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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-15071
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ADAPTEC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 94-2748530
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA 95035
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (408) 945-8600
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
The number of shares outstanding as of January 17, 1997 was 111,123,044.
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This document consists of 15 pages, excluding exhibits, of which this is page 1.
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TABLE OF CONTENTS
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations................................. 3
Condensed Consolidated Balance Sheets........................................... 4
Condensed Consolidated Statements of Cash Flows................................. 5
Notes To Condensed Consolidated Financial Statements............................ 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Results of Operations........................................................... 8-9
Liquidity and Capital Resources................................................. 9-10
Certain Factors Bearing on Future Results....................................... 10-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................... 14
Signatures........................................................................... 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADAPTEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTH NINE MONTH
PERIOD ENDED PERIOD ENDED
--------------------- ---------------------
DEC. 27, DEC. 29, DEC. 27, DEC. 29,
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Net revenues.................................... $251,703 $176,187 $668,760 $463,322
Cost of revenues................................ 103,139 74,201 281,735 193,526
-------- -------- -------- --------
Gross profit.................................... 148,564 101,986 387,025 269,796
-------- -------- -------- --------
Operating expenses:
Research and development...................... 34,859 23,321 93,339 60,488
Sales and marketing........................... 31,311 22,350 79,914 58,200
General and administrative.................... 13,731 9,241 34,988 23,976
Write-off of acquired in-process technology
and other.................................. 11,758 11,759 80,663 52,313
-------- -------- -------- --------
Total operating expenses.............. 91,659 66,671 288,904 194,977
-------- -------- -------- --------
Income from operations.......................... 56,905 35,315 98,121 74,819
Interest income, net of interest expense........ 2,460 3,116 7,393 8,413
-------- -------- -------- --------
Income before provision for income taxes........ 59,365 38,431 105,514 83,232
Provision for income taxes...................... 17,781 7,844 44,779 20,925
-------- -------- -------- --------
Net income...................................... $ 41,584 $ 30,587 $ 60,735 $ 62,307
======== ======== ======== ========
Net income per share............................ $ .36 $ .28 $ .53 $ .57
======== ======== ======== ========
Weighted average common and common equivalent
shares outstanding............................ 116,786 109,584 114,002 108,794
======== ======== ======== ========
</TABLE>
See accompanying notes.
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ADAPTEC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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MARCH
DECEMBER 27, 31,
1996 1996*
------------ --------
(IN THOUSANDS)
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ASSETS
Current assets:
Cash and cash equivalents....................................... $ 89,436 $ 91,211
Marketable securities........................................... 199,542 204,283
Accounts receivable, net........................................ 108,428 89,487
Inventories..................................................... 59,821 55,028
Prepaid expenses and other...................................... 30,268 25,271
-------- --------
Total current assets....................................... 487,495 465,280
-------- --------
Property and equipment, net........................................ 133,157 92,778
-------- --------
Other assets....................................................... 105,835 88,428
-------- --------
$726,487 $646,486
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................... $ 3,400 $ 3,400
Note payable.................................................... -- 46,200
Accounts payable................................................ 26,189 23,974
Accrued liabilities............................................. 83,199 56,717
-------- --------
Total current liabilities.................................. 112,788 130,291
-------- --------
Long-term debt, net of current portion............................. 1,700 4,250
-------- --------
Shareholders' equity:
Common stock.................................................... 222,334 182,932
Retained earnings............................................... 389,665 329,013
-------- --------
Total shareholders' equity................................. 611,999 511,945
-------- --------
$726,487 $646,486
======== ========
</TABLE>
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* Amounts are derived from the March 31, 1996 audited financial statements.
See accompanying notes.
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ADAPTEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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NINE-MONTH PERIOD ENDED
-----------------------------
DECEMBER 27, DECEMBER 29,
1996 1995
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(IN THOUSANDS)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................... $ 60,735 $ 62,307
Adjustments to reconcile net income to net cash provided by
operating activities:
Write-off of acquired in-process technology, net of taxes..... 77,192 39,686
Depreciation and amortization................................. 20,179 12,591
Changes in assets and liabilities:
Accounts receivable........................................... (16,545) (25,786)
Inventories................................................... 5,361 (8,740)
Prepaid expenses.............................................. (3,118) (4,872)
Other assets.................................................. (4,378) (17,255)
Accounts payable.............................................. (243) 817
Accrued liabilities........................................... 25,628 39,306
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... 164,811 98,054
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of certain net assets in connection with acquisitions
accounted for under the purchase method of accounting (see Note
5)............................................................... (89,264) (31,177)
Purchase of property and equipment................................. (54,280) (19,407)
Sales of (investment in) marketable securities, net................ 4,741 (12,646)
--------- --------
NET CASH USED FOR INVESTING ACTIVITIES............................. (138,803) (63,230)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term note......................................... (46,200) --
Proceeds from issuance of common stock............................. 20,967 9,483
Repurchase of common stock......................................... -- (7,765)
Principal payments on long-term debt............................... (2,550) (2,550)
--------- --------
NET CASH USED FOR FINANCING ACTIVITIES............................. (27,783) (832)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (1,775) 33,992
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................... 91,211 66,835
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......................... $ 89,436 $100,827
========= ========
</TABLE>
See accompanying notes.
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ADAPTEC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the unaudited condensed consolidated interim
financial statements included herein have been prepared on the same basis as the
March 31, 1996 audited consolidated financial statements and include all
adjustments, consisting of only normal recurring adjustments, necessary to
fairly state the information set forth herein. The statements have been prepared
in accordance with the regulations of the Securities and Exchange Commission,
but omit certain information and footnote disclosures necessary to present the
statements in accordance with generally accepted accounting principles. The
Company's net income per share, weighted average common and common equivalent
shares outstanding, and other share information included in these financial
statements reflect the two-for-one split of its common stock approved by its
Board of Directors in November 1996. These interim financial statements should
be read in conjunction with the financial statements and footnotes thereto
included in Adaptec's (the Company) Annual Report on Form 10-K for the year
ended March 31, 1996. The results of operations for the three and nine month
periods ended December 27, 1996 are not necessarily indicative of the results to
be expected for the entire year.
2. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Cash paid for interest and income taxes is as follows (in thousands):
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NINE-MONTH PERIOD ENDED
-----------------------------
DECEMBER 27, DECEMBER 29,
1996 1995
------------ ------------
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Interest................................................... $ 461 $ 604
Income taxes............................................... $ 49,956 $ 14,751
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3. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. The components of inventory are as follows (in thousands):
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DECEMBER 27, MARCH 31,
1996 1996
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Raw materials.............................................. $ 13,523 $ 23,415
Work in process............................................ 13,292 12,865
Finished goods............................................. 33,006 18,748
------- -------
$ 59,821 $ 55,028
======= =======
</TABLE>
4. NET INCOME PER SHARE
Net income per share for the three and nine month periods ended December
27, 1996 and December 29, 1995, is computed under the treasury stock method
using the weighted average number of common and common equivalent shares from
dilutive stock options outstanding during the respective periods.
5. ACQUISITIONS
On April 9, 1996, the Company acquired certain assets and the ongoing
business of Western Digital's Connectivity Solutions Group (CSG) for $33 million
cash. CSG supplies silicon solutions to meet the demands of the multi-gigabyte
SCSI disk drive market. On June 28, 1996, the Company acquired certain
technologies from Corel, Inc. for $12 million cash. Included in these
technologies was Corel's CD creator product for the CD-recordable software
market. On September 16, 1996, the Company acquired Data Kinesis,
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ADAPTEC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inc. (DKI) for $32 million and $15 million in cash and stock, respectively. DKI
develops software for improving system performance in file management and RAID
applications. On November 15, 1996, the Company acquired Sigmax Technology, Inc.
(Sigmax) for $14 million cash. Sigmax develops CD-Rom controllers for ATAPI
CD-Rom drives.
The Company accounted for these acquisitions using the purchase method of
accounting, and excluding the $79 million write-off of purchased in-process
technology from these companies, the aggregate impact on the Company's results
of operations from the acquisition date was not material.
The allocation of the Company's aggregate purchase price to the tangible
and identifiable intangible assets acquired was primarily based on preliminary
independent appraisals and is summarized as follows (in thousands):
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Tangible assets........................................................... $ 10,979
In-process technology..................................................... 78,958
Goodwill.................................................................. 16,404
--------
Assets acquired........................................................... $106,341
========
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The tangible assets acquired were primarily comprised of inventory and
fixed assets. Acquired in-process technology was written off in the periods in
which the acquisitions were completed, and the goodwill is being amortized over
respective benefit periods ranging from three to five years.
On August 12, 1996, the Company completed its acquisition of Cogent Data
Technologies, Inc. (Cogent). Cogent provides high-performance Fast Ethernet
products for the networking market. The Company acquired all of the outstanding
capital stock of Cogent in exchange for 2.6 million shares of its common stock.
Additionally, the Company incurred $1.7 million in professional fees related to
this acquisition which have been included in "write-off of acquired in-process
technology and other." The Company has recorded this acquisition using the
pooling of interests method of accounting. Cogent's historical operations have
not been material to the Company's consolidated financial statements and,
therefore, have not been reflected in the Company's consolidated financial
results prior to the acquisition. Beginning at the date of acquisition, the book
value of the acquired assets and assumed liabilities as well as the results of
Cogent's operations, all of which are not material to the Company have been
combined with those of the Company.
6. INCOME TAXES
The Company recorded a tax provision of $17.8 million (30% of income before
income taxes) for the three month period ended December 27, 1996. The higher
effective tax rate for the three and nine month periods ended December 27, 1996
primarily resulted from the write-off of in-process technology for which the
Company will receive no corresponding tax benefit. Excluding the effect of the
write-off of in-process technology, the Company's effective tax rate was 25% for
both the three and nine month periods ended December 27, 1996. The difference
between the Company's normal 25% tax rate and the U.S. statutory rate is
primarily due to income earned in Singapore where the Company is subject to a
significantly lower effective tax rate.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the items in the condensed consolidated
statements of operations as a percentage of net revenues:
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THREE MONTH NINE MONTH
PERIOD ENDED PERIOD ENDED
--------------------- ---------------------
DEC. 27, DEC. 29, DEC. 27, DEC. 29,
1996 1995 1996 1995
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Net revenues........................................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues....................................... 41.0 42.1 42.1 41.8
----- ----- ----- -----
Gross profit........................................... 59.0 57.9 57.9 58.2
----- ----- ----- -----
Operating expenses:
Research and development............................. 13.8 13.2 14.0 13.1
Sales and marketing.................................. 12.4 12.7 11.9 12.6
General and administrative........................... 5.5 5.3 5.2 5.1
Write-off of acquired in-process technology and
other............................................. 4.7 6.7 12.1 11.3
----- ----- ----- -----
36.4 37.9 43.2 42.1
----- ----- ----- -----
Income from operations................................. 22.6 20.0 14.7 16.1
Interest income, net................................... 1.0 1.8 1.1 1.9
----- ----- ----- -----
Income before provision for income taxes............... 23.6 21.8 15.8 18.0
Provision for income taxes............................. 7.1 4.4 6.7 4.6
----- ----- ----- -----
Net income............................................. 16.5% 17.4% 9.1% 13.4%
===== ===== ===== =====
</TABLE>
Net Revenues
Net revenues increased 43% to $252 million in the third quarter of fiscal
1997 and 44% to $669 million in the first nine months of fiscal 1997, from $176
million and $463 million in the corresponding periods of fiscal 1996. This
growth was primarily attributable to increased shipments of the Company's host
adapters and proprietary integrated circuits (IC) for mass storage devices.
These increases were primarily the result of continued growth in the markets for
high-performance microcomputers and servers for networking applications,
continued demand for SCSI in the client/server environment and an increase in
the use of diverse peripherals in microcomputer systems.
Gross Margin
Gross margins increased to 59% in the third quarter of fiscal 1997,
compared with 58% in the third quarter of fiscal 1996. For the first nine months
of fiscal 1997, gross margins were unchanged at 58% compared with the same
period in fiscal 1996. The increase in the third quarter was due primarily to
decreased costs of purchased components as well as increased manufacturing
efficiencies, which were offset slightly by the mix of products shipped, which
included a greater percentage of mass storage IC's and networking products. For
the nine months ended in fiscal 1997, gross margins were positively affected by
decreased manufacturing costs which were offset by the mix of products shipped.
Operating Expenses
Research and development expenses as a percentage of net revenues were 14%
during the third quarter and first nine months of fiscal 1997 compared to 13%
for the same periods in fiscal 1996. Actual spending for research and
development increased from the corresponding periods of fiscal 1996 by 49% to
$35 million in the third quarter and by 54% to $93 million in the first nine
months of fiscal 1997. This increased spending was a result of the Company's
continued development of serial architectures such as Fibre Channel and
Firewire,
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networking products, various peripheral technology solutions, and its ongoing
commitment to enhance its core SCSI business.
Sales and marketing expenses decreased to 12% as a percentage of revenues
in both the third quarter and first nine months of fiscal 1997 compared to 13%
for the same periods in fiscal 1996. Actual sales and marketing expenses
increased from the corresponding periods of fiscal 1996 by 40% to $31 million in
the third quarter and 37% to $80 million in the first nine months of fiscal
1997. The increase in actual spending was primarily a result of advertising and
promotional programs aimed at introducing new technologies and generating demand
for the Company's products and increased staffing levels to support the
continued growth of the Company.
General and administrative expenses as a percentage of net revenues in the
third quarter and first nine months of fiscal 1997 remained relatively
consistent with the comparable fiscal 1996 periods. Actual spending increased
from the prior periods primarily due to costs associated with increased staffing
levels to support the Company's growth.
During the first nine months of fiscal 1997, the Company acquired CSG,
certain technologies from Corel, Inc., DKI, and Sigmax for an aggregate purchase
price of $106 million in cash and stock. These acquisitions were accounted for
using the purchase method of accounting. Among the assets acquired was
in-process technology, resulting in an aggregate write-off of $79 million. Also
in connection with its acquisition of Cogent, the Company incurred $1.7 million
in professional fees which have been recorded in "write-off of acquired
in-process technology and other."
Interest and Income Taxes
Interest income, net of interest expense, decreased 21% to $2.5 million in
the third quarter and 12% to $7.4 million in the first nine months of fiscal
1997 compared to the respective periods in fiscal 1996. This was due to lower
cash, cash equivalents, and marketable securities balances in fiscal 1997
primarily as a result of the Company's various strategic acquisitions and
payments made to secure additional capacity for wafer fabrication.
As discussed under Note 6 of the Notes to Condensed Consolidated Financial
Statements in this report, the Company recorded a tax provision of $17.8 million
(30% of income before income taxes) for the three month period ended December
27, 1996. The higher effective tax rate for the three and nine month periods
ended December 27, 1996 primarily resulted from the write-off of in-process
technology for which the Company will receive no corresponding tax benefit.
Excluding the effect of the write-off of in-process technology, the Company's
effective tax rate was 25% for both the three and nine month periods ended
December 27, 1996. The difference between the Company's normal 25% tax rate and
the U.S. statutory rate is primarily due to income earned in Singapore where the
Company is subject to a significantly lower effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash generated by operations for the first nine months of fiscal 1997
was $165 million compared with $98 million for the same period in fiscal 1996.
During the first nine months of fiscal 1997, the majority of funds generated
from operations resulted from $61 million of net income adjusted by non-cash
items including a non-recurring write-off of acquired in-process technology of
$77 million (net of taxes), and depreciation and amortization of $20 million.
Also, contributing to favorable operating cash flows was a $26 million increase
in accrued liabilities mainly resulting from increased staffing and the timing
of federal income tax payments. Primarily offsetting these items was an increase
in accounts receivable of $17 million resulting from the timing and increases of
shipments during the quarter.
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Investing Activities
During the first nine months of fiscal 1997, the Company paid cash of $89
million toward the acquisitions of CSG, DKI, Sigmax, and certain technologies
from Corel, Inc. The Company also continued to invest in equipment for product
development, IC testing, board level production, and made various building and
leasehold improvements to its facilities. The Company anticipates capital
expenditures relating to property and equipment of approximately $10 million for
the remainder of fiscal 1997. The Company may also make investments for
increased capacity for wafer fabrication or acquisitions of complimentary
businesses, products, or technologies. During the first nine months of fiscal
1997, the Company continued to invest proceeds from operating activities in
marketable securities consisting mainly of various U.S. government and municipal
securities and used proceeds from the sale of marketable securities primarily
for acquisitions, equipment purchases, and to obtain guaranteed future wafer
capacity.
Financing Activities
In connection with an agreement with Taiwan Semiconductor Manufacturing
Co., Ltd. (TSMC) that ensures availability of a portion of the Company's wafer
capacity for both current and future technologies, the Company paid a short-term
note in June 1996 of $46 million due to TSMC. In return for this prepayment, the
Company will receive guaranteed future wafer capacity and a discount on
purchases that exceed certain prescribed minimum quantities. Additionally, in
connection with this agreement, the Company will receive access to future
process technology.
During the first nine months of fiscal 1997, the Company received proceeds
from common stock issued under its employee stock option and employee stock
purchase plans totaling $21 million.
The Company believes existing working capital, together with expected cash
flows from operations and available sources of bank, equity, debt and equipment
financing, will be sufficient to support its operations at least through fiscal
1998.
CERTAIN FACTORS BEARING ON FUTURE RESULTS
The following risk factors should be considered by anyone contemplating an
investment in the Company's Common Stock. In addition, the Company and its
representatives may from time to time make forward-looking statements, and the
following are important factors that could cause actual results to differ
materially from those projected in any such forward-looking statements.
Future Operating Results Subject to Fluctuation. The Company's operating
results may fluctuate in the future as a result of a number of factors,
including cancellations or postponements of orders, shifts in the mix of the
Company's products and sales channels, changes in pricing policies by the
Company's suppliers, interruption in the supply of custom integrated circuits,
the market acceptance of new and enhanced versions of the Company's products and
the timing of acquisitions of other business products and technologies and any
associated charges to earnings. The volume and timing of orders received during
a quarter are difficult to forecast. The Company's customers from time to time
encounter uncertain and changing demand for their products. Customers generally
order based on their forecasts. If demand falls below such forecasts or if
customers do not control inventories effectively, they may cancel or reschedule
shipments previously ordered from the Company. Additionally, the Company has
historically operated with a relatively small backlog, especially relating to
orders of its board-based I/O solutions. Further, the Company's expense levels
are based in part on expectations of future revenues, and the Company has been
significantly increasing and intends to continue to increase operating
expenditures and working capital balances as it expands its operations. As a
result of the difficulty of forecasting revenues and the Company's planned
growth in spending, operating expenses could be disproportionately high for a
given quarter, and the Company's operating results for that quarter, and
potentially future quarters, would be adversely affected. Operating results in
any particular quarter which do not meet the expectations of securities analysts
could cause volatility in the price of the Company's Common Stock.
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Dependence on the High-Performance Microcomputer Market. The Company's
board-based I/O solutions are used primarily in high performance computer
systems designed to support bandwidth-intensive applications and operating
systems. Historically, the Company's growth has been supported by increasing
demand for systems which support client-server and Internet/intranet
applications, computer-aided engineering, desktop publishing, multimedia, and
video. Should the growth of demand for such systems slow, the Company's business
or operating results could be materially adversely affected by a decline in
demand for the Company's products.
Certain Risks Associated with the Computer Peripherals Market. As a
supplier of controller circuits to manufacturers of computer peripherals such as
disk drives and other storage devices, a portion of the Company's business is
dependent on the overall market for computer peripherals. This market, which
itself is dependent on the market for personal computers, has historically been
characterized by periods of rapid growth followed by periods of oversupply and
contraction. As a result, suppliers to the computer peripherals industry from
time to time experience large and sudden fluctuations in demand for their
products as their customers adjust to changing conditions in their markets. If
these fluctuations are not accurately anticipated, such suppliers, including the
Company, could produce excessive or insufficient inventories of various
components which could materially and adversely affect the Company's business
and operating results. The computer peripherals industry is also characterized
by intense price competition which in turn creates pricing pressures on the
suppliers to that industry. If the Company is unable to correspondingly decrease
its manufacturing or component costs, such pricing pressures could have a
material adverse effect on the Company's business or operating results.
Reliance on Industry Standards; Technological Change; Dependence on New
Products. The computer industry is characterized by various standards and
protocols that evolve with time. The Company's current products are designed to
conform to certain industry standards and protocols such as SCSI, UltraSCSI,
PCI, RAID, ATM and Fast Ethernet. In particular, a majority of the Company's
revenues are currently derived from products based on the SCSI standard. If
consumer acceptance of these standards was to decline or if they were replaced
with new standards, and if the Company did not anticipate these changes and
develop new products, the Company's business or operating results could be
materially adversely affected.
The markets for the Company's products are characterized by rapidly
changing technology, frequent new product introductions and declining average
selling prices over product life cycles. The Company's future success is
therefore highly dependent upon the timely completion and introduction of new
products at competitive price/performance levels. The success of new product
introductions is dependent on several factors, including proper new product
definition, product cost, timely completion and introduction of new product
designs, quality of new products, differentiation of new products from those of
the Company's competitors and market acceptance of the Company's and its
customers' products. As a result, the Company believes that continued
significant expenditures for research and development will be required in the
future. There can be no assurance that the Company will successfully identify
new product opportunities and develop and bring new products to market in a
timely manner, that products or technologies developed by others will not render
the Company's products or technologies obsolete or noncompetitive, or that the
Company's products will be selected for design into the products of its targeted
customers. The failure of any of the Company's new product development efforts
could have a material adverse effect on the Company's business or operating
results. In addition, the Company's revenues and operating results could be
adversely impacted if its customers shifted their demand to a significant extent
away from board-based I/O solutions to application-specific ICs.
Dependence on Wafer Suppliers and Other Subcontractors. All of the finished
silicon wafers used for the Company's products are currently manufactured to the
Company's specifications by independent foundries. The Company currently
purchases a substantial majority of its wafers through a supply agreement with
Taiwan Semiconductor Manufacturing Company, Ltd. ("TSMC"). The Company also
purchases wafers from SGS-Thomson Microelectronics and Seiko Epson. The
manufacture of semiconductor devices is sensitive to a wide variety of factors,
including the availability of raw materials, the level of contaminants in the
manufacturing environment, impurities in the materials used, and the performance
of personnel and equipment. While the quality, yield and timeliness of wafer
deliveries to date have been acceptable, there can
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be no assurance that manufacturing yield problems will not occur in the future.
In addition, although the Company has various supply agreements with its
suppliers, a shortage of raw materials or production capacity could lead any of
the Company's wafer suppliers to allocate available capacity to customers other
than the Company, or to internal uses. Any prolonged inability to obtain wafers
with competitive performance and cost attributes, adequate yields or timely
deliveries from its foundries would delay production and product shipments and
could have a material adverse effect on the Company's business or operating
results. The Company expects that it will in the future seek to convert its
fabrication process arrangements to smaller geometries and to more advanced
process technologies. Such conversions entail inherent technological risks that
can affect yields and delivery times. If for any reason the Company's current
suppliers were unable or unwilling to satisfy the Company's wafer needs, the
Company would be required to identify and qualify additional foundries. There
can be no assurance that any additional wafer foundries would become available,
that such foundries would be successfully qualified, or that such foundries
would be able to satisfy the Company's requirements on a timely basis.
The Company's future growth will depend in large part on increasing its
wafer capacity allocation from current foundries, adding additional foundries
and gaining access to advanced process technologies. There can be no assurance
that the Company will be able to satisfy its future wafer needs from current or
alternative sources. Any increase in general demand for wafers within the
industry, or any reduction of existing wafer supply from any of the Company's
foundry sources, could materially adversely affect the Company's business,
financial condition or operating results.
In order to secure wafer capacity, the Company from time to time has
entered into "take or pay" contracts that committed the Company to purchase
specified quantities over extended periods, and has made prepayments to
foundries. In the future, the Company may enter into similar transactions or
other transactions, including, without limitation, non-refundable deposits with,
or loans to foundries or equity investments in, joint ventures or other
partnership relationships with foundries. Any such transaction could require the
Company to seek additional equity or debt financing to fund such activities.
There can be no assurance that the Company will be able to obtain any required
financing on terms acceptable to the Company.
Additionally, the Company relies on subcontractors for the assembly and
packaging of the ICs included in its products. The Company has no long-term
agreements with its assembly and packaging subcontractors. There can be no
assurance that such subcontractors will continue to be able and willing to meet
the Company's requirements for such components or services. Any significant
disruption in supplies from, or degradation in the quality of components or
services supplied by, such subcontractors could delay shipments and result in
the loss of customers or revenues or otherwise have a material adverse effect on
the Company's business and operating results.
Certain Risks Associated With Acquisitions. Since the beginning of fiscal
1996, the Company has acquired nine complementary companies and businesses. As
part of its overall strategy, the Company plans to continue to acquire or invest
in complementary companies, products or technologies and to enter into joint
ventures and strategic alliances with other companies. Risks commonly
encountered in such transactions include the difficulty of assimilating the
operations and personnel of the combined companies, the potential disruption of
the Company's ongoing business, the inability to retain key technical and
managerial personnel, the inability of management to maximize the financial and
strategic position of the Company through the successful integration of acquired
businesses, additional expenses associated with amortization of acquired
intangible assets, dilution of existing equity holders, the maintenance of
uniform standards, controls, procedures and policies and the impairment of
relationships with employees and customers as a result of any integration of new
personnel. There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with such
business combinations, investments or joint ventures or that such transactions
will not materially adversely affect the Company's business, financial condition
or operating results.
Competition. The markets for the Company's products are intensely
competitive and are characterized by rapid technological advances, frequent new
product introductions, evolving industry standards and price
12
<PAGE> 13
erosion. The Company's principal competitors in the host adapter market are
Symbios Logic Inc., a subsidiary of Hyundai Electronics America, and other
smaller manufacturers of host adapters. The Company's principal competitors in
the mass storage market are captive suppliers and Cirrus Logic, Inc. As the
Company has continued to broaden its bandwidth management product offerings into
the desktop, server and networking environments, it has experienced, and expects
to experience in the future, significantly increased competition both from
existing competitors and from additional companies that may enter its markets.
Some of these companies have greater technical, marketing, manufacturing and
financial resources than the Company. There can be no assurance that the Company
will be able to make timely introduction of new leading-edge solutions in
response to competitive threats, that the Company will be able to compete
successfully in the future against existing or potential competitors or that the
Company's business or operating results will not be materially adversely
affected by price competition.
Certain Issues Related to Distributors. The Company's distributors
generally offer a diverse array of products from several different
manufacturers. Accordingly, there is a risk that these distributors may give
higher priority to selling products from other suppliers, thus reducing their
efforts to sell the Company's products. A reduction in sales efforts by the
Company's current distributors could have a materially adverse effect on its
business and operating results. The Company's distributors may on occasion build
inventories in anticipation of substantial growth in sales, and if such growth
does not occur as rapidly as anticipated, distributors may decrease the amount
of product ordered from the Company in subsequent quarters. Such a slowdown in
orders could reduce the Company's revenues in any given quarter and give rise to
fluctuation in the Company's operating results.
Dependence on Key Personnel. The Company's future success depends in large
part on the continued service of its key technical, marketing and management
personnel and on its ability to continue to attract and retain qualified
employees, particularly those highly skilled design, process and test engineers
involved in the manufacture of existing products and the development of new
products and processes. The competition for such personnel is intense, and the
loss of key employees could have a material adverse effect on the Company's
business or operating results.
Certain Risks Associated with International Operations. The Company's
manufacturing facility and various subcontractors it utilizes from time to time
are located primarily in Asia. Additionally, the Company has various sales
offices and customers throughout Europe, Japan, and other countries. The
Company's international operations and sales are subject to political and
economic risks, including political instability, currency controls, exchange
rate fluctuations, and changes in import/export regulations, tariffs and freight
rates. In addition, because the Company's principal wafer supplier, TSMC, is
located in Taiwan, the Company is subject to the risk of political instability
in Taiwan, including the potential for conflict between Taiwan and the People's
Republic of China.
Intellectual Property Protection and Disputes. The Company has historically
devoted significant resources to research and development and believes that the
intellectual property derived from such research and development is a valuable
asset that has been and will continue to be important to the success of the
Company's business. Although the Company actively maintains and defends its
intellectual property rights, no assurance can be given that the steps taken by
the Company will be adequate to protect its proprietary rights. In addition, the
laws of certain territories in which the Company's products are or may be
developed, manufactured, or sold, including Asia and Europe, may not protect the
Company's products and intellectual property rights to the same extent as the
laws of the United States. The Company has from time to time discovered
counterfeit copies of its products being manufactured or sold by others.
Although the Company maintains an active program to detect and deter the
counterfeiting of its products, should counterfeit products become available in
the market to any significant degree it could materially adversely affect the
business or operating results of the Company.
From time to time, third parties may assert exclusive patent, copyright and
other intellectual property rights to technologies that are important to the
Company. There can be no assurance that third parties will not assert
infringement claims against the Company in the future, that assertions by third
parties will not result in costly litigation or that the Company would prevail
in such litigation or be able to license any valid and
13
<PAGE> 14
infringed patents from third parties on commercially reasonable terms.
Litigation, regardless of its outcome, could result in substantial cost and
diversion of resources of the Company. Any infringement claim or other
litigation against or by the Company could materially adversely affect the
Company's business or operating results.
Need for Interoperability. The Company's products must be designed to
interoperate effectively with a variety of hardware and software products
supplied by other manufacturers, including microprocessors, peripherals and
operating system software. The Company depends on significant cooperation with
these manufacturers in order to achieve its design objectives and produce
products that interoperate successfully. While the Company believes that it
generally has good relationships with leading system, peripheral and
microprocessor suppliers, there can be no assurance that such suppliers will not
from time to time make it more difficult for the Company to design its products
for successful interoperability or decide to compete with the Company.
Discretionary Use of Proceeds of Offering. The principal purposes of the
offering are to increase the Company's capital base and financial flexibility.
The Company expects to use the net proceeds principally for general corporate
purposes, including working capital, possible pre-payments or other arrangements
to obtain foundry capacity, capital expenditures and possible acquisitions.
However, the Company has no current specific plans for use of the net proceeds
of this offering. As a consequence, the Company's management will have the
ability to allocate the net proceeds of the offering at its discretion. There
can be no assurance that the proceeds will be utilized in a manner that the
Noteholders deem optimal or that the proceeds can or will be invested to yield a
significant return upon the completion of the offering. See "Use of Proceeds."
Volatility of Stock Price. The market price of the Notes could be
significantly affected by changes in the market price of the Common Stock. The
stock market in general, and the market for shares of technology companies in
particular, have from time to time experienced extreme price fluctuations, which
have often been unrelated to the operating performance of the affected
companies. In addition, factors such as technological innovations or new product
introductions by the Company, its competitors or its customers may have a
significant impact on the market price of the Company's Common Stock.
Furthermore, quarter-to-quarter fluctuations in the Company's results of
operations caused by changes in customer demand, changes in the microcomputer
and peripherals markets, or other factors, may have a significant impact on the
market price of the Company's Common Stock. These conditions, as well as factors
which generally affect the market for stocks of high technology companies, could
cause the price of the Company's stock and, in turn, the price of the Notes, to
fluctuate substantially over short periods.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
3.1 Eighth amended and restated articles of incorporation filed with the California
Secretary of State on November 1, 1996.
3.2 Certificate of determination of rights, preferences and privileges of series A
participating preferred stock filed with the California Secretary of State on
December 31, 1996.
10.1 Amendments Seven, Eight and Nine to the Revolving Credit Loan Agreement dated April
29, 1994 between the Registrant and Comerica Bank -- California expiring August 31,
1997.
10.2 Amendments One, Two, Three and Four to the Term Loan Agreement dated June 24, 1992
between the Registrant and Comerica Bank -- California (formerly the Plaza Bank of
Commerce) expiring June 30, 1998.
27.1 Financial Data Schedule for the three months ended December 27, 1996.
</TABLE>
No Reports on Form 8-K were filed during the quarter.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADAPTEC, INC.
--------------------------------------
Registrant
/s/ PAUL G. HANSEN
--------------------------------------
Paul G. Hansen, Vice-President,
Finance
and Chief Financial Officer
(Principal Financial Officer),
Assistant Secretary
Date: January 20, 1997
/s/ ANDREW J. BROWN
--------------------------------------
Andrew J. Brown, Vice-President and
Corporate Controller
(Principal Accounting Officer)
Date: January 20, 1997
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
3.1 Eighth Amended and Restated Articles of Incorporation filed with the California
Secretary of State on November 1, 1996.
3.2 Certificate of Determination of Rights, Preferences and Privileges of Series A
Participating Preferred Stock filed with the California Secretary of State on
December 31, 1996.
10.1 Amendments Seven, Eight and Nine to the Revolving Credit Loan Agreement dated April
29, 1994 between the Registrant and Comerica Bank -- California expiring August 31,
1997.
10.2 Amendments One, Two, Three and Four to the Term Loan Agreement dated June 24, 1992
between the Registrant and Comerica Bank -- California (formerly the
Plaza Bank of Commerce) expiring June 30, 1998.
27.1 Financial Data Schedule for the three months ended December 27, 1996.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
EIGHTH AMENDED AND
RESTATED ARTICLES OF INCORPORATION
OF
ADAPTEC, INC.
Paul G. Hansen hereby certifies that:
1. He is the Vice President of Finance, Chief Financial Officer and
Assistant Secretary of Adaptec, Inc., a California corporation.
2. The Articles of Incorporation of this corporation, as amended to
the date of the filing of this certificate, including amendments set forth
herein but not separately filed (and with the omissions required by Section 910
of the California Corporations Code) are amended and restated as follows:
I
The name of this corporation is Adaptec, Inc.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California, other than the banking business, the trust company business,
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
This corporation is authorized to issue two classes of shares of stock
to be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is 401,000,000
shares. The number of shares of Common Stock authorized is 400,000,000, $.001
per share par value. Upon the effective date hereof, each outstanding share of
Common Stock par value $.001 per share is split up and converted into two shares
of Common Stock, par value $.001 per share. The number of shares of Preferred
Stock authorized is 1,000,000, $.001 per share par value.
<PAGE> 2
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in these Articles of Incorporation to determine or alter the
rights, preferences, privileges and restrictions stated in these Articles of
Incorporation; to determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
IV
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
The corporation is authorized to provide for, whether by bylaw or
agreement, the indemnification of agents (as defined in Section 317 of the
California General Corporation Law) of the corporation in excess of that
expressly permitted by such Section 317, for breach of duty to the corporation
and its shareholders to the fullest extent permissible under California law.
Any repeal or modification of the foregoing provisions of this Article
IV by the shareholders of the corporation shall not adversely affect any right
or protection of a director of the corporation existing at the time of such
repeal or modification.
3. The foregoing Eighth Amended and Restated Articles of
Incorporation have been duly approved by the Board of Directors.
4. The article amendments included in the Seventh Amended and
Restated Articles of Incorporation are hereby made to effect a two-for-one stock
split of the Common Stock, including a proportionate increase in the number of
shares of Common Stock authorized to be issued. No shares of Preferred Stock are
outstanding. Pursuant to Section 902(c) of the California Corporations Code,
shareholder approval is not required for this action.
5. Pursuant to Section 110(c) of the California Corporations Code,
the foregoing Eighth Amended and Restated Articles of Incorporation shall become
effective at 5:00 P.M. Pacific Standard Time on November 1, 1996.
-2-
<PAGE> 3
I further declare under penalty of perjury under the laws of the State
of California that the matters set forth in the foregoing certificate are true
and correct of my own knowledge.
Executed at Milpitas, California this 31st day of October, 1996.
---------------------------------
Paul G. Hansen, Vice President of
Finance, Chief Financial Officer
and Assistant Secretary
-3-
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF DETERMINATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF ADAPTEC, INC.
The undersigned, Paul G. Hansen and Henry P. Massey, Jr. do hereby
certify:
1. That they are the duly elected and acting Vice President, Finance
and Chief Financial Officer and Secretary, respectively, of Adaptec, Inc., a
California corporation (the "Corporation").
2. That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the said Corporation, the said
Board of Directors on December 5, 1996 adopted the following resolution creating
a series of 250,000 shares of Preferred Stock designated as Series A
Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Restated Articles of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Stock of the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series A Participating Preferred Stock." The Series A
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be 250,000.
Section 2. Proportional Adjustment. In the event the Corporation
shall at any time after the issuance of any share or shares of Series A
Participating Preferred Stock (i) declare any dividend on Common Stock of the
Corporation ("Common Stock") payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders
of any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Participating Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of January, April, July and October in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Participating Preferred Stock, in an amount per share
(rounded to the
<PAGE> 2
nearest cent) equal to 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution
on the Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of
Series A Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 4. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock
shall entitle the holder thereof to 1,000 votes on all matters submitted to a
vote of the shareholders of the Corporation.
(b) Except as otherwise provided herein or by law, the
holders of shares of Series A Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(c) Except as required by law, holders of Series A
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
<PAGE> 3
Section 5. Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make
any distribution on, or redeem or purchase or otherwise acquire for
consideration any shares of Common Stock after the first issuance of a share or
fraction of a share of Series A Participating Preferred Stock unless
concurrently therewith it shall declare a dividend on the Series A Participating
Preferred Stock as required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with Series A Participating
Preferred Stock, except dividends paid ratably on the Series A Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 5, purchase or otherwise acquire such shares at such time and in
such manner.
<PAGE> 4
Section 6. Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Restated Articles of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, the holders of shares
of Series A Participating Preferred Stock shall be entitled to receive an
aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock plus an amount equal
to any accrued and unpaid dividends on such shares of Series A Participating
Preferred Stock.
Section 8. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.
Section 9. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
Section 10. Ranking. The Series A Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Restated Articles of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of
Series A Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares. Series A Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.
<PAGE> 5
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Determination
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of California law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
3. That the authorized number of shares of Preferred Stock of the
Corporation is 1,000,000 and that no such Preferred Stock has been issued.
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Determination are true and correct of our own
knowledge.
Executed at Palo Alto, California on December 18, 1996.
-------------------------------------------------
Paul G. Hansen, Vice President, Finance and Chief
Financial Officer
-------------------------------------------------
Henry P. Massey, Jr., Secretary
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NUMBER SEVEN TO
REVOLVING CREDIT LOAN AGREEMENT
THIS AMENDMENT NUMBER SEVEN TO REVOLVING CREDIT LOAN AGREEMENT dated as
of December 27, 1995 (the "Amendment") is entered into by and between ADAPTEC,
INC., a California corporation (the "Borrower"), and COMERICA BANK-CALIFORNIA
(formerly known as Plaza Bank of Commerce), a California banking corporation
(the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank are parties to a certain Revolving
Credit Loan Agreement dated as of June 3, 1992, as amended by Amendment Number
One dated as of August 21, 1992, Amendment Number Two dated as of December 31,
1992, Amendment Number Three dated as of April 29, 1994, Amendment Number Four
dated as of July 13, 1994, Amendment Number Five dated as of September 21, 1994,
and Amendment Number Six dated as of December 9, 1994 (as so amended, the
"Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
shall have the respective meanings set forth in the Agreement.
2. The definition of "Termination Date" set forth in Section 1.1 of the
Agreement is hereby amended to read in its entirety as follows:
'"Termination Date" shall mean December 31, 1997 (or such
later date as extended pursuant to Section 2.6 or such earlier date on
which the Borrower shall permanently terminate the Bank's commitment
under Section 2.14).1
3. The Borrower hereby represents and warrants to the Bank that (a) the
representations and warranties contained in the Agreement are true in all
material respects on and as of the date of this Amendment, and (b) no Default
has occurred and is continuing.
<PAGE> 2
4. Except as specifically amended pursuant to the foregoing paragraphs
of this Amendment, all recitals, representations, warranties, covenants,
undertakings, promises, indemnities, terms, conditions and provisions of the
Agreement shall remain in full force and effect and shall be and remain
unaffected by this Amendment.
5. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment and the Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Amendment shall become effective
when executed by each of the parties hereto and delivered to the Bank.
6. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California other than
principles of conflicts of laws.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
ADAPTEC, INC.
By: /s/ Christopher G. O'Meara
----------------------------
Christopher G. O'Meara
Vice President and Treasurer
COMERICA BANK-CALIFORNIA
(formerly known as Plaza
Bank of Commerce)
By: /s/ Lori Edwards
----------------------------
Lori S. Edwards
First Vice President
2
<PAGE> 3
AMENDMENT NUMBER EIGHT TO
REVOLVING CREDIT LOAN AGREEMENT
THIS AMENDMENT NUMBER EIGHT TO REVOLVING CREDIT LOAN AGREEMENT dated as
of December 29, 1995 (the "Amendment") is entered into by and between ADAPTEC,
INC., a California corporation (the "Borrower"), and COMERICA BANK-CALIFORNIA
(formerly known as Plaza Bank of Commerce), a California banking corporation
(the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank are parties to a certain Revolving
Credit Loan Agreement dated as of June 3, 1992, as amended by Amendment Number
One dated as of August 21, 1992, Amendment Number Two dated as of December 31,
1992, Amendment Number Three dated as of April 29, 1994, Amendment Number Four
dated as of July 13, 1994, Amendment Number Five dated as of September 21, 1994,
Amendment Number Six dated as of December 9, 1994, and Amendment Number Seven
dated as of December 27, 1995 (as so amended, the "Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
shall have the respective meanings set forth in the Agreement.
2. Section 6.4 of the Agreement is hereby amended to read in its
entirety as follows:
'16.4 Indebtedness. Incur, create, assume or permit to exist
any indebtedness or liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other indebtedness
or liability evidenced by notes, bonds, debentures or similar
obligations, or any other indebtedness whatsoever (including
sale/leaseback transactions) which at any time exceeds in the
aggregate, on a consolidated basis, Fifty Million Dollars
($50,000,000); provided, however, that none of the following shall be
considered for purposes of the foregoing limitation: (a) the
Indebtedness, (b) other indebtedness of the Borrower to the Bank,
whether now existing or hereafter arising, (c) trade payables and
accrued expenses incurred and paid in the ordinary course
<PAGE> 4
of business, (d) leases of, or conditional sales purchases of,
equipment in the ordinary course of business, so long as the unpaid
lease rental, purchase payment and other obligations thereunder do not
exceed, in the aggregate, on a consolidated basis, Five Million Dollars
($5,000,000) at any time hereunder, (e) outstanding tax obligations to
governmental agencies, (f) real estate leases in the ordinary course of
business, (g) reimbursement obligations under letters of credit
incurred in the ordinary course of business, (h) loans or advances by
the Borrower to any Subsidiary, or by any Subsidiary to either the
Borrower or any other Subsidiary.'
3. The Borrower hereby represents and warrants to the Bank that (a) the
representations and warranties contained in the Agreement are true in all
material respects on and as of the date of this Amendment, and (b) no Default
has occurred and is continuing.
4. Except as specifically amended pursuant to the foregoing paragraphs
of this Amendment, all recitals, representations, warranties, covenants,
undertakings, promises, indemnities, terms, conditions and provisions of the
Agreement shall remain in full force and effect and shall be and remain
unaffected by this Amendment.
5. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment and the Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Amendment shall become effective
when executed by each of the parties hereto and delivered to the Bank.
6. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California other than
principles of conflicts of laws.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
ADAPTEC, INC.
By: /s/ Christopher G. O'Meara
----------------------------
Christopher G. O'Meara
Vice President and Treasurer
2
<PAGE> 5
COMERICA BANK-CALIFORNIA
(formerly known as Plaza
Bank of Commerce)
By: /s/ Lori Edwards
----------------------------
Lori S. Edwards
First Vice President
3
<PAGE> 6
AMENDMENT NUMBER NINE TO
REVOLVING CREDIT LOAN AGREEMENT
THIS AMENDMENT NUMBER NINE TO REVOLVING CREDIT LOAN AGREEMENT dated as
of March 18, 1996 (the "Amendment") is entered into by and between ADAPTEC,
INC., a California corporation (the "Borrower"), and COMERICA BANK-CALIFORNIA
(formerly known as Plaza Bank of Commerce), a California banking corporation
(the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank are parties to a certain Revolving
Credit Loan Agreement dated as of June 3, 1992, as amended by Amendment Number
One dated as of August 21, 1992, Amendment Number Two dated as of December 31,
1992, Amendment Number Three dated as of April 29, 1994, Amendment Number Four
dated as of July 13, 1994, Amendment Number Five dated as of September 21, 1994,
Amendment Number Six dated as of December 9, 1994, Amendment Number Seven dated
as of December 27, 1995, and Amendment Number Eight dated as of December 29,
1995 (as so amended, the "Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
shall have the respective meanings set forth in the Agreement.
2. Section 1.1 of the Agreement is hereby amended to add the following
definition, in proper alphabetical sequence, which reads in its entirety as
follows:
'"Capital Leases" shall mean any and all lease obligations that, in
accordance with GAAP, are required to be capitalized on the books of a lessee.'
3. Section 6.4 of the Agreement is hereby amended to read in its
entirety as follows:
'16.4 Indebtedness. Incur, create, assume or permit to exist
any indebtedness or liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other indebtedness
or
<PAGE> 7
liability evidenced by notes, bonds, debentures or similar obligations,
or any other indebtedness whatsoever (including sale/leaseback
transactions) which at any time exceeds in the aggregate, on a
consolidated basis, One Hundred Million Dollars ($100,000,000) (the
"Permitted Debt"); provided, however, that the terms and conditions of
the Permitted Debt do not contain any restrictions on the ability of
the Borrower and its Subsidiaries to grant liens against their
inventory, accounts, contract rights or general intangibles (as such
terms are defined in the California Commercial Code), whether now owned
or hereafter acquired, and provided, further, that none of the
following shall be considered for purposes of the foregoing limitation:
(a) the Indebtedness, (b) other indebtedness of the Borrower to the
Bank, whether now existing or hereafter arising, (c) trade payables and
accrued expenses incurred and paid in the ordinary course of business,
(d) indebtedness under Capital Leases which does not exceed, in the
aggregate, on a consolidated basis, Five Million Dollars ($5,000,000)
at any time hereunder, (e) indebtedness under operating leases in the
ordinary course of business, (f) outstanding tax obligations to
governmental agencies, (g) reimbursement obligations under letters of
credit incurred in the ordinary course of business, and (h) loans or
advances by the Borrower to any Subsidiary, or by any Subsidiary to
either the Borrower or any other Subsidiary.'
4. Paragraph (a) of Section 6.15 of the Agreement is hereby amended to
read in its entirety as follows:
'(a) in the case of such acquisitions which are funded in the
form of consideration other than treasury stock or newly-issued equity
securities of the Borrower or any of its Subsidiaries, and which are
accounted for on a consolidated basis with the Borrower and its
Subsidiaries in accordance with GAAP, the Borrower and its Subsidiaries
may not give such consideration in an amount which exceeds, in the
aggregate, One Hundred Million Dollars ($100,000,000) in fair market
value thereof (or, if higher, the book value thereof as reflected in
the Borrower's financial statements) in any fiscal year of the
Borrower.'
5. The Borrower hereby represents and warrants to the Bank that (a) the
representations and warranties contained in the Agreement are true in all
material respects on and as of the date of this Amendment, and (b) no Default
has occurred and is continuing.
2
<PAGE> 8
6. Except as specifically amended pursuant to the foregoing paragraphs
of this Amendment, all recitals, representations, warranties, covenants,
undertakings, promises, indemnities, terms, conditions and provisions of the
Agreement shall remain in full force and effect and shall be and remain
unaffected by this Amendment.
7. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment and the Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Amendment shall become effective
when executed by each of the parties hereto and delivered to the Bank.
8. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California other than
principles of conflicts of laws.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
ADAPTEC, INC.
By: /s/ Christopher G. O'Meara
----------------------------
Christopher G.'O'Meara
Vice President and Treasurer
COMERICA BANK-CALIFORNIA
(formerly known as Plaza
Bank of Commerce)
By: /s/ Lori Edwards
----------------------------
Lori S. Edwards
First Vice President
3
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NUMBER ONE TO
TERM LOAN AGREEMENT
THIS AMENDMENT NUMBER ONE TO TERM LOAN AGREEMENT dated as of July 13,
1994 (the "Amendment") is entered into by and between ADAPTEC, INC., a
California corporation (the "Borrower") , and COMERICA BANK-CALIFORNIA (formerly
known as Plaza Bank of Commerce), a California banking corporation (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank entered into the Term Loan Agreement
dated as of June 24, 1992 (as the same may be further amended, restated,
supplemented or otherwise modified from time to time, the "Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
shall have the respective meanings set forth in the Agreement.
2. Section 6.2 of the Agreement is hereby amended to read in its
entirety as follows:
'6.2 Stock Acquisition. Purchase, redeem, retire or otherwise
acquire any of the shares of its capital stock, or make any commitment
to do so, in amounts which are, in the aggregate, greater than (a)
Thirty Million Dollars ($30,000,000) in the Borrower's fiscal year
ending March 31, 1995, and (b) Ten Million Dollars ($10,000,000) in any
other fiscal year of the Borrower. Any such amount which is unused in
any fiscal year shall not be available to carry forward for use in any
subsequent fiscal year.'
3. The Borrower hereby represents and warrants to the Bank that (a) the
representations and warranties contained in the Agreement are true in all
material respects on and as of the date of this Amendment, and (b) no Default
has occurred and is continuing.
<PAGE> 2
4. Except as specifically amended pursuant to the foregoing paragraphs
of this Amendment, all recitals, representations, warranties, covenants,
undertakings, promises, indemnities, terms, conditions and provisions of the
Agreement shall remain in full force and effect and shall be and remain
unaffected by this Amendment.
5. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment and the Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Amendment shall become effective
when executed by each of the parties hereto and delivered to the Bank.
6. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California other than
principles of conflicts of laws.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
ADAPTEC, INC.
By: /s/ Christopher G. O'Meara
----------------------------
Its: Vice President and Treasurer
COMERICA BANK-CALIFORNIA
(formerly known as Plaza
Bank of Commerce)
By: /s/ Lori Edwards
----------------------------
Its: First Vice President
2
<PAGE> 3
AMENDMENT NUMBER TWO TO
TERM LOAN AGREEMENT
THIS AMENDMENT NUMBER TWO TO TERM LOAN AGREEMENT dated as of September
21, 1994 (the "Amendment") is entered into by and between ADAPTEC, INC., a
California corporation (the "Borrower"), and COMERICA BANK-CALIFORNIA (formerly
known as Plaza Bank of Commerce), a California banking corporation (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank entered into the Term Loan Agreement
dated as of June 24, 1992, as amended by Amendment Number One dated as of July
13, 1994 (as the same may be further amended, restated, supplemented or
otherwise modified from time to time, the "Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
shall have the respective meanings set forth in the Agreement.
2. Section 6.2 of the Agreement is hereby amended to read in its
entirety as follows:
'6.2 Stock Acquisition. Purchase, redeem, retire or otherwise
acquire any of the shares of its capital stock, or make any commitment
to do so, in amounts which are, in the aggregate, greater than (a)
Fifty Million Dollars ($50,000,000) in the Borrower's fiscal year
ending March 31, 1995, and (b) Ten Million Dollars ($10,000,000) in any
other fiscal year of the Borrower. Any such amount which is unused in
any fiscal year shall not be available to carry forward for use in any
subsequent fiscal year.'
3. The Borrower hereby represents and warrants to the Bank that (a) the
representations and warranties contained in the Agreement are true in all
material respects on and as of the date of this Amendment, and (b) no Default
has occurred and is continuing.
<PAGE> 4
4. Except as specifically amended pursuant to the foregoing paragraphs
of this Amendment, all recitals, representations, warranties, covenants,
undertakings, promises, indemnities, terms, conditions and provisions of the
Agreement shall remain in full force and effect and shall be and remain
unaffected by this Amendment.
5. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment and the Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Amendment shall become effective
when executed by each of the parties hereto and delivered to the Bank.
6. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California other than
principles of conflicts of laws.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
ADAPTEC, INC.
By: /s/ Christopher G. O'Meara
----------------------------
Its: Vice President and Treasurer
COMERICA BANK-CALIFORNIA
(formerly known as Plaza
Bank of Commerce)
By: /s/ Lori Edwards
----------------------------
Its: First Vice President
2
<PAGE> 5
AMENDMENT NUMBER THREE TO
TERM LOAN AGREEMENT
THIS AMENDMENT NUMBER THREE TO TERM LOAN AGREEMENT dated as of December
29, 1995 (the "Amendment") is entered into by and between ADAPTEC, INC., a
California corporation (the "Borrower") , and COMERICA BANK-CALIFORNIA (formerly
known as Plaza Bank of Commerce), a California banking corporation (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank a parties to a certain Term Loan
Agreement dated as of June 24, 1992, as amended by Amendment Number One dated as
of July 13, 1994 and Amendment Number Two dated as of September 21, 1994 (as so
amended, the "Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
shall have the respective meanings set forth in the Agreement.
2. Section 6.4 of the Agreement is hereby amended to read in its
entirety as follows:
'6.4 Indebtedness. Incur, create, assume or permit to exist
any indebtedness or liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other indebtedness
or liability evidenced by notes, bonds, debentures or similar
obligations, or any other indebtedness whatsoever (including
sale/leaseback transactions) which at any time exceeds in the
aggregate, on a consolidated basis, Fifty Million Dollars
($50,000,000); provided, however, that none of the following shall be
considered for purposes of the foregoing limitation: (a) the
Indebtedness, (b) other indebtedness of the Borrower to the Bank,
whether now existing or hereafter arising, (c) trade payables and
accrued expenses incurred and paid in the ordinary course of business,
(d) leases of, or conditional sales purchases of, equipment in the
ordinary course of business, so long as the unpaid lease rental,
purchase payment and other obligations thereunder do not exceed, in the
aggregate, on a consolidated basis, Five Million
<PAGE> 6
Dollars ($5,000,000) at any time hereunder, (e) outstanding tax
obligations to governmental agencies, (f) real estate leases in the
ordinary course of business, (g) reimbursement obligations under
letters of credit incurred in the ordinary course of business, (h)
loans or advances by the Borrower to any Subsidiary, or by any
Subsidiary to either the Borrower or any other Subsidiary.'
3. The Borrower hereby represents and warrants to the Bank that (a) the
representations and warranties contained in the Agreement are true in all
material respects on and as of the date of this Amendment, and (b) no Default
has occurred and is continuing.
4. Except as specifically amended pursuant to the foregoing paragraphs
of this Amendment, all recitals, representations, warranties, covenants,
undertakings, promises, indemnities, terms, conditions and provisions of the
Agreement shall remain in full force and effect and shall be and remain
unaffected by this Amendment.
5. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment and the Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Amendment shall become effective
when executed by each of the parties hereto and delivered to the Bank.
6. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California other than
principles of conflicts of laws.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
ADAPTEC, INC.
By: /s/ Christopher G. O'Meara
----------------------------
Christopher G. O'Meara
Vice President and Treasurer
2
<PAGE> 7
COMERICA BANK-CALIFORNIA
(formerly known as Plaza
Bank of Commerce)
By: /s/ Lori Edwards
----------------------------
Lori S. Edwards
First Vice President
3
<PAGE> 8
AMENDMENT NUMBER FOUR TO
TERM LOAN AGREEMENT
THIS AMENDMENT NUMBER FOUR TO TERM LOAN AGREEMENT dated as of March 18,
1996 (the "Amendment") is entered into by and between ADAPTEC, INC., a
California corporation (the "Borrower"), and COMERICA BANK-CALIFORNIA (formerly
known as Plaza Bank of Commerce), a California banking corporation (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank a parties to a certain Term Loan
Agreement dated as of June 24, 1992, as amended by Amendment Number One dated as
of July 13, 1994, Amendment Number Two dated as of September 21, 1994, and
Amendment Number Three dated as of December 29, 1995 (as so amended, the
"Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined
shall have the respective meanings set forth in the Agreement.
2. Section 1.1 of the Agreement is hereby amended to add the following
definition, in proper alphabetical sequence, which reads in its entirety as
follows:
'"Capital Leases" shall mean any and all lease obligations that, in
accordance with GAAP, are required to be capitalized on the books of a lessee.'
3. Section 6.4 of the Agreement is hereby amended to read in its
entirety as follows:
'6.4 Indebtedness. Incur, create, assume or permit to exist
any indebtedness or liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other indebtedness
or liability evidenced by notes, bonds, debentures or similar
obligations, or any other indebtedness whatsoever (including
sale/leaseback transactions) which at any time exceeds in the
aggregate, on a consolidated basis, One Hundred Million Dollars
($100,000,000) (the "Permitted
<PAGE> 9
Debt"); Provided, however, that the terms and conditions of the
Permitted Debt do not contain any restrictions on the ability of the
Borrower and its Subsidiaries to grant liens against their inventory,
accounts, contract rights or general intangibles (as such terms are
defined in the California Commercial Code), whether now owned or
hereafter acquired, and provided, further, that none of the following
shall be considered for purposes of the foregoing limitation: (a) the
Indebtedness, (b) other indebtedness of the Borrower to the Bank,
whether now existing or hereafter arising, (c) trade payables and
accrued expenses incurred and paid in the ordinary course of business,
(d) indebtedness under Capital Leases which does not exceed, in the
aggregate, on a consolidated basis, Five Million Dollars ($5,000,000)
at any time hereunder, (e) indebtedness under operating leases in the
ordinary course of business, (f) outstanding tax obligations to
governmental agencies, (g) reimbursement obligations under letters of
credit incurred in the ordinary course of business, and (h) loans or
advances by the Borrower to any Subsidiary, or by any Subsidiary to
either the Borrower or any other Subsidiary.'
4. Paragraph (a) of Section 6.15 of the Agreement is hereby amended to
read in its entirety as follows:
'(a) in the case of such acquisitions which are funded in the
form of consideration other than treasury stock or newly-issued equity
securities of the Borrower or any of its Subsidiaries, and which are
accounted for on a consolidated basis with the Borrower and its
Subsidiaries in accordance with GAAP, the Borrower and its Subsidiaries
may not give such consideration in an amount which exceeds, in the
aggregate, one Hundred Million Dollars ($100,000,000) in fair market
value thereof (or, if higher, the book value thereof as reflected in
the Borrower's financial statements) in any fiscal year of the
Borrower.'
5. The Borrower hereby represents and warrants to the Bank that (a) the
representations and warranties contained in the Agreement are true in all
material respects on and as of the date of this Amendment, and (b) no Default
has occurred and is continuing.
6 . Except as specifically amended pursuant to the foregoing
paragraphs of this Amendment, all recitals, representations, warranties,
covenants, undertakings, promises, indemnities, terms, conditions and provisions
of the Agreement shall remain in full force and effect and shall be and remain
unaffected by this Amendment.
2
<PAGE> 10
7. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment and the Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Amendment shall become effective
when executed by each of the parties hereto and delivered to the Bank.
8. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California other than
principles of conflicts of laws.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
ADAPTEC, INC.
By: /s/ Christopher G. O'Meara
----------------------------
Christopher G.'O'Meara
Vice President and Treasurer
COMERICA BANK-CALIFORNIA
(formerly known as Plaza
Bank of Commerce)
By: /s/ Lori Edwards
----------------------------
Lori S. Edwards
First Vice President
3
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> DEC-27-1996
<EXCHANGE-RATE> 1
<CASH> 89,436
<SECURITIES> 199,542
<RECEIVABLES> 112,658
<ALLOWANCES> 4,230
<INVENTORY> 59,821
<CURRENT-ASSETS> 498,495
<PP&E> 186,981
<DEPRECIATION> 53,824
<TOTAL-ASSETS> 726,487
<CURRENT-LIABILITIES> 112,788
<BONDS> 1,700
0
0
<COMMON> 222,334
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<TOTAL-LIABILITY-AND-EQUITY> 726,487
<SALES> 251,703
<TOTAL-REVENUES> 251,703
<CGS> 103,139
<TOTAL-COSTS> 103,139
<OTHER-EXPENSES> 91,659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146
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<INCOME-TAX> 17,781
<INCOME-CONTINUING> 41,584
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</TABLE>
