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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998
REGISTRATION NO. 333-24557
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2 ON
FORM S-3
TO REGISTRATION STATEMENT ON FORM S-1
UNDER THE SECURITIES ACT OF 1933
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ADAPTEC, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2748530
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
691 S. MILPITAS BLVD.
MILPITAS, CALIFORNIA 95035
(408) 945-8600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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F. GRANT SAVIERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ADAPTEC, INC.
691 S. MILPITAS BLVD.
MILPITAS, CALIFORNIA 95035
(408) 945-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
HENRY P. MASSEY, JR., ESQ.
PETER S. HEINECKE, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
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Approximate date of commencement of proposed sale to the public: FROM
TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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PROSPECTUS
ADAPTEC, INC.
U.S. $230,000,000
4 3/4% Convertible Subordinated Notes due February 1, 2004
and
Shares of Common Stock Issuable Upon Conversion Thereof
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This Prospectus relates to $230,000,000 aggregate principal amount of
4 3/4% Convertible Subordinated Notes due February 1, 2004 (the "Notes") of
Adaptec, Inc. (the "Company") under the Securities Act of 1933, as amended (the
"Securities Act"), and the shares of Common Stock, $.001 par value of the
Company, ("Common Stock") issuable upon the conversion of the Notes (the
"Conversion Shares"). The Notes registered hereby were issued and sold on
February 3, 1997 (the "Original Offering") in transactions exempt from the
registration requirements of the Securities Act, to persons reasonably believed
by Bear, Stearns & Co. Inc., Lehman Brothers, Robertson Stephens & Company LLC,
and Unterberg Harris, as the initial purchasers (the "Initial Purchasers") of
the Notes, to be "qualified institutional buyers" (as defined by Rule 144A under
the Securities Act) or other institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under Regulation D of the Securities Act) or in
compliance with the provisions of Regulation S under the Securities Act. The
Notes and the Common Stock issuable upon conversion thereof may be offered and
sold from time to time by the holders named herein or by their transferees,
pledgees, donees or their successors (collectively, the "Selling
Securityholders") pursuant to this Prospectus. The Registration Statement of
which this Prospectus is a part has been filed with the Securities and Exchange
Commission pursuant to a registration rights agreement dated as of February 3,
1997 (the "Registration Agreement") between the Company and the Initial
Purchasers, entered into in connection with the Original Offering.
The Notes are convertible at the option of the holder into shares of
Common Stock of the Company (at any time on or after May 5, 1997 and prior to
redemption or maturity, at a conversion rate of 19.3573 shares per $1,000
principal amount of Notes), subject to adjustment under certain circumstances.
Interest on the Notes is payable semi-annually in arrears on February 1 and
August 1 of each year, commencing on August 1, 1997. On June 26, 1998, the
closing price of the Common Stock, which is quoted on the Nasdaq National Market
under the symbol "ADPT," was $15 3/4 per share.
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THE NOTES AND THE COMMON STOCK OFFERED HEREBY
INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 4.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 29, 1998
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The Notes are unsecured general obligations of the Company and are
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined in the Indenture). See "Description of Notes -- Subordination." The
Notes will mature on February 1, 2004, and may be redeemed, at the option of the
Company, in whole or in part, at any time on or after February 3, 2000 at the
redemption prices set forth herein plus accrued interest. Each holder of Notes
will have the right to cause the Company to repurchase all of such holder's
Notes, payable in cash or, at the Company's option, in Common Stock, in the
event the Common Stock is no longer publicly traded or in certain circumstances
involving a Change of Control (as defined in the Indenture).
The Notes and the Conversion Shares may be offered by the Selling
Securityholders from time to time in transactions (which may include block
transactions in the case of the Conversion Shares) on any exchange or market on
which such securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Notes or
Conversion Shares directly or to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Notes or Conversion Shares
for whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). The Company will not receive any of the
proceeds from the sale of the Notes or Conversion Shares by the Selling
Securityholders. The Company has agreed to pay all expenses incident to the
offer and sale of the Notes and Conversion Shares offered by the Selling
Securityholders hereby, except that the Selling Securityholders will pay all
underwriting discounts and selling commissions, if any. See "Plan of
Distribution."
The Notes have been designated for trading on the PORTAL Market. Notes
sold pursuant to this Prospectus are not eligible for trading on the PORTAL
Market.
The Selling Securityholders will receive all of the net proceeds from
the sale of the Notes and the Common Stock issuable upon conversion of the Notes
and will pay all underwriting discounts and selling commissions, if any,
applicable to the sale of the Notes and the Common Stock issuable upon
conversion of the Notes. The Company is responsible for payment of all other
expenses incident to the offer and sale of the Notes and the Common Stock
issuable upon conversion of the Notes.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements, and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as the regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements, and other information that are filed through
the Commission's Electronic Data Gathering, Analysis and Retrieval System. This
Web site can be accessed at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Notes and Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company, the
Notes and the Common Stock, reference is made to the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete
and, in each instance, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. Copies of the Registration
Statement, including all exhibits thereto, may be obtained from the Commission's
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission, or may be examined without charge at the offices of the Commission
described above.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus is delivered, upon written or oral request of
any such person, a copy of any and all of the information that has been or may
be incorporated by reference in this Prospectus, other than exhibits to such
documents. Requests for such copies should be directed to Rachel Haven, Adaptec,
Inc., 691 S. Milpitas Boulevard, Milpitas, CA 95035, Phone: (408) 945-8600.
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RISK FACTORS
This Prospectus contains or incorporates by reference forward-looking
statements that involve risks and uncertainties. The statements contained or
incorporated by reference in this Prospectus that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward- looking statements
included in this document are based on information available to the Company on
the date hereof, and all forward-looking statements in documents incorporated by
reference are based on information available to the Company as of the date of
such document. The Company assumes no obligation to update any such
forward-looking statements. The Company's actual results could differ materially
from those anticipated in these such-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. In evaluating the Company's business, prospective investors
should consider carefully the following factors in addition to the other
information set forth in this Prospectus.
Future Operating Results Subject to Fluctuation. In the second half of fiscal
1998, the Company's operating results were adversely affected by shifts in
corporate and retail buying patterns, increased competition, economic
instability in Asia and turbulence in the computer disk drive industry. In the
future, the Company's operating results may fluctuate as a result of these
factors and as a result of a wide variety of other factors, including, but not
limited to, 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,
product obsolescence and general worldwide economic and computer industry
fluctuations. In addition, fluctuations may be caused by future accounting
pronouncements, changes in accounting policies, 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. The Company has historically operated with
a relatively small backlog, especially relating to orders of its host interface
solutions and has set its operating budget based in part on expectations of
future revenues. Because much of the Company's operating budget is relatively
fixed in the short term, if revenues do not meet the Company's expectations, as
happened in the fourth quarter of fiscal 1998, then the Company's operating
income and net income may be disproportionately affected. Operating results in
any particular quarter which do not meet the expectations of securities analysts
are likely to cause volatility in the price of the Company's Common Stock.
Certain Risks Associated with the High-Performance Microcomputer Market. The
Company's host interface 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 that support client/server and Internet/intranet
applications, computer-aided engineering, desktop publishing, multimedia, and
video. During the second half of fiscal 1998, the demand for such systems slowed
as more businesses chose to use relatively inexpensive PC's for desktop
applications and information technology managers shifted resources toward
resolving Year 2000 problems and investing in network infrastructure. Should
demand for such systems continue to slow, the Company's business or operating
results could be materially adversely affected by a resulting decline in demand
for the Company's products.
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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, as happened in the second
half of fiscal 1998, 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,
Ultra2 SCSI, PCI, RAID, Fibre Channel, 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. For example, the Company
believes that changes in consumers' perceptions of the relative merits of SCSI
based products and products incorporating a competing standard, Ultra-DMA, have
recently started to adversely affect the sales of the Company's products and may
adversely affect the Company's future sales.
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 costs, 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
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,
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there can 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
wafer 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 with 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. In addition, the
Company is increasingly using board subcontractors to better balance production
runs and capacity. 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
or operating results.
Certain Risks Associated With Acquisitions. Since the beginning of fiscal 1996,
the Company has completed the acquisition of 13 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
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personnel. There can be no assurance that the Company will 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.
Certain Risks Associated with Implementation and Utilization of New Information
Systems. The Company has recently implemented new information systems in its
operations in the United States, Singapore and Europe and will implement new
information systems in its operations in Japan. There can be no assurance that
the Company will successfully implement and utilize these new systems
efficiently and in a timely manner. Problems with installation or utilization of
the new systems could cause substantial difficulties in operations, financial
reporting and management and thus could have a material adverse effect on the
Company's business or operating results.
Year 2000 Issues. The "Year 2000 issue" arises because most computer systems and
programs were designed to handle only a two-digit year not a four-digit year.
When the Year 2000 begins, these computers may interpret "00" as the year 1900
and could either stop processing date-related computations or could process them
incorrectly. The Company has recently implemented new information systems and
accordingly does not anticipate any internal Year 2000 issues from its own
information systems, databases or programs. However, the Company could be
adversely impacted by Year 2000 issues faced by major distributors, suppliers,
customers, vendors and financial service organizations with which the Company
interacts. The Company has sent surveys to certain third parties to determine
whether they are Year 2000 compliant and is in the process of evaluating and
following up on responses to determine the impact that third parties who are not
Year 2000 compliant may have on the operations of the Company. The Company
believes it is currently being impacted by the redirection of corporate
management information system budgets towards resolving the Year 2000 issue.
Continuation of this trend could lower the demand for the Company's products if
corporate buyers defer purchases of high-end business PCs.
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 erosion. In the host
adapter market, the Company competes with a number of host adapter
manufacturers. The Company's principal competitors for semiconductor solutions
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 or 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. In addition, there has recently
been an industry trend towards the elimination of price protection and
distributor incentive programs. This trend could result in a change in
distributor business habits, with distributors possibly deciding to decrease the
amount of product held
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so as to reduce inventory levels and this in turn 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 design enhancements and 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. The Company believes the recent
weakness in its financial performance and the resulting decline in its stock
price has adversely impacted its ability to attract and retain qualified
employees.
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. The Company may use forward exchange contracts to manage any
exposure associated with certain foreign currency denominated commitments. 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 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
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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.
Natural Disasters. The Company's corporate headquarters are located near major
earthquake faults. Any damage to the Company's information systems caused as a
result of an earthquake, fire, La Nina related floods or any other natural
disasters could have a material adverse effect on the Company's business,
results of operations and financial condition.
Volatility of Stock Price. 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, as occurred in the fourth quarter of
fiscal 1998, 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. In addition, the Company's stock
price may be affected by general market conditions and international
macroeconomic factors unrelated to the Company's performance such as those
recently evidenced by the financial turmoil in Asia. These conditions, as well
as factors that generally affect the market for stocks of high technology
companies, could cause the price of the Company's Common Stock to fluctuate
substantially over short periods.
Subordination. The Notes are unsecured and subordinated in right of
payment in full to all existing and future Senior Indebtedness of the Company.
As a result of such subordination, in the event of bankruptcy, liquidation or
reorganization of the Company, or upon the acceleration of any Senior
Indebtedness, the assets of the Company will be available to pay obligations on
the Notes only after all Senior Indebtedness has been paid in full, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
Notes then outstanding. The Company expects from time to time to incur
indebtedness constituting Senior Indebtedness. The Indenture does not prohibit
or limit the incurrence of additional indebtedness by the Company or its
subsidiaries and the incurrence of additional indebtedness by the Company or its
subsidiaries could adversely affect the Company's ability to pay its obligations
on the Notes. As of December 27, 1996, the Company had $5.1 million of
indebtedness outstanding that would have constituted Senior Indebtedness
(excluding accrued interest and Senior Indebtedness constituting liabilities of
a type not required to be reflected as a liability on the balance sheet of the
Company in accordance with generally accepted accounting principles). In
addition, the Notes are structurally subordinated to the liabilities, including
trade payables, of the Company's subsidiaries. As of December 27, 1996,
subsidiaries of the Company had outstanding $22.9 million of aggregate
liabilities (excluding intercompany liabilities and liabilities of a type not
required to be reflected as a liability on the balance sheets of such
subsidiaries in accordance with generally accepted accounting principles). See
"Description of Notes -- Subordination."
Limitations on Repurchase of Notes. Upon a Change of Control (as
defined), each Holder of Notes will have certain rights, at the Holder's option,
to require the Company to repurchase all or a portion of such Holder's Notes. If
a Change of Control were to occur, there can be no assurance that the Company
would have sufficient funds to pay the purchase price for all Notes tendered by
the Holders thereof. In addition, the terms of the Company's existing primary
bank facility prohibit the Company from repurchasing any Notes and also provide
that under certain circumstances a Change of Control would constitute an event
of default thereunder. Any future credit agreements or other agreements relating
to other indebtedness (including other Senior Indebtedness) to which the Company
becomes a party may contain similar restrictions and provisions. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing Notes by the terms of any
-9-
<PAGE> 11
indebtedness, the Company could seek the consent of its lenders to the purchase
of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company would remain prohibited from repurchasing Notes. In such
case, the Company's failure to repurchase tendered Notes would constitute an
Event of Default under the Indenture, which would, in turn, constitute a further
default under the Company's existing bank facility and may constitute a default
under the terms of other indebtedness that the Company may enter into from time
to time. In such circumstances, the subordination provisions in the Indenture
would restrict payments to the Holders of Notes. See "Description of Notes --
Repurchase at Option of Holders."
-10-
<PAGE> 12
THE COMPANY
The Company was incorporated in Delaware in November 1997. It is the
successor by statutory merger to Adaptec, Inc, a California corporation
("Adaptec California"), which was incorporationed in May 1981. Its principal
executive offices are located at 691 South Milpitas Boulevard, Milpitas,
California 95035, and its telephone number is 408-945-8600.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings 43.6x 64.4x 67.8x 38.1x 17.8
to fixed charges.
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated pre-tax income plus fixed charges and (ii)
fixed charges consist of interest expense incurred and the portion of rental
expense under leases deemed by the Company to be representative of the interest
factor.
-11-
<PAGE> 13
DESCRIPTION OF NOTES
The Notes were issued under an Indenture dated as of February 3, 1997
(the "Indenture") between the Company and State Street Bank and Trust Company,
as trustee (the "Trustee"). The terms of the Indenture are also governed by
certain provisions contained in the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The following summaries of certain provisions of the
Notes and the Indenture do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all the provisions of the Notes
and the Indenture, including the definitions therein of certain terms which are
not otherwise defined in this Prospectus and those terms made a part of the
Indenture by reference to the Trust Indenture Act as in effect on the date of
the Indenture. Wherever particular provisions or defined terms of the Indenture
(or of the forms of Notes which are a part thereof) are referred to, such
provisions or defined terms are incorporated herein by reference in their
entirety. As used in this "Description of Notes," the "Company" refers to
Adaptec, Inc., a California corporation, and does not, unless the context
otherwise indicates, include its subsidiaries.
GENERAL
The Notes represent general unsecured subordinated obligations of the
Company and are convertible into Common Stock as described below under
"-- Conversion of Notes." The Notes will mature on February 1, 2004, unless
earlier redeemed at the option of the Company or repurchased at the option of
the holders upon a Change of Control.
The Indenture does not contain any financial covenants or any
restrictions on the payment of dividends, the repurchase of securities of the
Company or the incurrence of debt by the Company or any of its subsidiaries. The
Indenture contains no covenants or other provisions to afford protection to
holders of Notes in the event of a highly leveraged transaction or a change in
control of the Company except to the extent described under "-- Repurchase at
Option of Holders" below.
The Notes bear interest from the date of original issue at the annual
rate set forth on the cover page hereof, payable semi-annually on February 1 and
August 1, commencing on August 1, 1997, to Holders of record at the close of
business on the preceding January 15 and July 15, respectively. Interest will be
computed on the basis of a 360-day year composed of twelve 30-day months.
Unless other arrangements are made, interest will be paid by check
mailed to holders entitled thereto, provided that with respect to any holder of
Notes with an aggregate principal amount equal to or in excess of $5,000,000, at
the request (such request to include appropriate wire instructions) of such
holder in writing to the Trustee on or before the record date preceding any
interest payment date, interest on such holder's Notes shall be paid by wire
transfer in immediately available funds. Principal will be payable, and the
Notes may be presented for conversion, registration of transfer and exchange,
without service charge, at the office of the Trustee or its agent in New York,
New York.
CONVERSION OF NOTES
The holders of Notes are entitled at any time on or after May 5, 1997
through the close of business on February 1, 2004, subject to prior redemption
and repurchase, to convert any Notes or portions thereof (in denominations of
$1,000 in principal amount or multiples thereof) into Common Stock at a
conversion price of $51.66 per share, subject to adjustment as described below;
provided that in the case of Notes called for redemption, conversion rights will
expire immediately prior to the close of business on the last business day
before the date fixed for redemption, unless the Company defaults in payment of
the redemption price. A Note
-12-
<PAGE> 14
(or portion thereof) in respect of which a holder is exercising its option to
require repurchase upon a Change of Control may be converted only if such holder
withdraws its election to exercise such repurchase option in accordance with the
terms of the Indenture.
Except as described below, no adjustment will be made on conversion of
any Notes for interest accrued thereon or for dividends paid on any Common Stock
issued. Holders of Notes at the close of business on a record date will be
entitled to receive the interest payable on such Note on the corresponding
interest payment date. However, Notes surrendered for conversion after the close
of business on a record date and before the opening of business on the
corresponding interest payment date must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted (unless such Note is subject to redemption on a redemption
date between such record date and the close of business on the business day
following the corresponding interest payment date). The interest payment with
respect to a Note called for redemption on a date during the period from the
close of business on or after any record date to the close of business on the
business day following the corresponding payment date will be payable on the
corresponding interest payment date to the registered holder at the close of
business on that record date (notwithstanding the conversion of such Note before
the corresponding interest payment date) and a holder of Notes who elects to
convert need not include funds equal to the interest paid. The Company is not
required to issue fractional shares of Common Stock upon conversion of Notes
and, in lieu thereof, will pay a cash adjustment based upon the closing price of
the Common Stock on the last business day prior to the date of conversion.
The conversion price is subject to adjustment by the Company (under
formulae set forth in the Indenture) upon the occurrence of certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on the
outstanding Common Stock, (ii) the issuance to all holders of Common Stock of
certain rights, options or warrants to purchase Common Stock at less than the
current market price, (iii) certain subdivisions, combinations and
reclassifications of Common Stock, (iv) distributions to all holders of Common
Stock of capital stock of the Company (other than Common Stock) or evidences of
indebtedness of the Company or assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
dividends and distributions in connection with the liquidation, dissolution or
winding up of the Company and dividends and distributions paid exclusively in
cash), (v) distributions consisting exclusively of cash (excluding any cash
portion of distributions referred to in clause (iv) or in connection with a
consolidation, merger or sale of assets of the Company as referred to in clause
(ii) of the third paragraph below) to all holders of Common Stock in an
aggregate amount that, together with (x) all other such all-cash distributions
made within the preceding 12 months in respect of which no adjustment has been
made and (y) any cash and the fair market value of other consideration payable
in respect of any tender offers by the Company or any of its subsidiaries for
Common Stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 20% of the Company's market capitalization
(being the product of the then current market price of the Common Stock times
the number of shares of Common Stock then outstanding) on the record date for
such distribution and (vi) the purchase of Common Stock pursuant to a tender
offer made by the Company or any of its subsidiaries which involves an aggregate
consideration that, together with (x) any cash and the fair market value of any
other consideration payable in any other tender offer by the Company or any of
its subsidiaries for Common Stock expiring within the 12 months preceding such
tender offer in respect of which no adjustment has been made and (y) the
aggregate amount of any such all-cash distributions referred to in clause (v)
above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 20% of the Company's market capitalization on the expiration of
such tender offer. No adjustment of the conversion price will be made for shares
issued pursuant to a plan for reinvestment of dividends or interest. Except as
stated above, the conversion price will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing. No adjustment in the
conversion price will be required unless such
-13-
<PAGE> 15
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
No adjustment will be made pursuant to clause (iv) of the preceding
paragraph if the Company makes proper provision for each holder of Notes who
converts a Note to receive, in addition to the Common Stock issuable upon such
conversion, the kind and amount of assets (including securities) that the holder
would have been entitled to receive if such holder had been a holder of the
Common Stock at the time of the distribution of such assets or securities.
Rights, options or warrants distributed by the Company to all holders of the
Common Stock that entitle the holders thereof to purchase shares of the
Company's capital stock and that, until the occurrence of an event (a
"Triggering Event"), (i) are deemed to be transferred with the Common Stock,
(ii) are not exercisable and (iii) are also issued in respect of future
issuances of Common Stock, shall not be deemed to be distributed until the
occurrence of the Triggering Event.
Under the provisions of the Company's 1996 Rights Agreement, upon
conversion of the Notes, the holders will receive, in addition to the Common
Stock issuable upon such conversion, the Rights (whether or not the Rights have
separated from the Common Stock at the time of the conversion). See "Description
of Capital Stock -- Preferred Stock -- Preferred Share Rights Plan." In
addition, the Indenture will provide that, if the Company implements a new
shareholder rights plan, such rights plan must provide that upon conversion of
the Notes the holders will receive, in addition to the Common Stock issuable
upon such conversion, such rights (whether or not such rights have separated
from the Common Stock at the time of such conversion).
In the case of (i) any reclassification or change of the Common Stock
(other than changes in par value or from par value to no par value or resulting
from a subdivision or a combination) or (ii) a consolidation or merger involving
the Company or a sale or conveyance to another corporation of the property and
assets of the Company as an entirety or substantially as an entirety (determined
on a consolidated basis), in each case as a result of which holders of Common
Stock shall be entitled to receive stock, other securities, other property or
assets (including cash) with respect to or in exchange for such Common Stock,
the holders of the Notes then outstanding will be entitled thereafter to convert
such Notes into the kind and amount of shares of stock, other securities or
other property or assets which they would have owned or been entitled to receive
upon such reclassification, change, consolidation, merger, sale or conveyance
had such Notes been converted into Common Stock immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance, after
giving effect to any adjustment event, assuming that a holder of Notes would not
have exercised any rights of election as to the stock, other securities or other
property or assets receivable in connection therewith and received per share the
kind and amount received per share by a plurality of non-electing shareholders.
In the event of a taxable distribution to holders of Common Stock (or
other transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to the United States income tax as a dividend; in certain
other circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock.
The Company from time to time may to the extent permitted by law reduce
the conversion price by any amount for any period of at least 20 days, in which
case the Company shall give at least 15 days' notice of such decrease, if the
Board of Directors has made a determination that such decrease would be in the
best interests of the Company, which determination shall be conclusive. The
Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Company deems advisable to avoid or
diminish any income tax to its shareholders resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
-14-
<PAGE> 16
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes
is, to the extent set forth in the Indenture, subordinated in right of payment
to the prior payment in full of all Senior Indebtedness. Upon any distribution
to creditors of the Company in a liquidation or dissolution of the Company or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
related to the Company or its property, in an assignment for the benefit of
creditors or any marshaling of the Company's assets and liabilities, the holders
of all Senior Indebtedness will first be entitled to receive payment in full of
all amounts due or to become due thereon before the holders of the Notes will be
entitled to receive any payment in respect of the principal of, premium, if any,
or interest on the Notes (except that holders of Notes may receive securities
that are subordinated at least to the same extent as the Notes to Senior
Indebtedness and any securities issued in exchange for Senior Indebtedness).
In the event of any acceleration of the Notes because of an Event of
Default, the holders of any Senior Indebtedness then outstanding would be
entitled to payment in full of all obligations in respect of such Senior
Indebtedness before the holders of the Notes are entitled to receive any payment
or distribution in respect thereof (except that holders of Notes may receive
securities that are subordinated at least to the same extent as the Notes are
subordinated to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness). The Indenture will further require that the Company
promptly notify holders of Senior Indebtedness if payment of the Notes is
accelerated because of an Event of Default.
The Company also may not make any payment upon or in respect of the
Notes (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes are subordinated to Senior Indebtedness
and any securities issued in exchange for Senior Indebtedness) if (a) a default
in the payment of the principal of, premium, if any, interest, rent under or
other obligations in respect of Senior Indebtedness occurs and is continuing
beyond any applicable period of grace or (b) any other default occurs and is
continuing with respect to Designated Senior Indebtedness that permits holders
of the Designated Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from a person entitled to give such notice under the
Indenture. Payments on the Notes may and shall be resumed (i) in the case of a
payment default, upon the date on which such default is cured or waived, and
(ii) in the case of a non-payment default, 179 days after the date on which the
applicable Payment Blockage Notice is received (or sooner, if such default is
cured or waived), unless the maturity of any Senior Indebtedness has been
accelerated. No new period of payment blockage based on a non-payment default
may be commenced within 365 days after the receipt by the Trustee of any prior
Payment Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on, rent under, and any other amounts payable on or in or in respect of
the Company's existing credit agreement and any other Indebtedness of the
Company (including, without limitation, any interest accruing after the filing
of a petition by or against the Company under any bankruptcy law, whether or not
allowed as a claim after such filing in any proceeding under such bankruptcy
law), whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to the foregoing); provided, however, that Senior
Indebtedness does not include (v) Indebtedness evidenced by the Notes, (w) any
liability for federal, state, local or other taxes owed or owing by the Company,
(x) Indebtedness of the Company to any subsidiary of the Company except to the
extent such Indebtedness may have been pledged, assigned or otherwise
transferred to a third party, (y) any indebtedness for the purchase of services,
goods or materials if such indebtedness is a trade payable of the
-15-
<PAGE> 17
Company incurred in the ordinary course of business, except to the extent such
indebtedness may have been pledged, assigned or otherwise transferred to a third
party, and (z) any Indebtedness in which the instrument creating or evidencing
the same or the assumption or guarantee thereof (or related agreements or
documents to which the Company is a party) expressly provides that such
Indebtedness shall not be senior in right of payment to, or is pari passu with,
or is subordinated or junior to, the Notes.
"Indebtedness" means, with respect to any person, all obligations,
whether or not contingent, of such person (i) (a) for borrowed money (including,
but not limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of the Company that is (1) given to secure all or part
of the purchase price of property subject thereto, whether given to the vendor
of such property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or other written
instrument, (c) under a lease required to be capitalized on the balance sheet of
the lessee under generally accepted accounting principles or entered into as
part of a sale and buy back transaction, whether or not required to be
capitalized, or under any lease or related document (including a purchase
agreement) that provides that the Company is contractually obligated to purchase
or cause a third party to purchase and thereby guarantee a minimum residual
value of the lease property to the lessor and the obligations of the Company
under such lease or related document to purchase or to cause a third party to
purchase such leased property, (d) in respect of letters of credit, bank
guarantees or bankers' acceptances (including reimbursement obligations with
respect to any of the foregoing), (e) with respect to indebtedness secured by a
mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or
resulting in an encumbrance to which the property or assets of such person are
subject, whether or not the obligation secured thereby shall have been assumed
by or shall otherwise be such person's legal liability, (f) in respect of the
balance of deferred and unpaid purchase price of any property or assets, (g)
under interest rate or currency swap agreements, cap, floor and collar
agreements, spot and forward contracts and similar agreements and arrangements;
(ii) with respect to any obligation of others of the type described in the
preceding clause (i) or under clause (iii) below assumed by or guaranteed in any
manner by such person or in effect guaranteed by such person through an
agreement to purchase (including, without limitation, "take or pay" and similar
arrangements), contingent or otherwise (and the obligations of such person under
any such assumptions, guarantees or other such arrangements); and (iii) any and
all Indebtedness constituting deferrals, renewals, extensions, refinancings and
refundings of, or amendments, modifications or supplements to, any of the
foregoing.
"Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).
By reason of the subordination provisions described above, in the event
of the Company's liquidation or insolvency, holders of Senior Indebtedness may
receive more, ratably, and holders of the Notes may receive less, ratably, than
the other creditors of the Company. Such subordination will not prevent the
occurrences of any Event of Default under the Indenture.
In the event that the Trustee (or paying agent if other than the
Trustee) or any holder receives any payment of principal or interest with
respect to the Notes at a time when such payment is prohibited under the
Indenture, such payment shall be held in trust for the benefit of, and shall be
paid over and delivered to, the holders of Senior Indebtedness or their
representative as their respective interests may appear. After all Senior
Indebtedness is paid in full and until the Notes are paid in full, holders shall
be subrogated (equally and ratably with all other Indebtedness pari passu with
the Notes) to the rights of holders of Senior Indebtedness to receive
-16-
<PAGE> 18
distributions applicable to Senior Indebtedness to the extent that distributions
otherwise payable to the holders have been applied to the payment of Senior
Indebtedness.
The Notes are obligations exclusively of the Company. Since the
operations of the Company are partially conducted through its subsidiaries, the
cash flow and the consequent ability to service debt, including the Notes, of
the Company, is partially dependent upon the earnings of the Company's
subsidiaries and the distribution of those earnings to, or upon loans or other
payments of funds by those subsidiaries to, the Company. The payment of
dividends and the making of loans and advances to the Company by its
subsidiaries may be subject to statutory or contractual restrictions, are
dependent upon the earnings of those subsidiaries and are subject to various
business considerations.
Any right of the Company to receive assets of any of its subsidiaries
upon their liquidation or reorganization (and the consequent right of the
holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that held by the Company.
As of December 27, 1996, the Company had approximately $5.1 million of
indebtedness outstanding that would have constituted Senior Indebtedness
(excluding accrued interest and Senior Indebtedness constituting liabilities of
a type not required to be reflected as a liability on the balance sheet of the
Company in accordance with generally accepted accounting principles). As of
December 27, 1996, there was also outstanding approximately $22.9 million of
aggregate liabilities of subsidiaries of the Company (excluding intercompany
liabilities and liabilities of a type not required to be reflected as a
liability on the balance sheets of such subsidiaries in accordance with
generally accepted accounting principles) as to which the Notes would have been
structurally subordinated. The Indenture does not limit the amount of additional
indebtedness, including Senior Indebtedness, that the Company can create, incur,
assume or guarantee, nor will the Indenture limit the amount of indebtedness and
other liabilities that any subsidiary can create, incur, assume or guarantee.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to
February 3, 2000. At any time on or after that date, the Notes may be redeemed
at the Company's option on at least 15 but not more than 60 days' notice, in
whole at any time or in part from time to time, at the following prices
(expressed in percentages of the principal amount), together with accrued
interest to the date fixed for redemption if redeemed during the 12- month
period beginning February 1 (beginning February 3, 2000 and ending January 31,
2001, in the case of the first such period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2000............................................ 102.71%
2001............................................ 102.04
2002............................................ 101.36
2003............................................ 100.68
</TABLE>
and 100% at February 1, 2004.
If fewer than all the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed in principal amounts of $1,000 or integral multiples
thereof by lot or, in its discretion, on a pro rata basis. If any Note is to be
redeemed in part only, a new Note or Notes in principal amount equal to the
unredeemed principal portion thereof will be issued. If a portion of a holder's
Notes is selected for partial redemption and such holder
-17-
<PAGE> 19
converts a portion of such Notes, such converted portion shall be deemed to be
taken from the portion selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS
Upon the occurrence of a Change of Control, each holder of Notes shall
have the right, at the holder's option, to require that the Company repurchase
such holder's Notes in whole or in part in integral multiples of $1,000, at a
purchase price in cash in an amount equal to 101% of the principal amount
thereof, together with accrued and unpaid interest to the date of repurchase,
pursuant to an offer (the "Change of Control Offer") made in accordance with the
procedures described below and the other provisions of the Indenture.
A "Change of Control" means an event or series of events as a result of
which (i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) acquires "beneficial ownership" (as determined in
accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 50% of the combined voting power of the then outstanding securities
entitled to vote generally in elections of directors of the Company (the "Voting
Stock"), (ii) the Company consolidates with or merges into any other
corporation, or conveys, transfers or leases all or substantially all of its
assets to any person, or any other corporation merges into the Company, and, in
the case of any such transaction, the outstanding Common Stock of the Company is
changed or exchanged as a result, unless the shareholders of the Company
immediately before such transaction own, directly or indirectly, at least 51% of
the combined voting power of the outstanding voting securities of the
corporation resulting from such transaction in substantially the same proportion
as their ownership of the Voting Stock immediately before such transaction, or
(iii) Continuing Directors do not constitute a majority of the Board of
Directors of the Company (or, if applicable, a successor corporation to the
Company); provided that a Change of Control shall not be deemed to have occurred
if either (i) the closing price per share of the Common Stock for any 5 trading
days within the period of 10 consecutive trading days ending immediately after
the announcement of such Change of Control shall equal or exceed 105% of the
conversion price of the Notes in effect on such trading day or (ii) at least 90%
of the consideration in the transaction or transactions constituting the Change
of Control transaction consists of shares of common stock traded on a national
securities exchange or quoted on the Nasdaq National Market (or which will be so
traded or quoted immediately following the Change of Control) and, as a result
of such transaction or transactions, the Notes become convertible solely into
such common stock (and any rights attached thereto).
"Continuing Directors" shall mean, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
Within 30 days following any Change of Control, the Company shall send
by first-class mail, postage prepaid, to the Trustee and to each holder of
Notes, at such holder's address appearing in the security register, a notice
stating, among other things, that a Change of Control has occurred, the purchase
price, the purchase date, which shall be a business day no earlier than 30 days
nor later than 60 days from the date such notice is mailed, and certain other
procedures that a holder of Notes must follow to accept a Change of Control
Offer or to withdraw such acceptance.
No quantitative or other established meaning has been given to the
phrase "all or substantially all" (which appears in the definition of Change of
Control) by courts which have interpreted this phrase in various contexts
-18-
<PAGE> 20
under the laws of the State of New York. To the extent the meaning of such
phrase is uncertain, uncertainty will exist as to whether or not a Change of
Control may have occurred (and, accordingly, as to whether or not the holders of
Notes will have the right to require the Company to repurchase their Notes).
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to holders of the Notes. The Company will comply with this
rule to the extent applicable at that time. In the event any of the provisions
governing a Change of Control Offer conflict with the federal securities laws of
the United States, such securities laws shall control.
The right to require the Company to repurchase Notes as a result of a
Change of Control could have the effect of delaying, deferring or preventing a
change of control or other attempts to acquire control of the Company unless
arrangements have been made to enable the Company to repurchase all the Notes on
the applicable purchase date. Consequently, this right may render more difficult
or discourage a merger, consolidation or tender offer (even if such transaction
is supported by the Company's Board of Directors or is favorable to the
shareholders), the assumption of control by a holder of a large block of the
Company's shares and the removal of incumbent management.
The foregoing provisions would not necessarily afford holders of the
Notes protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect holders. Moreover, certain
transactions and events that would constitute an actual change of control may
not be a Change of Control for purposes of the Indenture. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar restructuring. Subject to the limitation on mergers and consolidations
described below, the Company, its management or its subsidiaries could in the
future enter into certain transactions, including refinancings, certain
recapitalizations, acquisitions, the sale of all or substantially all of its
assets, the liquidation of the Company or similar transactions, that would not
constitute a Change of Control under the Indenture, but that would increase the
amount of Senior Indebtedness (or any other indebtedness) outstanding at such
time or substantially reduce or eliminate the Company's assets. There are no
restrictions in the Indenture on the creation of Senior Indebtedness (or any
other indebtedness) and, under certain circumstances, the incurrence of
significant amounts of additional indebtedness could have an adverse effect on
the Company's ability to service its indebtedness, including the Notes.
The Company's ability to repurchase Notes upon the occurrence of a
Change of Control is subject to limitations. There can be no assurance that the
Company would have the financial resources, or would be able to arrange
financing, to pay the purchase price for all the Notes that might be delivered
by holders of Notes seeking to exercise the repurchase right. Moreover, the
terms of the Company's existing primary bank facility prohibit the repurchase of
Notes by the Company or its subsidiaries, and the Company's ability to
repurchase Notes may be limited or prohibited by the terms of any future
borrowing arrangements, including Senior Indebtedness existing at the time of a
Change of Control. The Company's ability to repurchase Notes with cash may also
be limited by the terms of its subsidiaries' borrowing arrangements due to
dividend restrictions. Any failure by the Company to repurchase the Notes when
required following a Change of Control would result in an Event of Default under
the Indenture whether or not such repurchase is prohibited by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under Senior Indebtedness or other indebtedness of the Company. Moreover, the
occurrence of a Change of Control could result in an event of default under the
Company's existing primary bank facility and may cause an event of default under
terms of other indebtedness (including Senior Indebtedness) of the Company. As a
result, in each case, any repurchase of the Notes would,
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<PAGE> 21
absent a waiver, be prohibited under the subordination provisions of the
Indenture until the Senior Indebtedness is paid in full. See "-- Subordination."
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets (determined on a
consolidated basis), whether in a single transaction or a series of related
transactions, to, any person unless: (i) either the Company is the resulting,
surviving or transferee person (the "Successor Company") or the Successor
Company is a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and the Successor
Company (if not the Company) expressly assumes by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Indenture and the Notes, including the
conversion rights described above under "-- Conversion of Notes," (ii)
immediately after giving effect to such transaction no default or Event of
Default has occurred and is continuing and (iii) the Company delivers to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture comply
with the Indenture.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: default in
payment of the principal of or premium, if any, on the Notes when due at
maturity, upon redemption or otherwise, including failure by the Company to
purchase the Notes when required as described under "-- Change of Control"
(whether or not such payment shall be prohibited by the subordination provisions
of the Indenture); default for 30 days in payment of any installment of interest
on the Notes (whether or not such payment shall be prohibited by the
subordination provisions of the Indenture); default by the Company for 90 days
after notice in the observance or performance of any other covenants in the
Indenture; or certain events involving bankruptcy, insolvency or reorganization
of the Company. The Indenture provides that the Trustee may withhold notice to
the Holders of Notes of any default (except in payment of principal, premium, if
any, or interest with respect to the Notes) if the Trustee considers it in the
interest of the Holders of Notes to do so.
The Indenture provides that if any Event of Default shall have occurred
and be continuing, the Trustee or the Holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, on the Notes to be due and payable immediately, but if the Company shall
cure all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the Holders of a majority in principal amount of Notes then
outstanding.
The Holders of a majority in principal amount of the Notes then
outstanding shall have the right to direct the time, method and place of
conducting any proceedings for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture. The Indenture provides that,
subject to the duty of the Trustee following an Event of Default to act with the
required standard of care, the Trustee will not be under an obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless the Trustee receives satisfactory
indemnity against any associated loss, liability or expense.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect as to all outstanding
Notes (except as to (i) rights of registration of transfer and exchange and the
Company's right of optional redemption, (ii) substitution of
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<PAGE> 22
apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of
Holders of Notes to receive payments of principal of, premium, if any, and
interest on, the Notes, (iv) rights of Holders of Notes to convert to Common
Stock, (v) rights, obligations and immunities of the Trustee under the Indenture
and (vi) rights of the Holders of Notes as beneficiaries of the Indenture with
respect to the property so deposited with the Trustee payable to all or any of
them), if (A) the Company will have paid or caused to be paid the principal of,
premium, if any, and interest on the Notes as and when the same will have become
due and payable or (B) all outstanding Notes (except lost, stolen or destroyed
Notes which have been replaced or paid) have been delivered to the Trustee for
cancellation or (C) (x) the Notes not previously delivered to the Trustee for
cancellation will have become due and payable or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee upon delivery of notice and
(y) the Company will have irrevocably deposited with the Trustee, as trust
funds, cash, in an amount sufficient to pay principal of and interest on the
outstanding Notes, to maturity or redemption, as the case may be. Such trust may
only be established if such deposit will not result in a breach or violation of,
or constitute a default under, any agreement or instrument pursuant to which the
Company is a party or by which it is bound and the Company has delivered to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions related to such defeasance have been complied with.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
principal amount of the Notes at the time outstanding, to modify the Indenture
or any supplemental indenture or the rights of the Holders of Notes, except that
no such modification shall (i) extend the fixed maturity of any Note, reduce the
rate or extend the time of payment of interest thereon, reduce the principal
amount thereof or premium, if any, thereon, reduce any amount payable upon
redemption thereof, change the obligation of the Company to repurchase Notes
upon the happening of a Change of Control, impair or affect the right of a
Holder to institute suit for the payment thereof, change the currency in which
the Notes are payable, modify the subordination provisions of the Indenture in a
manner adverse to the Holders of Notes or impair the right to convert the Notes
into Common Stock subject to the terms set forth in the Indenture, without the
consent of the Holder of each Note so affected, or (ii) reduce the aforesaid
percentage of Notes, without the consent of the Holders of all of the Notes then
outstanding.
The Indenture also provides that the Company and the Trustee may amend
the Indenture without the consent of any holder of the Notes under certain
circumstances, (i) to cure any ambiguity, omission, defect or inconsistency,
(ii) to provide for the assumption by a successor corporation of the obligations
of the Company under the Indenture, (iii) to provide for uncertificated Notes in
addition to or in place of certificated Notes or vice versa, (iv) to add to the
covenants of the Company for the benefit of the Holders or to surrender any
right or power herein conferred upon the Company, (v) to comply with any
requirements of the Commission in connection with qualifying the Indenture under
the Trust Indenture Act, or (vi) to make any change that does not adversely
affect the rights of any Holder of the Notes.
GOVERNING LAW
The Indenture will provide that the Notes will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to applicable principles of conflicts of law.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture,
has been appointed by the Company as the paying agent, conversion agent,
registrar and custodian with regard to the Notes. The Trustee and/or its
affiliates may in the future provide banking and other services to the Company
in the ordinary course of their respective businesses.
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<PAGE> 23
SELLING SECURITYHOLDERS
The Notes offered hereby were originally issued by the Company and sold
by the Initial Purchasers, in a transaction exempt from the registration
requirements of the Securities Act, to persons reasonably believed by such
initial purchaser to be "qualified institutional buyers" (as defined in Rule
144A under the Securities Act), or other institutional "accredited investors"
(as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act or in
compliance with the provisions of Regulation S under the Securities Act. The
Selling Securityholders (which term includes their transferees, pledgees, donees
or their successors) may from time to time offer and sell pursuant to this
Prospectus any or all of the Notes and Common Stock issued upon conversion of
the Notes.
The following table sets forth, as of the dates indicated, information
with respect to the Selling Securityholders and the respective principal amounts
of Notes beneficially owned by each Selling Securityholder that may be offered
pursuant to this Prospectus. Such information has been obtained from the Selling
Securityholders. None of the Selling Securityholders has, or within the past
three years has had, any position, office or other material relationship with
the Company or any of its predecessors or affiliates, except as noted below.
Because the Selling Securityholders may offer all or some portion of the Notes
or the Common Stock issuable upon conversion thereof pursuant to this
Prospectus, no estimate can be given as to the amount of the Notes or the Common
Stock issuable upon conversion thereof that will be held by the Selling Holders
upon termination of any such sales. In addition, the Selling Securityholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their Notes since the date on which they provided the information
regarding their Notes in transactions exempt from the registration requirements
of the Securities Act. A subsequent listing of a Selling Securityholder in the
table after its initial listing indicates that as of the date of the subsequent
listing said Selling Securityholder owned additional Notes which they desired to
offer pursuant to this Prospectus but does is not necessarily indicative of the
aggregate principal amount of Notes held as of that date.
From time to time, Bear, Stearns & Co. Robertson Stephens & Co. LLP has
provided, and it continues to provide, investment banking services to the
Company, for which it received or will receive customer fees. None of the other
Selling Securityholders has had any position, office or other materials
relationship with the Company or its affiliates within the last three years.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PRINCIPAL AMOUNT OF COMMON STOCK
NOTES-BENEFICIALLY BENEFICIALLY OWNED
OWNED AND OFFERED
SELLING SECURITYHOLDER AND OFFERED HEREBY HEREBY(1)(2)
---------- -------
<S> <C> <C>
JUNE 24, 1997
Dreyfus Growth & Income Fund ................................... 12,000,000 232,288
BZW Securities Limited ......................................... 10,500,000 203,252
General Motors Employees Domestic Group Trust .................. 9,750,000 188,734
The Northwestern Mutual Life Insurance Company(3) .............. 9,250,000 179,055
The TCW Group, Inc. ............................................ 7,775,000 150,503
General Motors Retirement Program for Salaried Employees/General
Motors Hourly Rate Employees Pension Plan ...................... 6,000,000 116,144
State of Oregon/Oregon Equity Fund ............................. 5,500,000 106,465
Societe Generale Securities Corporation ........................ 5,000,000 96,786
</TABLE>
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<PAGE> 24
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PRINCIPAL AMOUNT OF COMMON STOCK
NOTES-BENEFICIALLY BENEFICIALLY OWNED
OWNED AND OFFERED
SELLING SECURITYHOLDER AND OFFERED HEREBY HEREBY(1)(2)
---------- -------
<S> <C> <C>
JP Morgan Securities, Inc. ..................................... 5,095,000 98,625
State of Oregon/SAIF Corporation ............................... 4,000,000 77,429
Robertson Stephens & Co. L.L.P ................................. 3,935,000 76,171
Pacific Horizon Capital Income Fund ............................ 3,275,000 63,395
Transamerica Occidental Life Insurance Company ................. 3,000,000 58,072
Equitable Life Assurance Separate Account Convertibles ......... 2,875,000 55,652
Delaware State Employees Retirement Fund ....................... 2,700,000 52,264
The Chase Manhattan Bank ttee for IBM Corporation
Retirement Plan Trust Dtd 12/18/45 ............................. 2,165,000 41,908
Pension Reserves Investment Management Board ................... 1,615,000 31,262
Aim Balanced Fund .............................................. 1,465,000 28,358
Bankers Trust ttee for Chrysler Corporation
Employee #1 Pension Plan ....................................... 1,270,000 24,583
Employers Reinsurance Corporation .............................. 1,250,000 24,196
Hudson River Trust Balanced Account ............................ 1,150,000 22,260
Memphis Light, Water, Gas Retirement Fund ...................... 1,140,000 22,067
State Street Bank Custodian for GE Pension Plan ................ 1,065,000 20,615
State of Delaware Retirement ................................... 1,050,000 20,325
Arkansas PERS .................................................. 1,000,000 19,357
Ariston Capital Management Corporation(4) ...................... 1,000,000 19,357
Motors Insurance Corporation ................................... 1,000,000 19,357
Hudson River Trust Growth Investors ............................ 920,000 17,808
American Investors Life Insurance Co. .......................... 875,000 16,937
Columbia/HCA Money Purchase Plan ............................... 860,000 16,647
Hudson River Trust Growth & Income Fund ........................ 855,000 16,550
Declaration Trust for the Defined Benefit Plan of ICI
American Holdings, INC ......................................... 820,000 15,873
Ingelsa Ltd. ................................................... 750,000 14,518
Thermo Electron Balanced Investment Fund ....................... 725,000 14,034
Bear Stearns Securities Corporation ............................ 675,000 13,066
The J.W. McConnell Family Foundation ........................... 600,000 11,614
Declaration of Trust for Defined Benefit Plan of
ZENECA Holdings Inc. ........................................... 580,000 11,227
Mega Life & Health Insurance ................................... 500,000 9,678
Smith Barney Convertible Securities Portfolio .................. 500,000 9,678
ICI American Holdings Pension Trust ............................ 425,000 8,226
Zeneca Holdings Pension Trust .................................. 425,000 8,226
Starvest Discretionary ......................................... 400,000 7,742
The Hotel Union & Industry of Hawaii ........................... 375,000 7,259
The First Foundation ........................................... 295,000 5,710
Southern Farm Bureau Life Insurance Co. ........................ 250,000 4,839
Bank of America Convertible Securities Fund .................... 250,000 4,839
Hillside Capital Incorporated Corporate Account ................ 250,000 4,839
First Church of Christ Scientist - Endowment ................... 250,000 4,839
Christian Science Trustees for Gifts & Endowments .............. 225,000 4,355
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PRINCIPAL AMOUNT OF COMMON STOCK
NOTES-BENEFICIALLY BENEFICIALLY OWNED
OWNED AND OFFERED
SELLING SECURITYHOLDER AND OFFERED HEREBY HEREBY(1)(2)
---------- -------
<S> <C> <C>
Salomon Brothers Total Return Fund ............................. 200,000 3,871
Equitable Life Assurance Separate Account Balanced ............. 195,000 3,774
NALCO Chemical Co. Retirement Trust ............................ 165,000 3,193
Kapiolani Medical Center for Women and Children ................ 150,000 2,903
Employee Benefit Convertible Fund .............................. 125,000 2,419
David Lipscomb University ...................................... 105,000 2,032
The Hotel Industry - ILWU Pension Trust ........................ 130,000 2,516
Island Insurance Convertible Account ........................... 140,000 2,710
Summer Hill Global Partners, L.P. .............................. 100,000 1,935
Retirement Plan for Pilots of Hawaiian Airlines ................ 100,000 1,935
Hawaii Airlines Employees Pension Plan - IAM ................... 70,000 1,355
Pacific Innovation Trust Capital Income Fund ................... 55,000 1,064
Hawaiian Airlines Pension Plan for Salaried Employees .......... 20,000 387
AUGUST 4, 1997
Merrill Lynch Pierce Fenner & Smith, Inc. ...................... 10,000,000 193,573
SBC Warburg, Inc. (5) ......................................... 6,000,000 116,144
Chase Securities Inc. .......................................... 6,000,000 116,144
State of Oregon/ Oregon Equity Fund ............................ 5,900,000 114,208
CFW-C, L.P. ................................................... 4,000,000 77,429
Robertson Stephens & Co. L.L.P ................................. 2,030,000 39,295
Lazard Freres & Co. LLC ........................................ 2,000,000 38,714
The Chase Manhattan Bank ttee for IBM Corporation
Retirement Plan Trust Dtd 12/18/45 ............................ 4,055,000 78,493
Pension Reserves Investment Management Board ................... 2,065,000 39,972
Bankers Trust ttee for Chrysler Corporation
Employee #1 Pension Plan ....................................... 2,355,000 45,586
State of Delaware Retirement ................................... 1,350,000 26,132
State Street Bank Custodian for GE Pension Plan ................ 1,310,000 25,358
Arkansas PERS .................................................. 1,550,000 30,003
ICI American Holdings Pension Trust ............................ 550,000 10,646
Zeneca Holdings Pension Trust .................................. 550,000 10,646
Starvest Discretionary ......................................... 500,000 9,678
Southern Farm Bureau Life Insurance Co. ........................ 425,000 8,226
Franklin and Marshall College .................................. 280,000 5,420
NALCO Chemical Co. Retirement Trust ............................ 225,000 4,355
Kapiolani Medical Center for Women and Children ................ 200,000 3,871
Island Insurance Convertible Account ........................... 0 0
Retirement Plan for Pilots of Hawaiian Airlines ................ 150,000 2,903
Hawaii Airlines Employees Pension Plan - IAM ................... 100,000 1,935
Hawaiian Airlines Pension Plan for Salaried Employees .......... 30,000 580
OCTOBER 1, 1997
General Motors Investment Management Corp.(6)................... 7,000,000 135,501
NatWest Securities Corporation ................................. 5,000,000 96,786
Bear Stearns & Co. L.L.P ....................................... 747,000 14,459
Robertson Stephens & Co. L.L.P ................................. 500,000 9,678
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PRINCIPAL AMOUNT OF COMMON STOCK
NOTES-BENEFICIALLY BENEFICIALLY OWNED
OWNED AND OFFERED
SELLING SECURITYHOLDER AND OFFERED HEREBY HEREBY(1)(2)
---------- -------
<S> <C> <C>
Market Main & Co. .............................................. 100,000 1,935
NOVEMBER 26, 1997
Credit Suisse First Boston Corporation.......................... 150,000 2,903
Bear Stearns & Co., Inc. ....................................... 1,500,000 29,036
Collective Employees Benefit Trust - Convertible Bond Fund Trust 375,000 7,259
Everen Securities .............................................. 350,000 6,775
Nicholas-Applegate Income & Growth Fund ........................ 984,000 19,047
Wake Forest University ......................................... 219,000 4,239
Engineers Joint Pension Fund ................................... 138,000 2,671
Boston Museum of Fine Art ...................................... 36,000 696
San Diego County Convertible ................................... 1,166,000 22,570
Robertson Stephens & Co., LLP .................................. 1,159,000 22,435
Highmark Convertible Security Fund ............................. 675,000 13,066
UBS Securities ................................................. 2,560,000 49,554
DECEMBER 17, 1997
Allstate Insurance Company ..................................... 1,500,000 29,036
Baptist Health of Miami ........................................ 90,000 1,742
Dunham & Associates Fund III ................................... 10,000 193
Lazard Freres & Co. ............................................ 5,000,000 96,786
Physicians Life ................................................ 250,000 4,839
San Diego City Retirement ...................................... 274,000 5,303
SBC Warburg Dillon Read Inc. ................................... 2,550,000 49,361
JANUARY 28, 1998
Bankers Trust .................................................. 4,000,000 77,429
Bear Stearns & Co. ............................................. 19,600,000 379,403
Robertson Stephens & Co. ....................................... 1,000,000 19,357
Smith Barney Inc. .............................................. 2,108,000 40,805
MARCH 5, 1998
Credit Suisse First Boston ..................................... 150,000 2,903
Tennessee Consolidate Retirement System ........................ 3,000,000 58,072
Surfboard & Co. ................................................ 5,000,000 96,786
Raymond James & Associates ..................................... 1,000,000 19,357
MARCH 20, 1998
Pacific Innovation Trust Capital Income Fund ................... 20,000 387
Franklin Investors Securities Trust -
Convertible Securities Fund .................................... 2,000,000 38,714
May 7, 1998
Pacific Innovation Trust Capital Income Fund ................... 20,000 387
Franklin Investors Securities Trust -
Convertible Securities Fund .................................... 2,000,000 38,715
NationsBanc Montgomery Securities LLC .......................... 5,000,000 96,787
Smith Barney, Inc. ............................................. 580,000 11,227
Donaldson, Lufkin & Jenrette ................................... 150,000 2,904
Raymond James & Associates ..................................... 1,000,000 19,357
June 12, 1998
BZW Securities Limited ......................................... 2,500,000 48,393
Donaldson Lufkin & Jenrette Securities Corp. ................... 225,000 4,355
Evergreen Income & Growth Fund ................................. 3,000,000 58,072
Robertson Stephens & Co., LLP .................................. 5,000,000 96,787
June 29, 1998
Deutsche Morgan Grenfell ....................................... 875,000 16,937
Bank America Roberson Stephens ................................. 1,000,000 19,357
</TABLE>
(1) Includes shares of Common Stock issuable upon conversion of the Notes.
(2) Assumes a conversion price of $51.66 per share, and a cash payment in
lieu of any fractional share interest; such conversion price is subject
to adjustment as described under "Description of Notes--Conversion."
Accordingly, the number of shares of Common Stock issuable upon
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<PAGE> 27
conversion of the Notes may increase or decrease from time to time.
Under the terms of Indenture, fractional shares will not be issued upon
conversion of the Notes; cash will be paid in lieu of fractional shares,
if any.
(3) Includes $250,000 in principal amount held in the Northwestern Mutual
Life Insurance Company Group Annuity Separate Account.
(4) Shares indicated as owned by Ariston Capital Management Corporation are
owned by various private investment accounts for which Ariston Capital
Management Corporation serves as trustee or managing agent.
(5) Includes $3,000,000 principal amount of notes beneficially owned by
Swiss Bank Corporation for which SBC Warburg acts as investment advisor.
(6) Represents shares beneficially owned by various employee benefit plans
of General Motors Corporation. The Selling Shareholder has agreed to
sell $1,000,000 in aggregate principal amount of the Notes offered
hereby to Goldman Sachs and Co.
The Selling Securityholders identified above may have sold, transferred
or otherwise disposed of, in transactions exempt from the registration
requirements of the Securities Act, all or a portion of their Notes since the
date on which the information in the preceding table is presented. Information
concerning the Selling Securityholders may change from time to time and any such
changed information will be set forth in supplements to this Prospectus if and
when necessary. Because the Selling Securityholders may offer all or some of the
Notes that they hold and/or Conversion Shares pursuant to the offering
contemplated by this Prospectus, no estimate can be given as to the amount of
the Notes or Conversion Shares that will be held by the Selling Securityholders
upon the termination of this offering. See "Plan of Distribution."
Information concerning the Selling Securityholders may change from time
to time and any such changed information will be set forth in supplements to
this Prospectus if and when necessary. In addition, the per share conversion
price, and therefore the number of shares issuable upon conversion of the Notes,
is subject to adjustment under certain circumstances. Accordingly, the aggregate
principal amount of Notes and the number of shares of Common Stock issuable upon
conversion thereof offered hereby may increase or decrease.
-26-
<PAGE> 28
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Securities offered hereby. The Securities may be sold from time to time to
purchasers directly by the Selling Securityholders. Alternatively, the Selling
Securityholders may from time to time offer the Securities through brokers,
dealers or agents who may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers of the Securities for whom they may act as agent. The Selling
Securityholders and any such brokers, dealers or agents who participate in the
distribution of the Securities may be deemed to be "underwriters," and any
profits on the sale of the Securities by them and any discounts, commissions or
concessions received by any such brokers, dealers or agents might be deemed to
be underwriting discounts and commissions under the Securities Act. To the
extent the Selling Securityholders may be deemed to be underwriters, the Selling
Securityholders may be subject to certain statutory liabilities of, including,
but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
The Securities offered hereby may be sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The Securities may be sold by one or more of the following methods, without
limitation: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of such exchange; (e) face-to-face
transactions between sellers and purchasers without a broker-dealer; (f) through
the writing of options; and (g) other. At any time a particular offer of the
Securities is made, a revised Prospectus or Prospectus Supplement, if required,
will be distributed which will set forth the aggregate amount and type of
Securities being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, any discounts, commissions,
concessions and other items constituting compensation from the Selling
Securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. Such Prospectus Supplement and, if necessary, a
post-effective amendment to the Registration Statement of which this Prospectus
is a part, will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of the Securities. In
addition, the Securities covered by this Prospectus may be sold in private
transactions or under Rule 144 rather than pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no plans,
arrangement or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Securities by the
Selling Securityholders. There is no assurance that any Selling Securityholder
will sell any or all of the Securities offered by it hereunder or that any such
Selling Securityholder will not transfer, devise or gift such Securities by
other means not described herein.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M which may limit the timing of purchases and sales of any of the Securities by
the Selling Securityholders and any other such person. Furthermore, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the Securities to engage in market-making activities with
respect to the particular Securities being distributed for a period of up to
five business days prior to the commencement of such distribution. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.
-27-
<PAGE> 29
Pursuant to the Registration Rights Agreement entered into in connection
with the offer and sale of the Notes by the Company, each of the Company and the
Selling Securityholders will be indemnified by the other against certain
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses
incidental to the registration, offering and sale of the Securities to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
LEGAL MATTERS
The validity of the Notes and the Common Stock being offered hereby will
be passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
INFORMATION INCORPORATED BY REFERENCE
There are hereby incorporated by reference in this Prospectus the
following documents and information heretofore filed with the Securities and
Exchange Commission:
(1) Registrant's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998, filed pursuant to Section 13 of the
Exchange Act (including those portions of the Company's Annual
Report to Stockholders and definitive proxy statement for the
Annual Meeting of Stockholders to be held on August 20, 1998).
(2) The description of Registrant's Common Stock to be offered
hereby contained in the Company's Registration Statement on Form
8-A filed July 20, 1992, filed pursuant to Section 12(g) of the
Exchange Act including any amendment or report filed for the
purpose of updating such description.
(3) The description of Registrant's Preferred Share Purchase Rights
contained in its Registration Statement on Form 8-A/A filed with
the Commission on January 14, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be part hereof from the date of filing such documents.
-28-
<PAGE> 30
<TABLE>
<S> <C>
======================================================== ========================================================
No dealer, salesman or any other person has been U.S. $230,000,000
authorized to give any information or to make any
representations other than those contained in this
Prospectus, in connection with the offer made by this
Prospectus, and, if given or made, such information or
representations must not be relied upon as having been
authorized by the corporation. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that there has
been no change in the affairs of the corporation since ADAPTEC, INC.
the date hereof. This Prospectus does not constitute an
offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is
not authorized to do so or to anyone to whom it is
unlawful to make such offer or solicitation in such
jurisdiction.
---------------------- 4 3/4% CONVERTIBLE SUBORDINATED NOTES DUE
TABLE OF CONTENTS FEBRUARY 1, 2004
---------------------- AND
COMMON STOCK ISSUABLE
UPON CONVERSION THEREOF
----------------------
PROSPECTUS
----------------------
JUNE 29, 1998
Available Information ...................... 3
Risk Factors ............................... 4
The Company ................................ 11
Ratio of Earnings to Fixed Charges ......... 11
Description of Notes ....................... 12
Selling Securityholders .................... 23
Plan of Distribution ....................... 28
Legal Matters .............................. 29
Information Incorporated by Reference ...... 29
----------------------
======================================================== ========================================================
</TABLE>
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the Selling Securityholders. All amounts are estimated except
the Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
SEC registration fee .................................. $ 69,697
Accounting fees and expenses .......................... 15,000
Legal fees and expenses ............................... 30,000
Printing expenses ..................................... 10,000
Trustee's Fees and Expenses ........................... 10,000
Miscellaneous fees and expenses ....................... 15,303
--------
Total ......................................... $150,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except for liability
(i) for any breach of their duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its
directors and officers and may indemnify its employees and other agents to the
fullest extent permitted by law. The Company's Bylaws also permit the Company to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the Company would have the power to indemnify him or her against such
liability under the General Corporation Law of Delaware. The Company currently
has secured such insurance on behalf of its officers and directors.
The Company has entered into agreements to indemnify its directors and
officers, in addition to indemnification provided for in the Company's Bylaws.
Subject to certain conditions, these agreements, among other things, indemnify
the Company's directors and officers for certain expenses (including attorney's
fees), judgments, fines and settlement amounts incurred by any such person in
II-1
<PAGE> 32
any action or proceeding, including any action by or in the right of the
Company, arising out of such person's services as a director or officer of the
Company, any subsidiary of the Company or any other company or enterprise to
which the person provides services at the request of the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.1 Second Amended and Restated Preferred Share Rights Agreement dated
December 5, 1996 between Adaptec California Chase Mellon Shareholder
Services, LLC(1)
4.2* Indenture dated as of February 3, 1997 between Adaptec California and
State Street Bank and Trust Company
4.3 First Amendment dated March 12, 1998 to Second Amended and Restated
Rights Agreement(2)
4.4 First Supplemental Indenture dated as of March 12, 1998 between
resistant and State Street Bank and Trust Company(2)
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Independent Accountants, Price Waterhouse LLP
23.3* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1)
24.1* Power of Attorney.
25.1* Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 of a Corporation designated to act as Trustee on Form
T-1.
</TABLE>
- ------------
* Previously filed.
(1) Incorporated by reference to Exhibit 1 filed with Amendment No. 4 to
Registrant's Registration Statement on Form 8-A file on January 4, 1997.
(2) Incorporated by reference to Exhibits filed with Registrant's Annual Report
on Form 10-K for the fiscal year ended March 31, 1998 filed on June 26,
1998.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement
to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Act, each such post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-offering
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new
II-2
<PAGE> 33
registration statement relating to the securities offered therein, and the
offering of such securities as that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to Delaware General Corporations Law, the Restated
Articles of Incorporation of the Registrant, the Bylaws of the Registrant,
Indemnification Agreements entered into between the Registrant and its officers
and directors, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that such a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment No. 2 on Form S-3 to a Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Milpitas, State of California, on the 26th day of June, 1998.
ADAPTEC, INC.
By: /s/ F. Grant Saviers
---------------------------------------
F. Grant Saviers
Chief Executive Officer, and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ F. Grant Saviers Chief Executive Officer and Director June 26, 1998
- -------------------------------
F. Grant Saviers
/s/ Paul G. Hansen* Vice President, Finance, Chief Financial Officer June 26, 1998
- ------------------------------- (Principal Financial Officer)
Paul G. Hansen
/s/ Andrew J. Brown* Vice President, Corporate Controller (Principal June 26, 1998
- ------------------------------- Accounting Officer)
Andrew J. Brown
/s/ Laurence B. Boucher* Director June 26, 1998
- -------------------------------
Laurence B. Boucher
Director
- -------------------------------
Carl J. Conti
Director
- -------------------------------
John East
/s/ Robert J. Loarie* Director June 26, 1998
- -------------------------------
Robert J. Loarie
/s/ B.J. Moore* Director June 26, 1998
- -------------------------------
B.J. Moore
/s/ W. Ferrel Sanders* Director June 26, 1998
- -------------------------------
W. Ferrel Sanders
Director
- -------------------------------
Phillip E. White
</TABLE>
*By: /s/ F. Grant Saviers
-------------------------------
Attorney-in-fact
II-4
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.1 Second Amended and Restated Preferred Share Rights Agreement dated
December 5, 1996 between Adaptec California Chase Mellon Shareholder
Services, LLC(1)
4.2* Indenture dated as of February 3, 1997 between Adaptec California and
State Street Bank and Trust Company
4.3 First Amendment dated March 12, 1998 to Second Amended and Restated
Rights Agreement(2)
4.4 First Supplemental Indenture dated as of March 12, 1998 between
resistant and State Street Bank and Trust Company(2)
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Independent Accountants, Price Waterhouse LLP
23.3* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1)
24.1* Power of Attorney.
25.1* Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 of a Corporation designated to act as Trustee on Form
T-1.
</TABLE>
- ------------
* Previously filed.
(1) Incorporated by reference to Exhibit 1 filed with Amendment No. 4 to
Registrant's Registration Statement on Form 8-A file on January 4, 1997.
(2) Incorporated by reference to Exhibits filed with Registrant's Annual Report
on Form 10-K for the fiscal year ended March 31, 1998 filed on June 26,
1998.
<PAGE> 1
Exhibit 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Pre-tax income from continuing operations $78,603 $124,437 $137,989 $171,781 $245,329
------ ------- ------- ------- -------
Fixed charges:
Interest expense 1,306 1,179 840 2,744 12,402
Rentals - 33% 541 784 1,226 1,881 2,168
------ ------- ------- ------- -------
Total fixed charges 1,847 1,963 2,066 4,625 14,570
------ ------- ------- ------- -------
Earnings before income taxes and fixed charges 80,450 126,500 140,055 176,406 259,899
====== ======= ======= ======= =======
Ratio of earnings to fixed charges 43.6 64.4 67.8 38.1 17.8
====== ======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-3 of our report dated April 29, 1998,
except for Note 12 which is as of May 21, 1998, which appears in the Annual
Report to Stockholders of Adaptec, Inc., which is incorporated by reference in
Adaptec, Inc.'s Annual Report on Form 10-K for the year ended March 31, 1998.
/s/ PRICE WATERHOUSE LLP
San Jose, California
June 24, 1998
