those laws as govern the enforceability of the
Indenture, the Debentures and the Company's Credit Agreement, dated October 3,
1994, as amended), to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Purchaser and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus in
this Section 6(b) include any supplements thereto on the Closing Date.
(c) On the date of this Agreement and on the Closing Date,
the Company shall have furnished to the Purchaser the opinion, addressed to the
Purchaser, of the Company's special Swiss counsel, which counsel shall be
reasonably satisfactory to the Purchaser, to the effect that:
(i) The Company is duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each jurisdiction of Switzerland in which it owns or leases
properties, or conducts any business, so as to require such qualification.
(d) On the date of this Agreement and on the Closing Date,
the Company shall have furnished to the Purchaser the opinion, addressed to the
Purchaser, of the Company's special Irish counsel, which counsel shall be
reasonably satisfactory to the Purchaser, to the effect that:
(i) The Company is duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each jurisdiction of Ireland in which it owns or leases
properties, or conducts any business, so as to require such qualification.
(e) On the date of this Agreement and on the Closing Date,
the Company shall have furnished to the Purchaser the opinion, addressed to the
Purchaser, of the Company's special Singapore counsel, which counsel shall be
reasonably satisfactory to the Purchaser, to the effect that:
(i) The Company is duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each jurisdiction of Singapore in which it owns or leases
properties, or conducts any business, so as to require such qualification.
9
<PAGE> 10
(f) On the date of this Agreement and on the Closing Date,
the Company shall have furnished to the Purchaser the opinion, addressed to the
Purchaser, of the Company's special Indonesian counsel, which counsel shall be
reasonably satisfactory to the Purchaser, to the effect that:
(i) The Company is duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each jurisdiction of Indonesia in which it owns or leases
properties, or conducts any business, so as to require such qualification.
(g) On the date of this Agreement and on the Closing Date,
the Company shall have furnished to the Purchaser the opinion of Andrew L.
Kryder, Vice President, Finance and Corporate General Counsel of the Company,
addressed to the Purchaser to the effect that:
(i) Neither the issue and sale of the Securities, nor
the consummation of any other of the transactions contemplated under
the Standby Agreement nor the fulfillment of the terms of the Standby
Agreement will conflict with, result in a breach or violation of, or
constitute a default under, any law or the Certificate of Incorporation
or Bylaws of the Company or the terms of any indenture or other material
agreement or instrument known to such counsel, after due inquiry, and to
which the Company or any of its subsidiaries is a party or bound or to
which any of the properties or assets of the Company or any of its
subsidiaries is subject, or any judgment, order or decree known to
such counsel to be applicable to the Company or any of its subsidiaries
of any court, regulatory body, administrative agency, governmental body
or arbitrator having jurisdiction over the Company or any its
subsidiaries.
(ii) To such counsel's knowledge, after due inquiry,
there is no franchise, contract or other document of a character
required to be disclosed in the Registration Statement or Prospectus,
or to be filed as an exhibit, that is not described or filed as required.
In addition, such counsel shall state that he has participated
in conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company, and
representatives of the Purchaser, at which the contents of the Registration
Statement and Prospectus and related matters were discussed and, although such
counsel need not pass upon, and need not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus and need not make any independent check or
verification thereof, during the course of such participation, no facts came to
the attention of such counsel that lead him to believe that, as of the Effective
Date, the Registration Statement, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that, as of its date,
the Prospectus contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading; it being understood
that such counsel need not express a belief with respect to the financial
statements, schedules and notes thereto in the Registration Statement or the
Prospectus.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
State of California or the United States, to the extent he deems proper and
specified in such opinion, upon the opinion of other counsel of good standing
whom he believes to be reliable and who are satisfactory to counsel for the
Purchaser and (B) as to matters of fact, to the extent he deems proper, on
certificates of responsible officers of the Company and public officials.
References to the Prospectus in this Section 6(g) include any supplements
thereto on the Closing Date.
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<PAGE> 11
(h) On the date of this Agreement and on the Closing Date,
the Purchaser shall have received from Latham & Watkins, counsel for the
Purchaser, such opinion or opinions, dated the date of this Agreement and the
Closing Date, respectively, with respect to the issuance and sale of the
Securities, the Registration Statement, the Prospectus (together with any
supplement thereto) and other related matters as the Purchaser may reasonably
require, and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters.
(i) On the date of this Agreement, and on each Effective Date
occurring after the Execution Time and on the Closing Date, the Company shall
have furnished to the Purchaser a certificate of the Company, signed by the
Chief Executive Officer and the Chief Financial Officer of the Company, dated
the date of delivery, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus, any supplement to
the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in
this Agreement are true and correct in all material respects on and as of
the date of such certificate as if made on the date of such certificate
and the Company has complied with all agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
date of such certificate;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any supplement
thereto), there has been no material adverse change in the condition
(financial or other), earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).
(j) At the Execution Time, and on each Effective Date
occurring after the Execution Time on which financial information is included in
the Registration Statement or the Prospectus and on the Closing Date, Ernst &
Young LLP shall have delivered to the Purchaser a letter or letters, dated as of
the date of delivery, in form and substance satisfactory to the Purchaser,
confirming that they are independent auditors within the meaning of the Act and
the applicable published rules and regulations thereunder and stating in effect
that:
(i) in their opinion, the audited consolidated financial
statements and financial statement schedule included in, or incorporated
by reference into, the Registration Statement and/or the Prospectus and
reported on by them comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the
related published rules and regulations thereunder;
(ii) on the basis of a reading of the latest unaudited
consolidated financial statements made available by the Company; carrying
out certain specified procedures (but not an examination in accordance
with generally accepted auditing standards) that would not necessarily
reveal matters of significance with respect to the comments set forth in
such letter; a reading of the fiscal 1997 minutes of the meetings of the
stockholders, Board of Directors and the
11
<PAGE> 12
Audit Committee and Compensation Committee of the Company; and inquiries
of certain officials of the Company who have responsibility for financial
and accounting matters of the Company and its subsidiaries as to
transactions and events subsequent to the date of the most recent audited
consolidated financial statements included in, and the audited
consolidated financial statements incorporated by reference into, the
Registration Statement and the Prospectus, nothing came to their attention
that caused them to believe that:
(A) any unaudited consolidated financial
statements included in, or incorporated by reference into, the
Registration Statement and/or the Prospectus do not comply
form in all material respects with applicable accounting
requirements of the Exchange Act as it applies to Form 10-Q
and with the related published rules and regulations
thereunder; and said unaudited consolidated financial
statements are not in conformity with generally accepted
accounting principles; or
(B) with respect to the period subsequent to the
date of the most recent consolidated financial statements,
audited or unaudited, included in, or incorporated by
reference into, the Registration Statement and/or the
Prospectus, for which internal financial statements are
available, there were any changes, at the internal financial
statement date prior to the date of the letter, in the capital
stock (except for activity pursuant to equity awards under
various benefit plans and conversions of Debentures) or
increases in consolidated long-term debt, inclusive of the
current portion (other than borrowings under credit
arrangements in existence at September 29, 1996 or increases
caused by changes in foreign currency exchange rates), or
decreases in the consolidated net current assets or
stockholders' equity of the Company as compared with the
amounts shown in the September 29, 1996 unaudited consolidated
balance sheet included in the Registration Statement and the
Prospectus, or for the period from the date of the most recent
financial statements included in the Registration Statement
and the Prospectus to the date of the most recent internal
financial statements there were any decreases, as compared
with the corresponding period in the preceding quarter in
consolidated net sales or in net income, except in all
instances for changes, increases or decreases set forth in
such letter, in which case the letter shall be accompanied by
an explanation by the Company as to the significance thereof
unless the Purchaser, in writing, deems such explanation
unnecessary; and
(C) with respect to the period subsequent to the
date of the most recent financial statements, audited or
unaudited, included in the Registration Statement and the
Prospectus for which internal financial statements are not
available, there were any changes, at a specified date not
more than five business days prior to the date of the letter,
in the capital stock (except for activity pursuant to equity
awards under various benefit plans and conversions of
Debentures), or any increases in consolidated long-term debt
(other than borrowings under credit arrangements in existence
at September 29, 1996 or increases caused by changes in
foreign currency exchange rates), of the Company as compared
with the amounts shown in the September 29, 1996 unaudited
consolidated balance sheet included in the Registration
Statement and the Prospectus; and
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<PAGE> 13
(iii) they have performed certain other specified
procedures as a result of which they determined that certain information
of an accounting, financial or statistical nature (which is limited to
accounting or financial information derived from the general accounting
records of the Company and its subsidiaries) set forth in the Registration
Statement and the Prospectus, including certain of the information set
forth under the captions "Risk Factors," "Capitalization" and "Redemption
of Debentures and Expiration of Conversion Privilege," and certain
information incorporated by reference in the Registration Statement and
Prospectus as agreed to by the Purchaser's counsel, agrees with the
accounting records of the Company and its subsidiaries, excluding any
questions of legal interpretation.
References to the Prospectus in this Section 6(j) include any supplement thereto
at the date of the letter.
(k) Subsequent to the Execution Time or, if earlier, the
dates as of which information is given in the Registration Statement (exclusive
of any amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in the
letter or letters referred to in Section 6(j) hereof or (ii) any change, or any
development involving a prospective change, in or affecting the business or
properties of the Company and its subsidiaries the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the Purchaser,
so material and adverse as to make it impractical or inadvisable to proceed with
the offering or delivery of the Securities as contemplated by the Registration
Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto).
(l) The Company shall have furnished to the Purchaser such
further information, certificates and documents as the Purchaser may reasonably
request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Purchaser and its counsel, this Agreement and all
obligations of the Purchaser hereunder may be canceled at, or at any time prior
to, the Closing Date by the Purchaser. Notice of such cancellation shall be
given to the Company in writing or by telephone confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill
Road, Palo Alto, California on the date of this Agreement or on the Closing
Date, as applicable.
7. Reimbursement of Purchaser's Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Purchaser set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Purchaser, the Company will reimburse the Purchaser upon demand
for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by it in connection with the proposed
purchase and sale of the Securities.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Purchaser, the directors, officers, employees and agents of the Purchaser and
each person who controls the Purchaser
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<PAGE> 14
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in, or incorporated by reference into, the Registration
Statement for the registration of the Securities as originally filed or in any
amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage or liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchaser through
the Purchaser specifically for inclusion therein. This indemnity agreement will
be in addition to any liability that the Company may otherwise have. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page and under the heading "Standby Arrangements" in any Preliminary Prospectus
and the Prospectus constitute the only information furnished in writing by or on
behalf of the Purchaser for inclusion in any Preliminary Prospectus or the
Prospectus, and you confirm that such statements are correct.
(b) The Purchaser severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Purchaser, but only with reference
to the statements set forth in the last paragraph of the cover page and the
statements under the heading "Standby Arrangements" in any Preliminary
Prospectus and the Prospectus. This indemnity agreement will be in addition to
any liability that the Purchaser may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under Section 8(a) or (b) above unless and to
the extent it did not otherwise learn of such action and such failure results in
the forfeiture by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification obligation provided in
Section 8(a) or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
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<PAGE> 15
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or comprise or consent to the entry of any judgment
with respect to any pending or threatened claim, action suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in Section 8(a)
or (b) above is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Purchaser agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively, "Losses") to which the Company and the Purchaser may be subject
in such proportion as is appropriate to reflect the relative benefits received
by Company and by the Purchaser from the offering of the Securities; provided,
however, that in no case shall the Purchaser be responsible for any amount in
excess of the fees payable by the Company to the Purchaser pursuant to Section 3
hereof. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Purchaser shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and of the Purchaser in connection with
the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the sum of (i) the principal amount of Debentures
converted by the Purchaser pursuant to Section 2(a) hereof and (ii) the net
amount paid by the Purchaser to the Company at the Closing, and benefits
received by the Purchaser shall be deemed to be equal to the total fees payable
by the Company to the Purchaser pursuant to Section 3 hereof. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or the Purchaser. The
Company and the Purchaser agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this Section 8(d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls the Purchaser within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of the Purchaser shall have the
same rights to contribution as the Purchaser, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each officer
of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
Section 8(d).
9. Soliciting Conversions. The Purchaser may assist the
Company in soliciting conversion of the Debentures by the holder thereof but
shall not be entitled to compensation by the Company for any such assistance.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Purchaser, by notice given to the Company at any
time prior to the Closing Date, if prior to such time (i)(a) trading in the
Company's Common Stock shall have been suspended by the Commission or the Nasdaq
Stock Market or trading in the Debentures shall have been suspended by the
Commission or the Nasdaq Stock Market prior to the Conversion Date, or (b)
trading in securities generally on the New
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<PAGE> 16
York Stock Exchange or the Nasdaq Stock Market shall have been suspended or
limited or minimum prices shall have been established on either of such exchange
or such market, (ii) a banking moratorium shall have been declared either by
Federal or New York State authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the judgment of the Purchaser,
impracticable or inadvisable to proceed with the offering or delivery of the
Securities as contemplated by the Prospectus (exclusive of any supplement
thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Purchaser set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Purchaser or the Company or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive the conversion of any Debentures and the delivery of and payment
for any securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and will be mailed, delivered or telecopied
and confirmed to:
If to Purchaser, addressed to:
Seven World Trade Center
New York, New York, 10048
Attention: Michael Sherman, Esq.
Telephone: (212) 783-5573
Facsimile: (212) 783-2274
With a copy to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Christopher L. Kaufman, Esq. and
Robert S. Michitarian, Esq.
Telephone: (415) 391-0600
Facsimile: (415) 395-8095
If to Company:
500 McCarthy Blvd., Building 2
Milpitas, California 95035
Attention: Legal Department
Telephone: (408) 894-4000
Facsimile: (408) 324-7005
16
<PAGE> 17
With a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven E. Bochner, Esq.,
John A. Fore, Esq., and
Jeffrey A. Herbst, Esq.
Telephone: (415) 493-9300
Facsimile: (415) 493-6811
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
15. Headings. The headings herein have been inserted for
convenience of reference only and are not intended to be part of, or affect
the meaning or interpretation of, this Agreement.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all such
counterparts together shall constitute one and the same instrument.
[signature page follows]
<PAGE> 18
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and the Purchaser.
Very truly yours,
QUANTUM CORPORATION
By:
--------------------------------------
Michael A. Brown
President and Chief Executive
Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
By:
---------------------------------
Robert W. Messih
Vice President
<PAGE> 1
EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 415-493-9300 FACSIMILE 415-493-6811
December 20, 1996
Quantum Corporation
500 McCarthy Boulevard
Milpitas, CA 95035
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed with
the Securities and Exchange Commission (the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as amended,
of up to 5,110,690 shares of Common Stock $0.01 par value, of Quantum
Corporation (the "Shares").
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states, where required, the Shares, when issued and sold in the
manner referred to in the Registration Statement, will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
--------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Quantum Corporation
for the registration of 5,110,690 shares of its common stock and to the
incorporation by reference therein of our report dated May 3, 1996, with respect
to the consolidated financial statements and schedule of Quantum Corporation
included in its Annual Report (Form 10-K) for the year ended March 31, 1996,
filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Jose, California
December 18, 1996
