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Background
Petitioner is the successor-in-interest to Conner
Peripherals, Inc., (Conner U.S.), a Delaware corporation.
Conner U.S. developed and manufactured hard disk drives for sale
to personal computer manufacturers and other customers. Conner
Malaysia, a third-tier, wholly owned Malaysian manufacturing
subsidiary of Conner U.S. manufactured hard disk drives and
head-stack assemblies for hard disk drives in Malaysia.
An Asset Purchase Agreement between Conner Malaysia, Read-
Rite Corp. (Read-Rite) and Conner U.S. was executed on August
30, 1991. Pursuant to the Asset Purchase Agreement, Conner
Malaysia sold its head-stack assembly operating assets (the
“assets”) to Read-Rite, an unrelated third party. The deal
negotiated between Conner Malaysia and Read-Rite called for
Conner Malaysia to sell its assets in exchange principally for
Read-Rite stock. At the time the sale was negotiated, Read-Rite
was preparing to make its initial public offering of stock
(IPO).
Pursuant to the Asset Purchase Agreement, the consideration
for the assets consisted of the following:
2.1 Read-Rite Shares. On the Delivery Date (as
defined in Section 3.2) Read-Rite shall deliver to
Conner shares of capital stock of Read-Rite (the
“Shares”) determined as follows:
(a) In the event of an initial public
offering of Read-Rite Common Stock pursuant to a
registration statement on Form S-1 (an “Initial Public
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