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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
10-K
Annual Report Pursuant to Section 13 of Section 15(d)
of the Securities Exchange Act of 1934
For the year ended December 30, 1995
Commission File No. 0-18033
EXABYTE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0988566
(State of Incorporation) (IRS Employer Identification No.)
1685 38th Street
Boulder, Colorado 80301
(Address of principal executive offices, including zip code)
Area Code(303) 442-4333
(Registrant's Telephone Number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-K. (X)
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 11, 1996 was $248,155,735 based
on the closing sale price on such date(a). The aggregate number of shares of
Common Stock outstanding on March 11, 1996 was 21,837,911.
Document incorporated by reference: Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held April 30, 1996: Part III, Items 10, 11, 12,
and 13.
(a) Excludes 3,624,646 shares of Common Stock held by directors, executive
officers and stockholders whose ownership exceeds ten percent of the Common
Stock outstanding at March 11, 1996. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power,
direct or indirect, to direct or cause the direction of the management or
policies of registrant, or that such person is controlled by or under common
control with the registrant.
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PART I
Item 1.
BUSINESS
THE COMPANY
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Exabyte Corporation ("Exabyte" or the "Company") designs, develops,
manufactures, markets and services tape subsystems and robotic tape
libraries for data storage applications. The Company's early strategy
was to capitalize on its proprietary adaptation of 8mm helical scan recording
technology, originally developed by others for video applications, to provide
highly reliable, cost-effective small form factor tape subsystems with
leading-edge capacity and superior performance characteristics. The
Company's current 8mm strategy includes the introduction of tape subsystems
based upon mechanical deck assemblies developed by the Company as well as by
third parties. The Company also expanded its helical scan product offerings
to include 4mm cartridge tape subsystems, which it discontinued in February
1996. The Company currently offers, through its Eagle(TM) division,
minicartridge products based upon quarter-inch linear as well as Travan(TM)
minicartridge technologies. The Company's various robotic tape libraries
store and retrieve multiple media cartridges and incorporate cartridge tape
subsystems offered by the Company as well as by others. The Company also
sells recording media and cleaning cartridges and provides repair services
for its products.
The Company's strategic focus is the market for information storage and
retrieval tape subsystems for workstations, midrange computer systems,
networks, and personal computers, particularly for data backup and archival
applications. As the need for data backup and archival storage increases,
computer manufacturers, system integrators and value-added resellers require
a variety of products with varying price, performance, capacity and
form-factor characteristics. The Company offers or intends to offer a number
of products to address a broad range of these requirements. The Company
markets its tape subsystems and robotic tape libraries principally to
Original Equipment Manufacturers ("OEMs"), Value-Added Resellers ("VARs"),
system integrators and distributors. Among Exabyte's OEM customers are
ATT/GIS, Bull S.A., Control Data, Data General, DEC, Hewlett-Packard, IBM,
Intergraph, Sequent, Siemens Nixdorf, Silicon Graphics, Sun Microsystems and
Unisys. Among the Company's distribution customers are Anthem, Arrow, Avnet,
Consan, Gates/FA, Ingram Micro, Intelligent Electronics, Merisel, Micro Age,
and Tech Data. See "Business--Marketing and Customers."
Exabyte was incorporated in June 1985 under the laws of the State of
Delaware. In addition to the historical information contained herein, the
following discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those discussed or otherwise contemplated in this document. Factors that
could cause or contribute to such differences include, but are not limited
to, those discussed in the section entitled "Risk Factors."
RISK FACTORS
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High technology companies, such as Exabyte, are subject to numerous risks
and uncertainties. The following risk factors should be carefully considered
in the evaluation of the Company, its business and its investment value.
Each and every forward-looking statement by the Company, whether or not
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specifically identified as such in this document or otherwise, shall be
deemed to be qualified in its entirety by reference to this section.
Product Development; Mammoth
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The Company participates in an industry that is subject to rapid
technological change. The Company believes that its future success will
depend upon its ability to apply and extend its technology and to continue
to develop reliable tape subsystems and robotic tape libraries with
competitive price performance and quality characteristics. Accordingly,
Exabyte's ability to compete successfully depends upon continued enhancements
of its existing products and the development on a timely basis of new
products that meet the changing needs of users. The Company has experienced
delays from time to time in completing product development efforts in
accordance with internal development schedules. See "Business--Business
Strategy and Products." In the future, the Company may encounter
difficulties that could delay or prevent other product development.
A significant portion of the Company's research and development is directed
toward the introduction of the announced 8mm Mammoth product. See "Business--
Research and Development." The announced Mammoth product incorporates a
mechanical deck assembly under development by the Company. The Company has
never before undertaken the design, development or manufacture of an 8mm
mechanical deck assembly and has experienced delays in its internal schedule
for the development and manufacture of this announced product. The announced
Mammoth product requires the successful development, both by the Company and
by third parties, of a number of critical supporting components. There can
be no assurance that the development of the Mammoth product or components by
either the Company or third parties will be successful or, if successful,
will be completed on a timely or cost-effective basis. The Company has had
only limited experience in the manufacture of mechanical decks and there can
be no assurance that the Company will be able to manufacture the Mammoth
product in commercial quantities at a commercially successful cost. See
"Business--Manufacturing." Further, there can be no assurance that the
manufacture and sale of the announced Mammoth product will not infringe the
proprietary rights of third parties. The mechanized deck assembly
incorporated in the announced Mammoth product is to be produced by the
Company rather than be purchased from a third party. As such, the Company
does not benefit from supplier indemnification with respect to patent or
other intellectual property infringement. See "Business--Patent and
Licensing." In addition, the introduction of the Mammoth product also
requires the availability of advanced media from Sony Corporation ("Sony"),
a current competitor of the Company. See "Business--Manufacturing" and
"Business--Competition." The inability to design, develop, manufacture and
introduce the Mammoth product on a timely basis at a competitive price would
have a material adverse effect on the Company's results of operations and
would also adversely affect the Company's competitive position with respect
to other product offerings.
Dependence on Key Vendors; Sony
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The Company's ability to maintain cost-effective manufacturing volume depends
upon uninterrupted access to high quality components in required volumes and
at competitive prices. Most of the Company's 8mm mechanical tape decks are
currently procured from a single source, Sony. While the Company has
contracts with Sony for the supply of the 8mm decks, there can be no
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assurance either that the supply of decks will continue or that prices will
remain at their current levels. In addition, the Company expects that Sony
initially will be the sole supplier of advanced media for the Company's
announced Mammoth product. See "Business--Manufacturing." Sony currently
offers competitive 4mm cartridge tape subsystems and the Company believes
that Sony could introduce one or more competitive 8mm tape drive subsystems.
Sony's competitive position may adversely affect the Company's ability to
procure 8mm mechanical decks and tape media at required volumes and at
competitive prices. See "Business--Manufacturing--Sony Tape Deck
Agreements." While there are other manufacturers of 8mm decks, the
customization effort required to make these decks suitable for the Company's
products would require many months of effort. There can be no assurance that
such effort would be successful or, even if successful, that it would not
result in a significant delay in the ability of the Company to ship its
products.
In addition to its dependence on Sony, the Company has engaged other third
parties, including competitors and potential competitors, in the joint
development of products or components. These relationships subject the
Company to other supply or technology dependencies. The Company further
relies upon other sole source vendors for certain critical components,
including, but not limited to, printed circuit boards, semiconductor circuits
and read/write heads. The Company has not executed master purchase
agreements with many of its sole source vendors and conducts business with
such vendors on a purchase order basis. The Company's reliance on these and
other sole source vendors involves several risks, including the possibility
of a shortage of certain key components and reduced control over delivery
schedules, manufacturing yields, quality and costs. The Company has, on
occasion, experienced problems with the quality of and interruptions in the
supply of sole source components although, to date, no such quality problem
or interruption has had a material effect on the Company's results of
operations. In the event of yield, quality, delivery or supply problems
with any of these vendors, the Company could be forced to delay shipments
of its products, which would have a material adverse effect on the Company's
results of operations. See "Business--Manufacturing."
The Company's quarter-inch cartridge drive subsystems incorporate cartridge
media developed and produced by 3M Corporation. 3M Corporation, owner of the
DC 2000 and Travan(TM) technology, devotes substantial resources to the
development of further enhancements to the technology. The Company's ability
to successfully compete in the quarter-inch business depends, in part, upon
its continued access to and its ability to adapt to change in such
quarter-inch technology. See "Business--Research and Development."
Competition
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The tape storage market is highly competitive and the Company expects
competition in the markets for tape subsystems and libraries to increase.
Numerous companies are engaged in the research, development and
commercialization of data storage products, including certain computer
manufacturers, such as IBM and Hewlett-Packard, that incorporate their own
tape storage products in their systems. Competition has in the past resulted
and is expected in the future to result in price erosion with respect to the
Company's products.
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The Company currently competes at the higher end of the tape subsystem market
against half-inch cartridge products produced by others. Such half-inch
products offer higher capacity and data transfer rates than do the Company's
current products. Quantum Corporation, with its introduction of digital
linear tape ("DLT"), serves the higher end of the tape subsystem market
addressed by the Company's current and announced products. In particular,
Quantum's DLT 4000 offering has established a significant presence in the
market targeted by the Company with its announced Mammoth product. In
addition, Quantum has announced products, including the announced DLT 7000,
with announced data storage capacities and transfer rates in excess of the
Company's current or announced products. Among the competitors currently
offering other half-inch cartridge products are Fujitsu, IBM, Overland Data
and StorageTek. In addition, other competitors may enter the half-inch
market in the future.
Additional competition in the tape subsystem market has come from companies
offering 4mm products using helical scan technology, as well as products
based on conventional tape technologies that record on parallel tracks, such
as quarter-inch cartridge tape products. At the low end of the market, the
Company's quarter-inch products compete directly with the quarter-inch
products manufactured by Seagate, Hewlett-Packard, Tandberg, Iomega and Rexon.
The Company's family of library products competes at the low end with 4mm
library products offered by Adic, Seagate, Qualstar and Hewlett-Packard, at
the midrange segment with products offered by IBM, Spectra Logic and
StorageTek, and at the high end with libraries offered by IBM, Quantum,
Odetics and StorageTek. The Company may face significant competitive
challenges in the library market in the form of pricing pressure and loss
of business. The Company's library offerings currently represent
higher-margin business to the Company and, as such, any shortfall in the sale
of these products would have a relatively greater impact on the Company's
results of operations. See "Business--Competition."
Some of the Company's current and prospective competitors have significantly
greater financial, technical, manufacturing and marketing resources than the
Company. There can be no assurance that these competitors will not devote
their significantly greater resources to the aggressive marketing of storage
products using helical scan, quarter-inch cartridge, half-inch cartridge,
optical or other technologies. Sony, one of the Company's key suppliers, is
also a 4mm competitor to the Company. See "Business--Manufacturing--Sony Tape
Deck Agreements."
Fluctuations in Quarterly Results
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The Company's results can fluctuate substantially from quarter to quarter for
various reasons. For example, the markets served by the Company are volatile
and subject to market shifts, which may or may not be discernible in advance
by the Company. A slowdown in the demand for workstations, midrange computer
systems, networks and personal computers could have a significant effect on
the demand for the Company's products in any given period. The Company has
experienced delays in receipt of purchase orders and, on occasion,
anticipated purchase orders have been rescheduled or have not materialized
due to changes in customer requirements. The Company's customers may cancel
or delay purchase orders for a variety of reasons, including the rescheduling
of new product introductions, changes in their inventory practices or
forecasted demand, general economic conditions affecting the computer market,
new product announcements by the Company or others, quality or reliability
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problems related to the Company's products, or selection of competitive tape
subsystem manufacturers as alternate sources of supply. The Company's
operations have in the past and may in the future reflect substantial
fluctuations from period to period as a consequence of such industry shifts,
price erosion, general economic conditions affecting the timing of orders
from customers as well as other factors discussed herein. In particular, the
Company's ability to forecast sales to distributors and VARs and, increasingly
to OEMs, is especially limited as such customers typically provide the Company
with relatively short order lead times. See "Business--Marketing and
Customers."
Management of Business and Product Transitions
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The Company is currently experiencing a period of rapid business and product
transition as it addresses the complexities of developing, manufacturing and
servicing multiple products incorporating several different technologies sold
through multiple marketing channels. This transition has placed, and is
expected to continue to place, a significant strain on the Company's
management, operational and financial resources. The Company's ability to
effectively manage its business transition will require it to continue to
implement and improve its operational, financial and information systems and
to expand, train and manage its employee base. In addition, the development
and manufacture of multiple product lines may affect the ability of the
Company to maintain acceptable product quality levels.
The Company continually assesses its product cycles in terms of the timing
of product introduction and product withdrawals. Any failure by the Company
to accurately estimate the timing of new product introductions may result in
the premature or delayed withdrawal of its existing product lines. The
premature withdrawal of an existing product line would result in the loss of
revenue and earnings contribution from such product line which could have a
material adverse effect on the Company's results of operations. The delayed
withdrawal of an existing product line could result in the Company's
assumption of excess product inventory which could have a material adverse
effect on the Company's results of operations.
Inventory Write-Downs and Special Charges
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The Company may be unable to manage inventories to levels necessary to meet
changing patterns of product demand, product transitions and new product
introductions. Such inability may result in the Company incurring a special
charge or inventory write-down, or establishing a reserve which would have a
material adverse impact in its results of operations. The Company's results
of operations for the third quarter of 1995 included a series of special
charges, aggregating $23 million after tax or $1.04 per share for the year,
reflecting the write-down of 4mm, quarter-inch and end-of-life 8mm full-high
inventories, the establishment of reserves to cover certain obligations
including vendor commitments, and goodwill write-offs. Further, the Company
has experienced in the past certain quality and reliability problems with
respect to certain of its products and may experience other such quality and
reliability problems with respect to these and other products in the future.
There can be no assurance that additional reserves, write-downs or write-offs
will not be taken in the future and that such actions will not have a
material adverse effect on the Company's results of operations. See
"Business--Business Strategy and Products."
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Replacement of Information Systems
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The Company plans to replace its information and business systems during the
second quarter of 1996 to more effectively address the complexities of the
Company's business. The Company has experienced certain delays in this
effort in the past and there can be no assurance that it will successfully
accomplish such implementation in the future. The failure to successfully
accomplish the replacement of these systems in a timely manner or any failure
otherwise to achieve the necessary levels of information and business system
support could have an immediate and material adverse effect on the Company
and its results of operations.
Volatility of Stock Price
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The market price of the Company's Common Stock has historically been, and is
expected to continue to be, extremely volatile. The Company's operating
results have in the past and are likely in some future quarter to be below
the expectations of investors and market analysts. A shortfall in the
Company's operating results relative to analyst or investor expectations
could have an immediate and significant impact on the market price of the
Company's Common Stock. Other factors including, without limitation, the
Company's disclosure of its assessment of its business prospects, new product
announcements by the Company's competitors and general conditions in the
computer market could have an immediate and significant impact on the market
price of the Company's Common Stock.
Dependence on Key Customers
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During 1995, IBM accounted for 15% of the Company's sales and the Company's
three largest customers accounted for an aggregate of 31% of the Company's
sales. These customers are not required to purchase a minimum quantity of
the Company's products and may cancel or reschedule orders without
significant penalty. The loss of one or more of these customers or
substantial cancellations by these customers would have a material adverse
effect on the Company's results of operations. In addition, significant
rescheduling or deferrals of orders by any of these customers could cause
substantial fluctuations in the Company's quarterly results. See
"Business--Marketing and Customers."
Risks Related to Foreign Sourcing
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Because many of the Company's key components, as well as certain of the
Company's products, are currently or will be manufactured in Japan, Germany,
The Netherlands, Malaysia and Singapore, the Company's results of operations
may be materially affected by fluctuations in currency exchange rates. A
substantial portion of the Company's products incorporate subassemblies and
components purchased from Japanese or other overseas suppliers, with the
purchase of such subassemblies and components denominated in yen or another
foreign currency. The Company enters into foreign currency forward contracts
which it uses to hedge the purchase of certain inventory components from
Japanese or other overseas suppliers. See Note 1 of Notes to the
Consolidated Financial Statements. The Company may additionally enter into
contractual arrangements with its overseas suppliers providing the Company
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with some limited sharing with such suppliers of foreign exchange rate
risks. The Company's international procurement is also subject to certain
other risks common to foreign operations in general, including government
regulation and import restrictions. In particular, an adverse foreign
exchange movement of the U.S. dollar versus Japanese yen or other currency,
or the imposition of import restrictions or tariffs by the United States
government on products or components shipped from Japan or from another
country could have a material adverse effect on the Company's results of
operations. In addition, because of the Company's use of components produced
overseas, the sale of the Company's products to domestic federal or state
agencies may be restricted by limitations imposed by the Buy American Act or
the Trade Agreement Act.
Risks Related to Foreign Sales
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Direct international sales accounted for approximately 31% of sales in 1995
and the Company currently expects that direct international sales will
continue to represent a significant portion of the Company's revenue. In
addition, many of the Company's domestic customers ship a significant portion
of products purchased from the Company to their customers overseas.
Currently, a small percentage of sales of the Company's products are
denominated in foreign currencies and may thus be directly affected by
foreign exchange rate fluctuations. In addition, changes in the foreign
exchange rates may affect the volume of sales denominated in U.S. dollars to
overseas customers as such an exchange rate movement would impact local
currency pricing. The Company's sales are also subject to risks common to
export activities, including government regulation, tariffs, and import and
environmental restrictions. The Company's international sales must be
licensed by the Office of Export Administration of the U.S. Department of
Commerce. To date, the Company has experienced no material difficulties in
obtaining export licenses.
Risks Related to Foreign Operations
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The functional currency applicable to the Company's subsidiaries located in
Scotland, Germany, Japan and other foreign countries is the U.S. dollar. See
Note 1 to the Company's Consolidated Financial Statements. As a result, the
translation of the local currency assets and liabilities of such subsidiaries
will be affected by foreign exchange rate movement between the U.S. dollar
and the respective local currency and could have a material impact on the
Company's results of operations. In addition, the Company's foreign
operations are subject to the risks generally applicable to the conduct of
business in such countries.
Third Party Proprietary Rights
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The Company has received in the past, and may receive in the future,
communications from third parties asserting that the Company's products
infringe the proprietary rights of third parties or seeking indemnification
against such infringement. There can be no assurance that any of these
claims will not result in protracted and costly litigation. While it may be
necessary or desirable in the future to obtain licenses relating to one or
more of its products or relating to current or future technologies, there can
be no assurance that the Company will be able to do so on commercially
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reasonable terms. The inability to obtain any required license or to obtain
such license on commercially reasonable terms could have a material adverse
effect on the Company's results of operations. See "Business--Patents and
Licenses."
Third Party Contract Manufacturing
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The Company has entered into agreements with domestic and overseas third
parties to manufacture the Company's libraries and quarter-inch drive
subsystems as well as components for a number of its products. The
manufacture of the Company's products by third parties may impair the
Company's ability to establish and maintain adequate product manufacturing
design standards or otherwise to achieve necessary product quality levels.
The risks associated with the transfer of product manufacturing to third
parties are particularly pronounced in the early stages of the manufacture of
the product and may subject the Company to additional risks. A number of the
Company's third party manufacturing programs involve such early-stage
manufacturing. See "Business--Manufacturing."
The manufacture of the Company's products by third parties is based in part
on technology that the Company believes to be proprietary. Exabyte may
license this technology to contract manufacturers to enable them to
manufacture products for the Company. There can be no assurance that
such manufacturers will abide by any use limitations or confidentiality
restrictions in licenses with the Company. In addition, any such
manufacturers may develop process technology related to the manufacture of
the Company's products which it owns independently or jointly with the
Company, which would increase the Company's reliance on such manufacturers or
require the Company to obtain a license from such manufacturers in order to
have its products manufactured. There can be no assurance that such
licenses, if required, would be available on terms acceptable to the Company,
if available at all. See "Business--Patents and Licenses."
Anti-Takeover Provisions
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The Company has taken a number of actions which could have the effect of
deterring a hostile takeover or otherwise delaying or preventing a change
in control that might result in payment to the Company's stockholders of a
premium for their shares or that might otherwise be beneficial to
stockholders. The Company has adopted a stockholder rights plan which
could cause substantial dilution to a person who attempts to acquire the
Company on terms not approved by the Company's Board of Directors. In
addition, the Company's Restated Certificate of Incorporation and By-laws
contain provisions which may have the effect of delaying or preventing a
change in control. These provisions include: (i) the classification of the
Board of Directors; (ii) the authority of the Board to issue Preferred
Stock, without further action by the stockholders, with such voting rights
and other provisions as the Board may determine; (iii) the requirement that
actions by stockholders be taken at a meeting of stockholders and not by
written consent; (iv) the requirement for advance notice of stockholder
proposals and director nomination; (v) the provision that only the Board
of Directors may increase the authorized number of directors; and (vi) the
requirement that special meetings of stockholders may be called only by the
Chairman, President or majority of directors.
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Effective January 26, 1996, the Compensation Committee approved and the Board
of Directors adopted a severance compensation program ("Severance Program")
under which officers and other specified employees of the Company would
receive certain severance payments in the event their employment with the
Company were terminated within one year after certain changes in control of
the Company. The Severance Program provides for a severance payment in
varying amounts, not to exceed 18 months of compensation, depending upon
(i) the time of any such change in control, and (ii) the position level of
such terminated officer or employee. The Severance Program further provides,
in certain circumstances, for the acceleration of the vesting of outstanding
and unexercised stock options held by the affected officer or employee.
Securities Suits
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A large number of companies and company directors and officers in the high
technology industry have been subjected to suits in the form of class and
derivative actions filed in federal and state courts, generally alleging that
the defendants failed to adequately disclose certain risks. The Company's
results of operations may be materially affected by the legal costs of
defending such actions, the divergence of management's attention from the
Company's business, and the payment of any judgment or settlement arising out
of any such actions against the Company in the future. In 1993, the Company
successfully defended a series of such class actions at an immaterial cost to
the Company and it is the Company's current belief there are no current or
pending actions against the Company.
INDUSTRY BACKGROUND
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Advances in microprocessor technology have resulted in the development of
compact, powerful and low-cost computers such as workstations, midrange
computer systems, networks and personal computers. These advances, together
with the increasing complexity of application software, the expanding size of
databases and the shift in the nature of data stored from text to images,
graphics and other storage-intensive applications, have driven the demand for
high-end disk drives with greater "on-line" storage capacity. Because
critical data stored on disk drives can be lost for many reasons, including
hardware failure and human error, convenient and timely access to backup data
has become essential. Magnetic tape subsystems have evolved as the preferred
method for backup primarily because the media is inexpensive and may be
easily removed and stored.
Prior to the introduction in 1987 of the Company's initial 8mm product, tape
technology and alternate forms of backup had not kept pace with the growth
in disk drive capacity. As a result, computer users had to back up their
files with smaller capacity tape subsystems which took hours to record or
restore data, requiring attended operation to change the cartridges or
reels. With the trends toward larger networks, smaller computers, more
storage-intensive applications and high capacity disk drives, demand
increased for larger storage capacities, smaller form factors, higher
reliability and greater speed.
Exabyte adapted 8mm helical scan technology, initially developed for video
applications, to address the need for high-capacity data storage and high
data transfer rates. The Company subsequently introduced 4mm helical scan
cartridge subsystems, which it discontinued in early 1996, and quarter-inch
linear tape subsystems to offer various price performance options.
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BUSINESS STRATEGY AND PRODUCTS
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The Company's strategic focus is the market for information storage and
retrieval tape subsystems for workstations, midrange computer systems,
networks and personal computers, particularly for data backup and archival
applications. As the need for data backup and archival storage increases,
computer manufacturers, system integrators and value-added resellers are
requiring a variety of products which vary as to price, performance, capacity
and form-factor characteristics. The Company's strategy is to offer a number
of products to address a broad range of these requirements.
Exabyte's family of 8mm drive subsystems, with capacities ranging from 5
gigabytes to 14 gigabytes for current products (and up to 40 gigabytes with
data compression for the announced Mammoth product), addresses a portion of
the higher end of the market, the remainder of which is largely served by
half-inch linear tape subsystems produced by others. The Company also offers
the quarter-inch linear tape subsystem based upon the DC-2000 minicartridge
and Travan(TM) technologies, to address a portion of the lower end of the
market. There can be no assurance that any announced products referred to
above will be successfully developed, made commercially available on a timely
basis or achieve market acceptance. See "Business--Business Strategy and
Products--Tape Subsystem Products--Announced Products."
The Company offers various robotic libraries which incorporate its 8mm drive
subsystems to extend the capacity of these products. Exabyte's strategy also
includes the development of 4mm-based robotic libraries for use in
conjunction with 4mm drive subsystems previously offered by the Company or
offered by others. The Company also offers consumables, including media and
cleaning cartridges, and provides service for its product lines.
Tape Subsystem Products
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Current Products
The primary factors distinguishing the Company's tape subsystem product
offerings from one another are base technology, form factor, data capacity,
data transfer rate, and inclusion of the data compression feature. The 8mm
subsystems are based upon helical scan technology. The Company's
quarter-inch product incorporates linear DC-2000 and Travan(TM) minicartridge
tape subsystem technology. Form factor refers to the physical size of the
device with respect to the industry standard formats: 5 1/4" Half-High or
3 1/2" form factors. The data capacity refers to the total amount of data
which may be stored on a single media cartridge. The data transfer rate
refers to the speed at which the data may be transferred to or from the
subsystem. Both data capacity and transfer rate are affected by the successful
application of data compression. The Company's 8mm data compression is
accomplished by incorporating the Improved Data Recording Capabilities
(IDRC), a compression algorithm licensed from IBM. The data capacity and
transfer rate reflected in the accompanying table assumes a data compression
ratio of two to one. The actual compression ratio will vary depending upon
the nature of the data being compressed.
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Transfer
Product Media Technology Form Factor Capacity (GB) Rate (kB/s)
EXB-8205XL 8mm Helical Scan 5 1/4" HH 3.5/7.0* 250/500*
EXB-8505XL 8mm Helical Scan 5 1/4" HH 7.0/14.0* 500/1,000*
EXB-8700 8mm Helical Scan 5 1/4" HH 7.0/14.0* 500/1,000*
Eagle '96 Quarter-Inch DC-2000 3 1/2" HH .68/1.36* 158/316*
Eagle TR-3 Quarter-Inch Travan(TM) 3 1/2" 1.6/3.2* 158/316*
HH-- Half-High
* -- Denotes that the number is with the application of data compression.
The Company also offers stand-alone versions of certain of the above 8mm
products. Each such version incorporates a power supply and is housed in a
desktop enclosure. These stand-alone products have received applicable
regulatory approvals, enabling the Company's customers to begin shipping
immediately without incurring their own design and regulatory agency approval
delays.
Cartridge tape subsystems together accounted for 70%, 78% and 79% of revenue
in 1995, 1994 and 1993, respectively, and represented, by category, the
following percentages of revenue:
1995 1994 1993
---- ---- ----
Full-High 8mm 4% 19% 46%
Half-High 8mm 52% 47% 24%
Stand-Alone 8mm 6% 6% 6%
4mm 6% 5% 2%
Quarter-Inch 2% 1% 1%
Total Tape Subsystems 70% 78% 79%
Announced Products
The Company has announced the following new tape subsystem product:
Mammoth
The Company has announced the Mammoth product, the next generation 5 1/4"
half-high 8mm tape subsystem, with an announced uncompressed capacity
of 20 gigabytes and a transfer rate of three megabytes per second. The
announced Mammoth capacity and transfer rate will, typically, double
with the successful application of data compression. Mammoth is
targeted for application in the high-end workstation, midrange systems,
network server and mainframe markets. The Company currently expects to
commence commercial shipment of the Mammoth product in the first half
of 1996. The introduction of the Mammoth product has been subject to
previous delays which has had an adverse effect on the Company's
business and competitive position. There can be no assurance that the
Company will succeed in meeting this schedule or that the product will
achieve market acceptance. In particular, the successful introduction
of the Mammoth product is dependent upon the Company's ability to
successfully manufacture its own deck mechanism and other subsystem
components as well as the availability of advanced media. See
"Business--Research and Development" and "Business--Manufacturing."
Any additional delay in the commercial availability of Mammoth would
<PAGE> 13
have a material adverse effect on the Company's result of operations and
would adversely affect the Company's competitive position with respect
to other product offerings.
Libraries
- ---------
Current Library Products
The Company offers a family of library subsystems which automate the
storage and retrieval of substantial amounts of data. Each library
subsystem incorporates one or more drive subsystems and multiple tape
media cartridges. The accompanying table lists the Company's current
library offering in terms of the technology, the form factor and the
maximum number of drive subsystems as well as the number of tape media
cartridges which may be incorporated in the library. The EXB-218 and
the EXB-018 are the Company's 4mm tape library offerings designed to
incorporate, respectively, the 4mm tape drive subsystems previously
offered by the Company and those offered by others.
Product Drive Max. # Max. #
("EXB-") Technology Form Factor of Drives of Cartridges
-------- ---------- ----------- --------- -------------
210 8mm 5 1/4" HH 2 10
440 8mm 5 1/4" HH 4 40
480 8mm 5 1/4" HH 4 80
10h 8mm 5 1/4" HH 1 10
218/018 4mm 3 1/2" 2 18
________________
HH -- Half-High
Library products together accounted for 16%, 11% and 7% of revenue in 1995,
1994 and 1993, respectively.
Announced Library Products
Certain of the Company's library products are designed to be upgradeable
to incorporate the announced Mammoth 8mm tape drive. The announced
EXB-480 8mm library is designed to incorporate up to four of the
Company's announced Mammoth subsystems and 80 media cartridges. The
Company anticipates commercial availability of the libraries
incorporating the Mammoth drive in the second quarter of 1996, although
there can be no assurance that the Company will succeed in meeting this
schedule or that the products will achieve market acceptance.
The Company's library product offerings provide relatively higher levels of
profit margin contribution to the Company's results of operations. Any
shortfall in the sale of the Company's higher-margin products, such as its
library offerings, would have a relatively greater impact on the Company's
results of operations.
Exabyte periodically evaluates its current and announced products in terms
of the changing needs of the market for such products. There can be no
assurance that such evaluation will not result in the determination by the
Company to discontinue the offer of any current or announced product. The
<PAGE> 14
Company discontinued in February 1996 the production of 4mm cartridge tape
subsystems. The discontinuance of one or more current or announced products
may result in the write-off of inventory, tooling, and other assets
associated with such discontinued products and such write-off could have a
material adverse effect on the Company's results of operations.
Consumables
- -----------
The Company distributes 8mm, 4mm and quarter-inch data cartridges as well as
cleaning cartridges and data cartridge holders. The high-quality media,
produced by one or more third parties, is available in different lengths to
handle various data storage requirements. Sales of consumables accounted for
approximately 9%, 8% and 8% of sales in 1995, 1994 and 1993, respectively.
Service
- -------
The Company provides repair services domestically at its headquarters in
Boulder, Colorado and in Europe at its facility in Scotland. Service
accounted for approximately 4% in each of 1995, 1994 and 1993. Customer
service may also be provided by certain third party depots under contract
with the Company.
MARKETING AND CUSTOMERS
- -----------------------
The Company markets its tape subsystems principally to OEMs, VARs, system
integrators, distributors and resellers. The Company's initial sales of new
products are often made directly through its own sales force and through
distributors to VARs and system integrators, who are generally quicker to
evaluate, integrate and adopt new technology. However, as a new product
successfully completes the qualification process, OEM sales have generally
represented an increasing proportion of sales of that product.
VARs and system integrators often use the Company's tape subsystems to
upgrade various types of installed computer systems, including those
manufactured by IBM, Sun Microsystems and Digital Equipment Corporation, to
provide a more cost-effective tape backup solution. Some VARs package the
Company's tape subsystems into a stand-alone enclosure containing a power
supply and software for attachment to the end user's system. System
integrators often combine the Company's products with other storage devices,
such as single or multiple disk drives, to deliver a value-added storage
subsystem solution. Direct sales to VARs and system integrators accounted
for approximately 14%, 22% and 33% of sales in 1995, 1994 and 1993,
respectively.
The Company's OEM customers incorporate the Company's drives as part of their
system offerings. The Company often works with OEMs early in the product
development cycle in order to have its tape subsystems designed into their
computing systems. The sales cycle for OEM customers involves extensive
product and system evaluation and integration and typically ranges from 6 to
18 months. An OEM sales cycle typically consists of general evaluation of
the technology, qualification of the product specification, verification of
product compliance with product specification, integration of the product
into the customers' systems and announcement and volume shipment of the
customers' systems. Exabyte's product shipments are linked to the
<PAGE> 15
development cycle and introduction to the OEMs' new systems. Sales of all
products to OEMs represented 42%, 40% and 41% of sales in 1995, 1994 and
1993, respectively.
The Company also markets its products through a number of distributors to
OEMs, VARs, system integrators and end users. The various classes of the
Company's distributors, including industrial, commercial and technical
distributors as well as national and regional resellers, provide differing
levels of marketing, technical and sales support. As a result, the Company
often supports its distributors by providing marketing and technical support
directly to the distributors' customers, thereby incurring certain additional
costs for such sales. Other costs and risks associated with the distribution
business include various inventory price protections and stock rotation
obligations undertaken by the Company. The distribution business is also
characterized by relatively short order lead times which limit the Company's
ability to forecast sales to these customers. In 1993, the Company acquired
the assets and business of the former Tallgrass Technologies Corporation to
further the Company's effort to expand its distribution network. Sales to
distributors accounted for approximately 40%, 35% and 24% of sales in 1995,
1994 and 1993, respectively.
The Company markets its products overseas directly to OEMs and VARs and
through distributors to VARs, system integrators and end users. Each major
international market addressed by the Company is served by distributors with
rights to sell the Company's products in a country or group of countries.
The Company has established a wholly-owned subsidiary in The Netherlands to
provide sales and technical support throughout Europe. The Company has also
established a wholly-owned subsidiary in Scotland for the purpose of
providing product repair services to European customers as well as
manufacturing certain of the Company's products. See
"Business--Manufacturing." Several of the Company's independent overseas
distributors provide repair services directly or through their affiliates.
Direct international sales accounted for approximately 31%, 27% and 18% of
sales in 1995, 1994 and 1993, respectively. See Note 1 of Notes to
Consolidated Financial Statements. In addition, many of the Company's
domestic customers ship a significant portion of the Company's purchased
products to their customers overseas. Currently a small percentage of sales
of the Company's products are denominated in foreign currencies and may thus
be directly affected by foreign exchange rate fluctuations. In addition,
changes in the foreign exchange rates may adversely affect the volume of
sales denominated in U.S. dollars to overseas customers as such an exchange
rate movement would affect local currency pricing. The Company's sales are
also subject to risks common to export activities, including government
regulation, tariffs and import restrictions. The Company's international
sales must be licensed by the Office of Export Administration of the U.S.
Department of Commerce. To date, the Company has experienced no material
difficulties in obtaining export licenses.
IBM accounted for approximately 15%, 17% and 16% of sales in 1995, 1994 and
1993, respectively. Sun Microsystems accounted for approximately 11%, 7%
and 10% of sales during each of 1995, 1994 and 1993, respectively. No other
customer accounted for 10% or more of sales for any year during the
three-year period ending December 30, 1995. In addition, during 1995, the
Company's three largest customers accounted for an aggregate of 31% of the
Company's sales. These customers are not required to purchase a minimum
quantity of the Company's products and may cancel or reschedule orders
<PAGE> 16
without significant penalty. The loss of one or more of these customers
or substantial cancellations by these customers would have a material
adverse effect on the Company's results of operations. Significant
rescheduling or deferrals of orders by any of these customers could cause
substantial fluctuation in the Company's quarterly results. In addition,
the Company's agreements with certain of its customers contain most favored
customer provisions which have resulted in the past, and may result in the
future, in price reductions or pricing credits for such customers.
The Company believes that the demand for its tape subsystems and libraries
is substantially dependent upon the demand for workstations, midrange
computer systems, networks and personal computers. These markets are
volatile and subject to market shifts, which may or may not be discernible in
advance by the Company, and a slowdown in the demand for such products could
have a material adverse effect on the demand for the Company's products in
any given period. In addition, the Company's OEM, VAR and distributor
customers may cancel or delay purchase orders for a variety of reasons,
including rescheduling of new product introductions, changes in their
inventory practices or forecasted demand, general economic conditions
affecting the computer market, quality or reliability problems related to the
Company's products, or selection of competitive tape subsystem manufacturers
as alternate sources of supply. Inaccuracies in demand forecasts in the
environment in which the Company operates can quickly result in either
insufficient or excessive inventories and disproportionate overhead
expenses. The Company has experienced delays in receipt of purchase
orders and, on occasion, anticipated purchase orders have been rescheduled
or have not materialized due to changes in customer requirements. In
particular, any weakness in demand in the distribution and VAR channels,
which generally represent higher-margin sales, tends to have a relatively
greater impact on profitability and could have a material adverse effect on
the Company's results of operations.
MANUFACTURING
- -------------
The announced Mammoth product incorporates a mechanical deck for manufacture
by the Company, rather than for purchase from Sony or from another third
party. The Company's manufacturing experience in the past has been largely
limited to the assembly and testing of purchased components, and the Company
has had limited experience in other phases of manufacturing. In particular,
the Company has had only limited experience in the manufacture of mechanical
decks and there can be no assurance that the Company will be able to
manufacture products in commercial quantities at a commercially acceptable
cost. Because the Company has previously quoted sales pricing for the
Mammoth product, an inability to control cost could result in
lower-than-anticipated gross margins which could have a material adverse
effect on the Company's results of operations. Any inability of the Company
to manufacture the Mammoth product in the required volumes would have a
material adverse effect on the Company's competitive position and on its
results of operations. In addition, the Company believes the manufacture of
Mammoth will require the Company to significantly increase its capital assets
and inventory requirements, thereby adversely affecting the Company's
financial leverage.
The Company currently manufactures its 8mm, quarter-inch and certain of its
library products at its facility in Boulder, Colorado. The Company also
manufactures or expects to manufacture certain of its products at its
<PAGE> 17
facility in Scotland. In addition, the Company's Scottish operation
customizes generic units of the Company's other product lines to meet
customer-specific requirements for its European customers. The Company has
significantly increased the size of its Scottish facility, as well as its
capital asset and inventory base, to accommodate the Company's expected
increase in its manufacturing requirements.
The Company has contracts with third parties to manufacture certain of the
Company's products. The Company currently anticipates that some or all of the
Company's quarter-inch products will be manufactured for the Company by CAM
Technology Center P.T.E., Ltd. at CAM's facility in Singapore or elsewhere.
The manufacture of the Company's products by third parties may impair the
Company's ability to establish and maintain adequate product manufacturing
design standards or otherwise to achieve necessary product quality levels.
The risks associated with the transfer of product manufacturing to those or
other third parties are particularly pronounced in the early stages of the
manufacture of the product. A number of the Company's third party
manufacturing programs involve such early-stage manufacturing.
The inability of Exabyte to maintain cost-effective volume production of
high-quality products and to introduce announced products would have a
material adverse effect on the Company's results of operations. Exabyte
employs just-in-time manufacturing techniques with an emphasis on
flexibility and continuous flow. These techniques depend upon uninterrupted
access to high-quality components in required volumes and at competitive
prices. Many of these components, manufactured to the Company's
specifications, are acquired from sole sources. The principal custom
components for the Company's current tape subsystems are the 8mm tape decks
supplied by Sony, circuit boards from Solectron and EFTC and semiconductor
circuits from various suppliers. The Company has not executed master
purchase agreements with many of its sole-source vendors and conducts
business with those vendors on a purchase order basis. The Company's
reliance on these and other sole-source vendors involves several risks,
including the possibility of a shortage of certain key components and
reduced control over delivery schedules, manufacturing yields, quality and
costs. The Company has, on occasion, experienced problems with the quality
of and interruptions in the supply of sole-source components. To date, no
such quality problems or interruptions have had a material effect on the
Company's results of operations. In the event of yield, quality, delivery,
supply or availability problems with any of these vendors in the future,
however, the Company could be forced to delay shipments of its current
products or the introduction of announced products, which could have a
material adverse effect on the Company's results of operations.
In addition, the Company's ability to maintain its current product
offerings and to introduce its announced product offerings depends upon
access to high-quality tape media which is produced by a small number of
vendors, including Sony and 3M. The future introduction of announced
products, including Mammoth, is dependent upon the availability of certain
advanced tape media which is currently sourced from Sony. In the event such
advanced tape media is not available in sufficient volume, at an acceptable
quality level, and at a competitive price, the Company could be forced to
delay or cancel the introduction of announced products, which could have a
material adverse effect on the Company's results of operations. See
"Business--Risk Factors--Dependence on Key Vendors; Sony."
<PAGE> 18
Sony Tape Deck Agreements
- -------------------------
Sony has been the Company's principal supplier of the tape deck for the
Company's 8mm tape subsystems since the commencement of product shipments in
1987. The tape decks incorporated in the Company's 8mm products are
customized to meet the Company's specifications for data storage
applications. The Company and its wholly-owned Japanese subsidiary, Nihon
Exabyte Corporation, entered into a supply agreement with Sony providing for
the supply by Sony of the customized tape decks for the Company's full-high
8mm products. Effective January 1, 1992, the same parties entered into a
separate agreement for the supply by Sony of jointly-developed decks for
incorporation into the Company's half-high 8mm products. The supply
agreement for the Company's half-high products provides that Sony will not
sell to third parties certain jointly-developed components. However,
neither of the above supply agreements provides the Company with rights to
preclude Sony from selling to third parties similar products or from
incorporating such products into Sony's own 8mm product offerings. Further,
the half-high supply agreement, as amended, currently expires in March 1998,
subject to automatic renewal on an annual basis unless terminated by either
party upon 180 days' written notice. There can be no assurance that either
of the supply agreements will continue through or beyond the current term or
that prices will remain at their current levels during the current term of
the agreement or thereafter. Sony's competitive position may adversely
affect the Company's ability to procure 8mm mechanical decks at required
volumes and at competitive prices. See "Business--Competition." While
there are other manufacturers of 8mm decks, the customization effort required
to make these decks suitable for the Company's products would require many
months of effort. There can be no assurance that such effort would be
successful or, even if successful, that it would not result in a significant
delay in the ability of the Company to ship its products.
FOREIGN EXCHANGE AND IMPORT RESTRICTIONS
- ----------------------------------------
Because many of the Company's key components, as well as certain of the
Company's products, are currently manufactured in Japan, Germany, The
Netherlands, Malaysia and Singapore, the Company's results of operations may
be materially affected by fluctuations in currency exchange rates. A
substantial portion of the Company's products incorporate subassemblies and
components purchased from Japanese or other overseas suppliers, with such
purchases denominated in yen or another foreign currency. The Company may
enter into foreign currency forward contracts which it uses to hedge the
purchase of certain inventory components from Japanese or other overseas
suppliers. See Note 1 of Notes to Consolidated Financial Statements. The
Company may additionally enter into contractual arrangements with its
overseas suppliers providing the Company with some limited sharing with such
suppliers of foreign exchange rate risks. The Company's international
procurement is also subject to certain other risks common to foreign
operations in general, including government regulation and import
restrictions. In particular, an adverse foreign exchange movement of the
U.S. dollar versus Japanese yen or other currency or the imposition of import
restrictions or tariffs by the United States government on products or
components shipped from Japan or from another country could have a material
adverse effect on the Company's results of operations. In addition, because
of the Company's use of components produced overseas, the sale of the
Company's products to domestic federal or state agencies may be restricted
<PAGE> 19
by limitations imposed by the Buy American Act or the Trade Agreement Act.
The functional currency applicable to the Company's subsidiaries located in
Scotland, Germany, Japan and other foreign countries is the U.S. dollar. See
Note 1 of Notes to Consolidated Financial Statements. As a result, the
translation of the local currency assets and liabilities of such subsidiaries
will be affected by foreign exchange rate movement between the U.S. dollar
and the respective local currency and could have a material impact on the
Company's results of operations. In addition, the Company's foreign
operations are subject to the risks generally applicable to the conduct of
business in such countries.
RESEARCH AND DEVELOPMENT
- ------------------------
The Company participates in an industry that is subject to rapid
technological change. The Company believes that its future success will
depend upon its ability to extend its technology and continue to develop
highly reliable tape subsystems with competitive price performance
characteristics. The Company's research and development efforts are
principally directed toward the development of new products with improved
price performance characteristics. In addition, the Company is engaged in
the ongoing enhancement of its current products.
To date, most of the Company's sales have been derived from products based
on 8mm technology. There can be no assurance that other companies do not
have or will not develop technologies which are equivalent or superior to
the Company's technology or which render the Company's products obsolete or
non-competitive. Accordingly, Exabyte's ability to compete successfully
depends upon continued enhancements of its existing products and the
development on a timely basis of new products that meet the changing needs of
users. The Company has experienced delays from time to time in completing
product development efforts in accordance with internal development schedules
and, in the future, may encounter difficulties that could delay or prevent
product development.
A significant portion of the Company's research and development is directed
at the introduction of the announced 8mm Mammoth product. See
"Business--Business Strategy and Products." The announced Mammoth product
incorporates a mechanical deck assembly under development by the Company.
The Company has never before undertaken the design, development or
manufacture of an 8mm mechanical deck assembly at a commercially reasonable
cost and thus may experience delays in the development or manufacturing
effort. The announced Mammoth product also requires the successful
development of a number of critical supporting components. Among the
critical components necessary for the successful development of the Mammoth
product are head scanner drum assemblies. The development of the scanner
assembly had been undertaken by a division of Grundig A.G. under contract
with the Company. In October 1994, the Company acquired that division from
Grundig A.G. The Company now operates the acquired division as a
wholly-owned subsidiary, named Exabyte Magnetics GmbH. Other critical
components necessary for the successful development and production of the
Mammoth product include, without limitation, advanced integrated circuits and
dual motor reel heads. The Company has engaged a number of third parties,
including, without limitation, Philips, Harris and AT&T to develop several
critical components of the announced Mammoth product. In addition, the
successful introduction of Mammoth requires the availability of advanced tape
<PAGE> 20
media. See "Business--Manufacturing." There can be no assurance that the
development by the Company or by such third parties of the Mammoth product
will be successful or, if successful, will be completed on a timely basis or
at a commercially reasonable cost. The inability to design, develop and
introduce the Mammoth product or other competitive new products on a timely
basis at a competitive price would have a material adverse effect on the
Company's results of operations and would adversely affect the Company's
competitive position with respect to other product offerings.
The Company's quarter-inch cartridge drive subsystems incorporate cartridge
media developed and produced by 3M Corporation. 3M Corporation, owner of
the DC 2000 and Travan(TM) technology, devotes substantial resources to the
development of further enhancements to the technology. The Company's ability
to successfully compete in the quarter-inch business depends, in part, upon
its continued access to and its ability to adapt to change in such
quarter-inch technology.
The Company's research and development expenses were approximately $37.0
million, $33.6 million and $31.6 million in 1995, 1994 and 1993,
respectively. All of the Company's research and development costs are
expensed as incurred. The Company's research and development organization
consisted of 243 persons as of February 3, 1996.
COMPETITION
- -----------
The tape storage market is intensely competitive and subject to rapid
technological change, as a number of manufacturers of alternative tape
technologies compete for a limited number of customers. The Company will
face more significant competitive challenges in the future in the form of
loss of market share, pricing pressure and otherwise.
The Company believes that the principal competitive factors in this market
are storage capacity, data transfer rate, form factor, price, product quality
and reliability, timing of new product introductions, volume availability,
and customer support. Numerous companies are engaged in the research,
development and commercialization of data storage products, including certain
computer manufacturers that incorporate their own tape storage products into
their systems, such as IBM and Hewlett-Packard. Some of the Company's
current and potential competitors have significantly greater financial,
technical and marketing resources than those of the Company. The industry
has experienced a number of consolidations, such as the merger of Conner
Peripherals with Seagate and Quantum's purchase of Digital Equipment
Corporation's digital linear tape division. These changes have increased and
may continue to increase the competitive pressures on the Company. While the
Company believes that it is currently the only manufacturer of 8mm tape
subsystems for data storage applications, the Company believes Sony and
others could introduce a competitive 8mm tape drive. See
"Risk Factors--Dependence on Key Vendors; Sony." There can be no assurance
that other companies will not enter the 8mm market in the future.
The Company currently competes at the higher end of the tape subsystem market
against half-inch cartridge products produced by others. Such half-inch
products offer higher capacity and data transfer rates than do the Company's
current products. Quantum Corporation, with its introduction of digital
linear tape ("DLT"), serves the higher end of the tape subsystem market
addressed by the Company's current and announced products. In particular,
Quantum's DLT 4000 offering has established a significant presence in the
market targeted by the Company with its announced Mammoth product. In
<PAGE> 21
addition, Quantum has announced products, including the announced DLT 7000,
with announced data storage capacities and transfer rates in excess of the
Company's current or announced products. Among the competitors currently
offering other half-inch cartridge products are Fujitsu, IBM, Overland Data
and StorageTek. In addition, other competitors may enter the half-inch
market in the future.
Additional competition in the tape subsystem market has come from companies
offering 4mm products using helical scan technology. The 4mm products
typically offer the advantages of lower price and smaller size, making 4mm
products more readily adaptable to computing systems using smaller form
factors. As a result, the Company's 8mm products have experienced
competition from 4mm-based products principally in the low-end file server
and workstation markets. In addition, Sony, one of the Company's key
suppliers, currently offers a competitive tape storage product based on 4mm
technology. There can be no assurance that Sony's current efforts to produce
and market competitive products will not adversely affect Sony's supply of
8mm tape decks and advanced tape media to the Company. See
"Business--Manufacturing--Sony Tape Deck Agreements."
At the low end of the market, the Company's quarter-inch products compete
directly with the quarter-inch products manufactured by Seagate,
Hewlett-Packard, Tandberg, Iomega and Rexon. The Company's 8mm products also
currently compete at the low end of the tape storage market with products
using conventional tape technologies, such as quarter-inch products.
Quarter-inch technology typically offers the advantage over 8mm products of
low price as well as compatibility of new products with the large installed
base of earlier generation quarter-inch products. As a result, quarter-inch
drives have often been used to store data for desktop personal computers and
networks. While the Company's 8mm products have historically had a capacity
advantage over available products based on quarter-inch technologies, vendors
of quarter-inch based products have announced tape storage products with
increased transfer rates and capacities of up to 14 gigabytes and may
announce tape storage products with even greater capacities. If these higher
capacity products are successfully introduced, they could represent a more
significant competitive challenge to the Company.
The Company may face significant competitive challenges in the library market
in the form of pricing pressure, loss of business and otherwise. The
Company's library offerings currently represent higher-margin business to the
Company and, as such, any shortfall in the sale of these products would have
a relatively greater impact on the Company's results of operations. The
following chart represents the Company's major competitors in library
products:
8mm DLT 4mm
--- --- ---
IBM X
Qualstar X X
Adic X X X
Hewlett-Packard X
Quantum X
Breece Hill X
Odetics X
StorageTek X X X
Spectra Logic X X
Seagate X
<PAGE> 22
Significant competition could also develop from companies offering erasable
and non-erasable optical disks. In addition, other companies in the future
may introduce competitive storage subsystems based upon new technologies.
PATENTS AND LICENSES
- --------------------
The Company relies on a combination of patents, copyright and trade secret
protection, non-disclosure agreements and licensing arrangements to establish
and protect its proprietary rights. As of February 12, 1996, the Company
owns 33 United States patents relating to technologies and certain aspects of
the Company's tape subsystems and robotic tape libraries and has taken steps
to establish certain protection in Asia and Europe. In addition, also as of
February 12, 1996, the Company has 25 patent applications pending in the
United States and intends to file additional applications for patents
covering its products. There can be no assurance that patents will issue
from any of these pending applications or, if patents do issue, that any
claims allowed will be sufficiently broad to protect the Company's
technology. In addition, there can be no assurance that any patents that
may be issued to the Company will not be challenged, invalidated or
circumvented, or that any rights granted thereunder would provide proprietary
protection to the Company. Although the Company continues to implement
protective measures and intends to defend its proprietary rights, policing
unauthorized use of the Company's technology or products is difficult and
there can be no assurance that these measures will be successful. In
addition, the laws of certain foreign countries may not protect the Company's
proprietary rights to the same extent as do the laws of the United States.
The Company believes that, because of the rapid pace of technological change
in the tape storage industry, patent and trade secret protection are less
significant than factors such as the knowledge, ability and experience of the
Company's personnel, new product introductions and frequent product
enhancements.
The Company has received, and may receive in the future, communications from
third parties asserting that the Company's products infringe the proprietary
rights of third parties or seeking indemnification against such
infringement. There can be no assurance that any of these claims will not
result in protracted and costly litigation. While it may be necessary or
desirable in the future to obtain licenses relating to one or more of its
products or relating to current or future technologies, there can be no
assurance that the Company will be able to do so on commercially reasonable
terms. In particular, the Company's announced Mammoth product incorporates a
mechanical deck assembly to be produced by the Company rather than be
purchased from a third party. The Company does not therefore benefit from
supplier indemnification with respect to patent or other intellectual
property infringement. There can be no assurance that the manufacture or
sale of the Mammoth product will not infringe the proprietary rights of third
parties. The inability to obtain any required license or to obtain such
license on commercially reasonable terms could have a material adverse effect
on the Company's results of operations.
The manufacture of the Company's products by third parties under contract
with the Company is based in part on technology that the Company believes to
be proprietary. See "Business--Manufacturing." Exabyte may license this
technology to contract manufacturers to enable them to manufacture products
for the Company. There can be no assurance that such manufacturers will
<PAGE> 23
abide by any use limitations or confidentiality restrictions in licenses with
the Company. In addition, any such manufacturer may develop process
technology related to the manufacture of the Company's products which it owns
independently or jointly with the Company, which would increase the Company's
reliance on such manufacturer or require the Company to obtain a license from
such manufacturer in order to have its products manufactured. There can be
no assurance that such license, if required, would be available on terms
acceptable to the Company, if at all.
The Company and Sony have entered into certain joint development agreements
with respect to tape decks and tape deck subassemblies. Under these
agreements, the Company and Sony have joint ownership of certain technology
related to these decks and subassemblies. See "Business--Research and
Development." In addition, the Company has granted manufacturing licenses
to certain customers which enable them to manufacture and sell the Company's
products upon the occurrence of certain events, including the failure of the
Company to perform its supply obligations.
BACKLOG
- -------
The Company's backlog as of December 30, 1995 and December 31, 1994 totaled
approximately $21 million and $29.5 million, respectively. The Company's
customers typically execute master purchase contracts with the Company.
These agreements generally do not require the customer to purchase minimum
quantities of the Company's products. Backlog consists of purchase orders
for which a delivery schedule within six months has been specified by the
customer. Lead times for the release of purchase orders depend upon the
scheduling practices of each customer, and the Company anticipates that the
rate of new orders will vary significantly from month to month. In addition,
the Company's actual shipments depend upon its production capacity and
component availability. Customers may cancel or reschedule orders without
significant penalty. For these reasons, the Company's backlog as of any
particular date may not be indicative of the Company's actual sales for any
succeeding fiscal period.
EMPLOYEES
- ---------
As of January 31, 1996, the Company had 1,278 full-time employees and 98
temporary, part-time or contract employees for a total of 1,376 employees.
Of the Company's total employees, 243 were employed in engineering, 245 in
sales, marketing and technical support, 707 in manufacturing and service,
and 76 in finance and administration. None of the Company's employees is
represented by a labor union although Exabyte Magnetics GmbH is subject to
an organized Works Council. In addition, the Company has experienced no
work stoppages and believes that its employee relations are good.
The Company's success depends to a significant extent upon the ability to
attract, retain and motivate key engineering, marketing, sales,
manufacturing, support and executive personnel.
<PAGE> 24
Item 2.
PROPERTIES
The Company's corporate offices, research and development, and manufacturing
facilities are located in Boulder, Colorado, in leased buildings aggregating
approximately 420,000 square feet. The lease terms on these facilities
expire on various dates ranging from May 1996 to September 2005. The Company
believes that additional space will be available if needed for further
expansion. The Company also leases approximately 5,500 square feet in San
Jose, California.
The Company also leases a research and development office and manufacturing
facilities in Nuremberg (Germany); a procurement office in Tokyo (Japan); a
service and manufacturing facility in Falkirk (Scotland); sales and support
offices in Utrecht (The Netherlands); Woodbridge, Ontario (Canada); Paris
(France); Gwynedd (United Kingdom); Frankfurt (Germany); Shanghai (China);
and Singapore; and domestic sales and support offices in Campbell and Mission
Viejo, California; Tampa, Florida; Oak Brook, Illinois; Annapolis, Maryland;
Walpole, Massachusetts; Clark, New Jersey; Huntersville, North Carolina;
Beaverton, Oregon; Dallas and Houston, Texas.
Item 3.
LEGAL PROCEEDINGS
There are no material legal proceedings against the Company.
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
EXECUTIVE OFFICERS OF THE COMPANY
=================================
The executive officers of the Company and their ages as of March 15, 1996 are
as follows:
Peter D. Behrendt(1) 57 Chairman of the Board of Directors,
President and Chief Executive Officer
Mark W. Canright 45 Senior Vice President
Sales and Customer Support
William L. Marriner 43 Executive Vice President, Finance &
Administration, Chief Financial Officer
& Treasurer
David L. Riegel 58 Executive Vice President of Operations &
Chief Operating Officer
(1) Member of the Stock Option Committee of the Board of Directors.
Mr. Peter D. Behrendt joined the Company as President, Chief Operating
Officer and director in July 1987 and has served as the Company's Chief
Executive Officer since July 1990 and as the Company's Chairman of the
Board since January 1992. Prior to joining the Company, Mr. Behrendt held
various executive positions during 26 years with IBM, including director of
Quality and Product Assurance for the Information Systems and Communications
Group as well as Product Manager of the electronic typewriter business, and
was responsible for product and business planning for IBM's tape and disk
offerings. Mr. Behrendt is also a director of Western Digital Corporation
and Infocus Systems Corporation.
<PAGE> 25
Mr. William L. Marriner joined the Company in March 1987 as Vice President,
Finance and Administration and Chief Financial Officer, and has served as
Treasurer since July 1990, Senior Vice President since July 1991 and
Executive Vice President since December 1994. Mr. Marriner served as
Secretary from July 1989 to February 1995. Prior to joining the Company,
Mr. Marriner held various positions at StorageTek from 1978 to 1987,
including Vice President of Pacific and Latin American Operations, Manager
of Business Planning and Administration for International Operations, and
Assistant to the President.
Mr. Mark W. Canright joined Exabyte in 1987 as Western Region Sales Manager
and was promoted to Western Region Director in 1990, Vice President of North
American Sales in January 1992, Vice President of Worldwide Sales and Support
in July 1992, Vice President of Worldwide Sales and Marketing in January 1993
and of Senior Vice President of Worldwide Sales and Marketing in January
1994. Mr. Canright has held the position of Senior Vice President of Sales
and Customer Support since February 1996. Prior to joining the Company,
Mr. Canright held various sales management positions at the Burroughs
Corporation, Data General and Convergent Technologies.
Mr. David L. Riegel joined the Company in November 1992 as Senior Vice
President of 8mm Operations. He became Senior Vice President of Operations
in July 1993 and has served as Executive Vice President and Chief Operating
Officer since December 1994. Prior to joining the Company, Mr. Riegel was
President and CEO and has continued to serve on the board of directors of
Bolder Technologies Corp. (previously Bolder Battery), a company engaged in
the development of batteries, from May 1992 until November 1992. Mr. Riegel
served as President and CEO of PrairieTek Corp., a disk drive manufacturer,
from July 1990 until November 1992. PrairieTek Corp. filed for protection
under the Federal bankruptcy laws in August 1991. Mr. Riegel previously
served as the Vice President of Component Operations for Imprimus Technology,
a subsidiary of Control Data Corporation, from September 1987 until October
1989.
Executive officers serve at the discretion of the Board. There are no family
relationships among any of the directors and officers.
<PAGE> 26
PART II
Item 5.
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter market and quoted
in the National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbol EXBT. The
following table shows, for the calendar quarters indicated, the high and low
closing prices of the Company's Common Stock as reported on the NASDAQ
National Market System.
Calendar Year High Low
- ------------- ----- -----
1994
First Quarter................................ 22-3/8 16-7/8
Second Quarter............................... 20-3/8 14-1/8
Third Quarter................................ 21-1/8 14-1/8
Fourth Quarter............................... 23-5/16 17-3/8
1995
First Quarter................................ 21-1/8 15-7/8
Second Quarter............................... 17-1/8 12
Third Quarter................................ 17 12-3/8
Fourth Quarter............................... 14-13/16 11-1/2
1996
First Quarter (through March 1, 1996)........ 16 13-1/8
At March 1, 1996, the Company had 1,010 holders of record of its Common Stock.
The Company has never paid cash dividends on its Common Stock. In addition,
the Company's bank line of credit prohibits the payment of dividends without
prior bank approval. The Company presently intends to retain any earnings for
use in its business and does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future.
<PAGE> 27
Item 6.
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
The selected financial data set forth below with respect to the Company's
consolidated statements of operations for the fiscal years ended December
30, 1995, December 31, 1994, January 1, 1994, January 2, 1993 and December
28, 1991 and with respect to the consolidated balance sheets as of December
30, 1995, December 31, 1994, January 1, 1994, January 2, 1993 and December
28, 1991 are derived from consolidated financial statements audited by Price
Waterhouse LLP, independent accountants. The consolidated financial
statements for the years ended December 30, 1995, December 31, 1994 and
January 1, 1994 are included elsewhere in this report on Form 10-K and the
selected financial data shown below are qualified by reference to such
financial statements.
<TABLE>
<CAPTION>
Fiscal Years Ended
Dec. 30, Dec. 31, Jan. 1, Jan. 2, Dec. 28,
Consolidated Statement of Operations Data: 1995 1994 1994 1993 1991
- ------------------------------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales.................................... $374,147 $381,844 $310,295 $287,444 $234,052
Cost of goods sold........................... 311,891 257,365 219,053 183,380 139,751
-------- -------- -------- -------- --------
Gross profit................................. 62,256 124,479 91,242 104,064 94,301
Operating Expenses
Selling, general and administrative..... 49,896 42,560 37,169 30,790 24,704
Research and development................ 36,956 33,586 31,648 22,896 21,101
Purchased research and development...... -- 2,597(1) -- 13,469 --
-------- -------- -------- -------- --------
Income (loss) from operations................ (24,596) 45,736 22,425 36,909 48,496
Other income, net............................ 1,568 2,069 1,507 1,954 1,751
-------- -------- -------- -------- --------
Income (loss) before income taxes............ (23,028) 47,805 23,932 38,863 50,247
(Provision) benefit for income taxes......... 10,593 (15,400) (7,750) (18,369) (18,050)
-------- -------- -------- -------- --------
Net income (loss)............................ $(12,435) $32,405 $16,182 $20,494 $32,197
======== ======== ======== ======== ========
Net income (loss) per share.................. $(0.57) $1.48 $0.76 $0.95 $1.51
======== ======== ======== ======== ========
Common and common equivalent shares used in
the calculation of net income (loss)
per share(2)............................ 21,711 21,965 21,399 21,612 21,323
Consolidated Balance Sheet Data:
- -------------------------------
Working Capital.............................. $137,143 $157,978 $129,693 $112,688 $ 96,879
Total Assets................................. 250,336 242,765 197,307 183,066 149,940
Long-term obligations, excluding current
portion................................. 4,181 237 454 495 143
Stockholders' equity......................... 186,366 196,907 158,535 140,260 112,123
</TABLE>
(1) See Note 10 of Notes to Consolidated Financial Statements for an
explanation of the accounting for the Grundig Data Scanner GmbH
acquisition during 1994.
(2) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing net
income (loss) per share.
<PAGE> 28
Quarterly Results of Operations (Unaudited)
- -------------------------------------------
The following table sets forth unaudited operating results for each quarter of
fiscal 1995 and 1994. This information has been prepared on the same basis as
the audited financial statements and, in the opinion of management, contains
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair statement thereof. The operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Quarters Ended
Dec. 30, Sep. 30, Jul. 1, Apr. 1,
1995 1995 1995 1995
------- ------- ------- -------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales.............................. $96,871 $84,100 $96,983 $96,193
Cost of goods sold..................... 71,947 99,772 73,728 66,444
-------- ------- ------- -------
Gross profit (loss).................... 24,924 (15,672) 23,255 29,749
Selling, general and administrative.... 12,560 14,725 11,951 10,660
Research and development............... 8,855 10,007 9,237 8,857
Purchased research and development..... -- -- -- --
-------- ------- ------- -------
Income (loss) from operations.......... 3,509 (40,404) 2,067 10,232
Other income (expense), net............ 77 (93) 140 1,444
-------- ------- ------- -------
Income (loss) before income taxes...... 3,586 (40,497) 2,207 11,676
(Provision) benefit for income taxes... (319) 15,632 (517) (4,203)
-------- ------- ------- -------
Net income (loss)...................... $ 3,267 $(24,865) $ 1,690 $ 7,473
======== ======= ======= =======
Net income (loss) per share............ $0.15 $(1.13) $0.08 $0.34
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As a Percentage of Net Sales
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 74.3 118.7 76.0 69.1
-------- ------- ------- -------
Gross margin........................... 25.7 (18.7) 24.0 30.9
Selling, general and administrative.... 13.0 17.5 12.3 11.1
Research and development............... 9.1 11.9 9.5 9.2
Purchased research and development..... -- -- -- --
-------- ------- ------- -------
Income (loss) from operations.......... 3.6 (48.1) 2.2 10.6
Other income (expense), net............ 0.1 (0.1) 0.1 1.5
-------- ------- ------- -------
Income (loss) before income taxes...... 3.7 (48.2) 2.3 12.1
(Provision) benefit for income taxes... (0.3) 18.6 (0.6) (4.3)
-------- ------- ------- -------
Net income (loss)...................... 3.4% (29.6)% 1.7% 7.8%
======== ======= ======= =======
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
Quarters Ended
Dec. 31, Oct. 1, Jul. 2, Apr. 2,
1994 1994 1994 1994
------- ------- ------- -------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales.............................. $103,268 $99,001 $92,681 $86,894
Cost of goods sold..................... 68,535 66,443 62,863 59,524
-------- ------- ------- -------
Gross profit........................... 34,733 32,558 29,818 27,370
Selling, general and administrative.... 11,950 10,646 10,552 9,412
Research and development............... 9,165 8,671 8,133 7,617
Purchased research and development..... 2,597 -- -- --
-------- ------- ------- -------
Income from operations................. 11,021 13,241 11,133 10,341
Other income(expense), net............. 471 485 485 628
-------- ------- ------- -------
Income before income taxes............. 11,492 13,726 11,618 10,969
Provision for income taxes............. (2,328) (4,941) (4,182) (3,949)
-------- ------- ------- -------
Net income............................. $ 9,164 $ 8,785 $ 7,436 $ 7,020
======== ======= ======= =======
Net income per share................... $0.41 $0.40 $0.34 $0.32
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As a Percentage of Net Sales
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 66.4 67.1 67.8 68.5
-------- ------- ------- -------
Gross margin........................... 33.6 32.9 32.2 31.5
Selling, general and administrative.... 11.5 10.7 11.4 10.8
Research and development............... 8.9 8.8 8.8 8.8
Purchased research and development..... 2.5 -- -- --
-------- ------- ------- -------
Income from operations................. 10.7 13.4 12.0 11.9
Other income(expense), net............. 0.5 0.5 0.5 0.7
-------- ------- ------- -------
Income before income taxes............. 11.2 13.9 12.5 12.6
Provision for income taxes............. (2.3) (5.0) (4.5) (4.5)
-------- ------- ------- -------
Net income............................. 8.9% 8.9% 8.0% 8.1%
======== ======= ======= =======
</TABLE>
<PAGE> 30
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following tables set forth items in the Exabyte Corporation and
Subsidiaries (the "Company") Consolidated Statements of Operations for the
three years ended December 30, 1995, December 31, 1994 and January 1, 1994
as a percentage of net sales.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Years
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0%
Cost of goods sold.......................... 83.4 67.4 70.6
----- ----- -----
Gross margin................................ 16.6 32.6 29.4
Operating expenses:
Selling, general and administrative....... 13.3 11.1 12.0
Research and development.................. 9.8 8.8 10.2
Purchased research and development........ -- 0.7 --
----- ----- -----
Income (loss) from operations............... (6.5) 12.0 7.2
Other income, net........................... 0.4 0.5 0.5
----- ----- -----
Income (loss) before income taxes........... (6.1) 12.5 7.7
(Provision) benefit for income taxes........ 2.8 (4.0) (2.5)
----- ----- -----
Net income (loss)........................... (3.3)% 8.5% 5.2%
===== ===== =====
</TABLE>
<PAGE> 31
PRODUCT MIX TABLE
<TABLE>
<CAPTION>
Fiscal Years
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
8mm products:
EXB-8200.................................. 1.1% 5.1% 14.3%
EXB-8500.................................. 3.0 13.6 32.2
EXB-8205.................................. 4.3 3.5 1.8
EXB-8505.................................. 48.6 43.1 22.1
Stand-alone subsystems (for above
products)............................... 6.3 6.5 6.1
EXB-8700.................................. 0.8 -- --
EXB-10, 10i, 10e, 60 and 120.............. 1.6 7.8 7.1
EXB-10h, 210, 440 and 480................. 14.1 2.8 --
4mm and quarter-inch cartridge products:
EXB-4200.................................. 5.8 4.8 1.8
EXB-2501 and EXB-1500..................... 1.9 1.5 0.9
Consumables................................. 9.5 8.1 7.9
Service, spares and other................... 5.6 4.9 6.3
Sales allowances............................ (2.6) (1.7) (0.5)
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
In addition to the historical information contained herein, the following
discussion contains forward-looking statements that include risks and
uncertainties. The Company's results of operations may differ materially
from results contemplated or otherwise anticipated by each and every such
forward-looking statement. Factors that could cause actual results to differ
include, but are not limited to, those identified herein as well as those
discussed in the Company's filings on Form 10-K and Forms 10-Q.
FISCAL YEAR 1995 COMPARED TO 1994
- ---------------------------------
The Company's net sales of $374.1 million for fiscal 1995 decreased 2.0% from
net sales of $381.8 million for 1994. This decrease was the result of lower
shipments of 8mm full-high drive and library products. Partially offsetting
this decrease was an increase in the shipments of 8mm half-high, 4mm and
quarter-inch drives and libraries. Consumable sales and service revenues
also grew.
During 1995, sales of the Company's half-high products increased as customer
demand shifted from the Company's full-high products. This shift was evident
in both drives and libraries. This shift is expected to continue until the
last of the full-high units are shipped in 1996. Demand for 8mm drives has
shifted to the half-high products such as the EXB-8505 whose sales increased
to 49% of sales in 1995 from 43% in 1994. Sales of the Company's full-high
drives, the EXB-8200 and EXB-8500, decreased to 1% and 3%, respectively, of
sales in 1995 from 5% and 14%, respectively, in 1994. Sales of libraries have
shifted to the half-high EXB-10h, EXB-210, EXB-440 and EXB-480, which
represented 14% of sales during 1995 compared to 3% in 1994. Sales of the
full-high library products, the EXB-10, EXB-60 and EXB-120 decreased to 2% of
sales during 1995, compared to 8% in the prior year.
<PAGE> 32
The relative customer mix during 1995 shifted to distributors, original
equipment manufacturers ("OEMs") and end-users from value-added resellers
("VARs"). Sales to distributors increased to 40% of sales in 1995 from 35%
in 1994. OEM customers accounted for 42% of sales in 1995, compared to 40% in
1994. Sales to end-users increased to 4% of net sales in 1995 from 3% in
1994. VAR sales decreased to 14% of sales in 1995 from 22% in 1994. This
shift in customer mix was primarily the result of greater sales to existing
distributor accounts and the addition of a large distributor in December 1994.
The Company's gross margin percentage for 1995 decreased to 16.6% compared to
32.6% for 1994. The 1995 margins were affected by special non-recurring third
quarter charges in other cost of sales of $34.2 million. Excluding such
charges, the gross margin for the year was 25.8%. The special charges
resulted from : (1) the write-off of raw material inventories associated with
previously announced end-of-life products; (2) the write-off of specialized
fixed assets utilized in the manufacture of these products; (3) the write-down
of end-of-life finished goods to their net realizable value; (4) the recording
of losses on certain vendor obligations related to these products; and (5)
losses on the sale of certain excess raw materials. Gross margin was also
affected by a number of other factors during the year. A decline in the value
of the dollar versus the yen resulted in significantly higher dollar costs for
Japanese components in several products. A shift in product mix to lower
margin 4mm and quarter-inch drives also adversely impacted the margin.
Additionally, full-high products were sold at discounted prices in an effort
to reduce inventory levels. Price erosion on all products is a continuing
factor for the Company due to the competitive nature of the storage
peripherals business.
Selling, general and administrative expenses increased to $49.9 million in
1995 from $42.6 million in 1994. The increases were primarily the result of
overall growth in the Company's European sales operations and increased
promotional activity. Increases also include special non-recurring third
quarter charges of $2.6 million, comprised of a write-off of goodwill related
to two previous acquisitions and write-offs of capitalized evaluation and
demonstration equipment related to end-of-life products. The principal
components of these selling, general and administrative costs include salaries
and benefits, sales commissions, advertising and promotion, travel and related
costs and depreciation expenses.
Research and development expenditures increased to $37.0 million for 1995
compared to $33.6 million in 1994. The increases were attributed to the
acquisition of an engineering subsidiary, Exabyte Magnetics GmbH, in October
of 1994, increased expenditures related to the development of the Mammoth
product and increased costs dedicated to software support.
Both selling, general and administrative and research and development
expenditures were modestly impacted by shutdown and severance costs related
to closure and consolidation of facilities in Ann Arbor, Michigan, San Jose,
California, and Lenexa, Kansas during 1995.
Other income, net, consists primarily of interest income, royalty income
and expense, state franchise taxes, foreign currency gains and losses and
other miscellaneous items.
The benefit for income tax for 1995 was 46.0% compared to a provision of
32.2% in the prior year. See Note 6 of Notes to Consolidated Financial
Statements for a description of the factors which resulted in the effective
tax rates being different from the statutory tax rate of 35%.
<PAGE> 33
FISCAL YEAR 1994 COMPARED TO 1993
The Company's net sales of $381.8 million for fiscal 1994 increased 23% from
net sales of $310.3 million for 1993. This sales growth was primarily the
result of increases in the unit shipments of 8mm half-high drives, 4mm drives,
quarter-inch drives and libraries. Partially offsetting these increases was a
reduction in the unit volume shipments of 8mm full-high drives as well as
decreases in the average selling prices of all products.
During 1994, sales of the half-high EXB-8505 product increased to 43% of sales
from 22% in 1993. Sales of full-high products, the EXB-8200 and EXB-8500,
decreased to 5% and 14% of sales, respectively, from 14% and 32% in 1993.
The decreased sales of full-high products reflect shifting customer demand to
the Company's half-high products.
The relative customer mix during 1994 shifted more to distributors from OEMs
and VARs. Distributors accounted for 35% of total sales in 1994 compared to
24% in 1993. OEM sales represented 40% of total sales, down from 41% in 1993.
VARs accounted for 22% of total sales in 1994 compared to 33% in 1993.
End-users accounted for 3% of total sales in 1994 compared to 2% in 1993.
This shift in customer mix for 1994 was the result of increased sales to
existing distributor accounts as well as the addition of several new
distribution customers.
The Company's gross margin increased to 32.6% of sales in 1994 compared to
29.4% in 1993. This increase in gross margin was due to an increased
percentage of sales to higher margin distribution customers and a change in
the sales mix to higher margin 8mm half-high and library products.
Selling, general and administrative expenses increased to $42.6 million in
1994 from $37.2 million in 1993. These expenses represented 11.1% of sales
in 1994 compared to 12.0% in 1993. The increase in total expenditures can
be attributed to support costs of a higher sales level.
Research and development expenditures increased to $33.6 million in 1994
from $31.6 million in 1993. These expenses represented 8.8% of sales in
1994 compared to 10.2% in 1993. The increase in absolute dollars is due to
expansion of the Company's product lines and includes expenses directed at
cost and performance improvements to the Company's existing products and the
development of recently announced as well as unannounced new products.
The Company recorded "Purchased Research and Development" costs of
approximately $2.6 million related to the acquisition of Grundig Data Scanner
GmbH (now known as Exabyte Magnetics GmbH, or EMG) during the fourth quarter
of 1994. This cost represented the excess of the acquisition price over the
net assets acquired. See Note 10 of Notes to Consolidated Financial
Statements for a further explanation of the accounting for the Grundig
acquisition.
Other income, net, consists primarily of interest income, royalty income,
interest expense, state franchise taxes and other miscellaneous items.
Interest income increased by $1.4 million in 1994 over 1993 due to higher
interest rates and the investment of larger cash balances in 1994.
The provision for income taxes for 1994 decreased to 32.2% of income before
income taxes from 32.4% in 1993. See Note 6 of Notes to Consolidated
Financial Statements for a description of the factors which resulted in
the effective tax rates being lower than the statutory tax rate of 35%.
<PAGE> 34
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During 1995, the Company generated $10.6 million of cash from operating
activities, received $1.8 million from the issuance of common stock to Company
employees, expended $23.3 million for capital equipment and paid $0.5 million
on long-term liabilities. Together, these activities resulted in a decrease
in the combined balance of cash and short-term investments of $11.4 million to
a year-ending balance of $68.9 million.
The Company's working capital decreased to $137.1 million on December 30,
1995, from $158.0 million on December 31, 1994. The decrease in working
capital was primarily the result of negative cash flow combined with the
write-off of certain inventories and increased inventory reserves which
resulted in a decrease in inventories of $4.1 million.
The Company has a $7.5 million bank line of credit which expires April 30,
1996, with borrowings under the line limited to 80% of eligible accounts
receivable plus 25% of eligible inventory (limited to $3,000,000). On
December 30, 1995, the amount available under the line was $7.5 million and
no borrowings were outstanding. Borrowings under the line of credit bear
interest at the lower of the bank's prime rate or LIBOR + 2%. The ability to
borrow under this line of credit is dependent upon the Company's adherence to
a set of financial covenants, including the need to be profitable on a
quarterly basis. As a result of the loss for the third quarter and year-
to-date 1995, the Company was in technical violation of this profitability
covenant. This technical violation was subsequently waived by the lender.
The Company anticipates that it will renew such line at comparable terms
upon its expiration.
The Company currently expects to make capital expenditures of approximately
$18 million during 1996. The Company believes its existing sources of
liquidity and funds expected to be generated from operations will provide
adequate cash to fund anticipated working capital and other cash requirements
through fiscal 1996.
<PAGE> 35
Item 8.
FINANCIAL STATEMENTS
Page
Report of Independent Accountants................................... 36
Consolidated Balance Sheets -
December 30, 1995 and December 31, 1994............................. 37
Consolidated Statements of Operations - for the years ended
December 30, 1995, December 31, 1994 and January 1, 1994 ........... 38
Consolidated Statements of Changes in Stockholders' Equity -
for the years ended
December 30, 1995, December 31, 1994 and January 1, 1994 ........... 39
Consolidated Statements of Cash Flows -
for the years ended
December 30, 1995, December 31, 1994 and January 1, 1994............ 40-41
Notes to Consolidated Financial Statements.......................... 42-52
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Exabyte Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity, present fairly, in all material respects, the financial
position of Exabyte Corporation and its subsidiaries at December 30, 1995 and
December 31, 1994, and the results of their operations and their cash flows
for each of the three years in the period ended December 30, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Boulder, Colorado
January 17, 1996
<PAGE> 37
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS December 30, December 31,
1995 1994
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 40,137 46,233
Short-term investments............. 28,800 34,111
Accounts receivable, net........... 56,785 64,940
Inventories, net................... 44,169 48,236
Deferred income taxes.............. 17,595 7,329
Other current assets............... 9,446 2,750
-------- --------
Total current assets................. 196,932 203,599
-------- --------
Property and equipment, net.......... 42,972 29,166
Deferred income taxes................ 7,703 6,458
Other assets......................... 2,729 3,542
-------- --------
53,404 39,166
-------- --------
$250,336 $242,765
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 21,840 $ 20,459
Accrued liabilities................ 32,945 21,345
Accrued income taxes............... 4,104 3,600
Current portion of long-term
obligations ..................... 900 217
-------- --------
Total current liabilities............ 59,789 45,621
Long-term obligations ............... 4,181 237
-------- --------
Commitments (Note 8).................
Stockholders' equity:
Preferred stock, $.001 par value;
14,000 shares authorized; no
shares issued and outstanding.... -- --
Common stock, $.001 par value;
50,000 shares authorized;
21,827 and 21,657 shares
issued........................... 22 22
Capital in excess of par value..... 59,102 57,208
Treasury stock, at cost, 15 shares. (9) (9)
Retained earnings.................. 127,251 139,686
-------- --------
Total stockholders' equity........... 186,366 196,907
-------- --------
$250,336 $242,765
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 38
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Years Ended
December 30, December 31, January 1,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
Net Sales............................ $374,147 381,844 $310,295
Cost of goods sold................... 311,891 257,365 219,053
-------- -------- --------
Gross profit......................... 62,256 124,479 91,242
Operating expenses:
Selling, general and administrative.. 49,896 42,560 37,169
Research and development............. 36,956 33,586 31,648
Purchased research and development... -- 2,597 --
-------- -------- --------
Income (loss) from operations........ (24,596) 45,736 22,425
Other income, net.................... 1,568 2,069 1,507
-------- -------- --------
Income (loss) before income taxes.... (23,028) 47,805 23,932
(Provision) benefit for income taxes. 10,593 (15,400) (7,750)
-------- -------- --------
Net income (loss).................... $(12,435) $32,405 $16,182
======== ======== ========
Net income (loss) per share.......... $(0.57) $1.48 $0.76
======== ======== ========
Common and common
equivalent shares used in the
calculation of net income (loss)
per share............................ 21,711 21,965 21,399
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 39
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except per share data)
<TABLE>
<CAPTION>
Common Stock Treasury Stock Capital in Excess Retained
Shares Amount Shares Amount of Par Value Other Earnings
------ ------ ------ ------ ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 2, 1993............... 20,940 $21 (14) $(9) $49,150 $(1) $91,099
Common stock options exercised ($.10
to $16.88 per share)................. 163 891
Common stock issued pursuant to the
Employee Stock Purchase Plan
($8.61 per share).................... 87 755
Treasury stock purchased............... (1)
Amortization of deferred compensation.. 1
Tax effect of disqualifying
dispositions of common stock......... 446
Net income for the year................ 16,182
------ ---- ---- ---- --------- --- --------
Balance, January 1, 1994............... 21,190 21 (15) (9) 51,242 -- 107,281
Common stock options exercised ($.10
to $20.63 per share)................. 392 1 3,993
Common stock issued pursuant to the
Employee Stock Purchase Plan
($12.11 per share)................... 75 906
Tax effect of disqualifying
dispositions of common stock......... 1,067
Net income for the year................ 32,405
------ ---- ---- ---- --------- --- --------
Balance, December 31, 1994 ............ 21,657 22 (15) (9) 57,208 -- 139,686
Common stock options exercised ($.10
to $18.38 per share)................. 85 825
Common stock issued pursuant to the
Employee Stock Purchase Plan
($11.69 and $11.63 per share)........ 85 987
Tax effect of disqualifying
dispositions of common stock......... 82
Net loss for the year.................. (12,435)
------ ---- ---- ---- --------- --- --------
Balance, December 30, 1995 ............ 21,827 $22 (15) $(9) $59,102 $-- $127,251
====== ==== ==== ==== ========= === ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 40
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------
December 30, December 31, January 1,
1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $382,862 $371,046 $301,978
Cash received from related party........ -- -- 2,702
Cash paid to suppliers and employees.... (367,875) (325,868) (236,680)
Cash paid to related party.............. -- -- (31,792)
Interest received....................... 3,251 2,433 1,264
Interest paid........................... (330) (156) (159)
Income taxes paid....................... (7,292) (21,104) (9,334)
Net cash provided by -------- -------- --------
operating activities............. 10,616 26,351 27,979
-------- -------- --------
Cash flows from investing activities:
(Purchase) sale of short-term
investments, net...................... 5,311 (13,111) (4,050)
Capital expenditures.................... (23,365) (13,568) (7,994)
Acquisitions, net of cash acquired -- (3,035) (6,437)
Net cash used for -------- -------- --------
investing activities............. (18,054) (29,714) (18,481)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock ......................... 1,812 4,900 1,646
Principal payments on long-term
obligations........................... (470) (299) (393)
Net cash provided by -------- -------- --------
financing activities............. 1,342 4,601 1,253
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................. (6,096) 1,238 10,751
Cash and cash equivalents at beginning
of year................................. 46,233 44,995 34,244
-------- -------- --------
Cash and cash equivalents at end
of year................................. $40,137 $46,233 $44,995
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 41
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 30, December 31, January 1,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
Reconciliation of net income (loss) to net
cash provided by operating activities:
Net income (loss)......................... $(12,435) $32,405 $16,182
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, amortization
and other.......................... 17,153 13,697 13,746
Write-down of fixed assets........... 792 81 487
Deferred income tax provision........ (12,262) (6,212) (3,875)
Provision for losses and reserves
on accounts receivable............. 8,723 5,442 1,798
Provision for end-of-life inventory
write-downs........................ 31,188 -- --
Purchased research and development... -- 2,597 --
Change in assets and liabilities, net of
acquisitions:
Accounts receivable.................. (569) (17,187) (8,103)
Inventories.......................... (28,752) (10,669) 13,433
Other current assets................. (6,695) (1,613) 75
Other assets......................... (845) (103) (106)
Accounts payable..................... 1,382 790 (9,894)
Accrued liabilities.................. 11,600 6,614 1,945
Accrued income taxes................. 1,336 509 2,291
-------- -------- --------
Net cash provided by
operating activities............... $10,616 $26,351 $27,979
======== ======== ========
Supplemental schedule of non-cash
investing and financing activities:
Transfer of inventories to
property and equipment.................. $2,605 $2,613 $1,830
Capital lease obligations................. 4,042 -- 286
Fair market value of acquisition assets,
including purchased research
and development and goodwill............ -- 3,605 8,677
Acquisition liabilities assumed........... -- 538 2,177
Income tax benefit of disqualifying
dispositions of common stock............ 82 1,067 446
Note payable issued to purchase software
licenses................................ 1,055 -- --
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 42
EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Exabyte Corporation (the "Company") was incorporated on June 5, 1985 under the
laws of the state of Delaware. The Company engages in the design,
development, manufacture and marketing of computer magnetic tape subsystems
for general commercial application. The Company reports its results of
operations on the basis of a fiscal year of 52 or 53 weeks ending on the
Saturday closest to December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Exabyte FSC Ltd., a foreign sales
corporation, Nihon Exabyte Corporation (Japan), Exabyte Europe B.V. (The
Netherlands), Exabyte Scotland Limited (Scotland) and Exabyte Magnetics GmbH
(Germany). During 1995, the Company liquidated a wholly owned subsidiary,
Exabyte Texas Corporation (Texas) whose business activities have been
integrated into the Company. All intercompany accounts and transactions
have been eliminated.
Foreign Currency Translation
The U.S. dollar is the functional currency of the consolidated corporation.
For the Company's foreign subsidiaries, monetary assets and liabilities are
translated into U.S. dollars using the exchange rates in effect at the
balance sheet date and nonmonetary assets are translated at historical rates.
Results of operations are translated using the average exchange rates during
the period. Foreign exchange gains and losses included in the consolidated
statements of operations were not material in any year presented.
Foreign Currency Forward Contracts
The Company enters into foreign currency forward contracts in anticipation
of movements in the dollar/yen exchange rate which it uses to hedge the
purchase of certain inventory components from Japanese manufacturers. The
Company had outstanding contracts totaling $21.7 million and $20.4 million at
December 30, 1995 and December 31, 1994, respectively. The maturity dates
for these contracts for both years were within six months of the Company's
respective year-end. Hedged inventory transactions are included in the
Statement of Cash Flows as operating activities. At December 30, 1995 and
December 31, 1994, the Company had unrealized losses on future contracts of
approximately $1.3 million and $0.3 million, respectively, based upon the
dollar/yen spot rates on those dates. Transaction gains or losses due to
exchange rate movements are recorded upon settlement of the transaction,
deferred into inventory, and recognized in income as the underlying inventory
is sold.
Revenue Recognition
Sales are recognized upon shipment of products to customers. Revenue from
sales to certain distributors is subject to agreements allowing certain rights
of return and price protection on unsold merchandise held by those
distributors. Accordingly, reserves for estimated future returns and for
price protection are provided in the period of the sale.
<PAGE> 43
Concentration of Credit Risk
The Company's customers include original equipment manufacturers, value-added
resellers and distributors. Financial instruments which potentially subject
the Company to concentrations of credit risk are primarily accounts
receivable, cash equivalents and short-term investments. The Company
performs ongoing credit evaluations of its customers' financial condition and,
generally, requires no collateral from its customers. Accounts receivable are
summarized below:
December 30, December, 31
1995 1994
-------- --------
(In thousands)
Accounts receivable.......................... $63,617 $69,394
Less: reserves and allowance for
non-collection............................. (6,832) (4,454)
------- -------
$56,785 $64,940
======= =======
During the fiscal years ended December 30, 1995, December 31, 1994 and January
1, 1994, one customer accounted for approximately 15%, 17% and 16%,
respectively, of sales. During the fiscal years ended December 30, 1995 and
January 1, 1994, another customer accounted for approximately 11% and 10%,
respectively, of sales in each year. No other customers accounted for 10% or
more of sales in any of the three years presented.
Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Such cash
equivalents aggregated $33,622,000 and $40,687,000 at December 30, 1995 and
December 31, 1994, respectively. Cash equivalents are carried at cost which
approximates fair value.
Short-Term Investments
Short-term investments are stated at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost or market, cost being determined by
the first-in, first-out method. Inventories consisted of the following:
December 30, December 31,
1995 1994
-------- --------
(In thousands)
Raw materials and component parts............ $24,932 $34,125
Work-in-process.............................. 2,033 1,914
Finished goods............................... 17,204 12,197
------- -------
$44,169 $48,236
======= =======
<PAGE> 44
During the third quarter of 1995, the Company recorded a lower of cost or
market write-down on certain end-of-life products aggregating $23,636,000. At
the same time, the Company accrued for losses on purchase commitments of
$7,552,000 related to such products.
Depreciation and Amortization
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the respective
depreciable assets (two to five years). Leasehold improvements are amortized
on a straight-line basis over the shorter of the useful life of the asset or
the lease term. Maintenance and repairs are expensed as incurred and
improvements are capitalized. Goodwill resulting from acquisitions is
amortized using the straight-line method over five years. Amortization
expense was $440,000, $880,000 and $807,000 in 1995, 1994 and 1993,
respectively.
In the third quarter of 1995, the Company determined that remaining goodwill
aggregating $2,273,000 related to two 1993 acquisitions had been impaired and,
accordingly, it was written off.
Warranty Costs
A provision for estimated future costs which may be incurred under the
Company's various product warranties is recorded when products are shipped.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Deferred income taxes are provided for temporary differences between the
financial reporting basis and tax basis of the Company's assets and
liabilities. Income taxes are also provided for taxes currently payable
based on taxable income.
Net Income (Loss) Per Share
Net income per common share is based on the weighted average number of shares
of common stock and common stock equivalents (dilutive stock options)
outstanding during each respective period. Proceeds from the exercise of the
dilutive stock options are assumed to be used to repurchase outstanding shares
of the Company's common stock at the average fair market value during the
period. In a period in which a loss is realized, only the weighted average
number of common shares is used to compute the loss per share as the inclusion
of common stock equivalents would be antidilutive.
Use of Estimates
The Company has prepared these financial statements in conformity with
generally accepted accounting principles which require the use of management's
estimates. Actual results could differ from the estimates used.
<PAGE> 45
Currently Issued Accounting Standard
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." SFAS 123, which is effective for fiscal years beginning after
December 15, 1995, encourages, but does not require, companies to recognize
compensation expense for the theoretical fair value of grants to employees
of equity instruments based on mathematical formulas. Companies that choose
not to adopt the new accounting rules will continue to apply the existing
accounting contained in Accounting Principles Board Opinion (APBO) No. 25,
"Accounting for Stock Issued to Employees." SFAS 123 requires companies that
choose not to adopt the new fair value accounting rules to disclose the pro
forma net income and earnings per share as if the fair value rules had been
adopted.
Exabyte Corporation will adopt SFAS 123 in 1996. The Company anticipates it
will elect to continue accounting for stock-based compensation in accordance
with APBO 25 and provide the disclosures required by SFAS 123. Accordingly,
the adoption of SFAS 123 will not have any effect on the Company's
consolidated financial position or results of operations.
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 30, December 31,
1995 1994
-------- --------
(In thousands)
Equipment and furniture...................... $66,280 $51,738
Assets under capital leases.................. 5,968 1,944
Leasehold improvements....................... 16,417 13,831
Less: accumulated depreciation and
amortization............................... (45,693) (38,347)
------- -------
$42,972 $29,166
======= =======
Depreciation expense was $14,443,000, 12,956,000 and $12,851,000 in 1995, 1994
and 1993, respectively. Amortization of equipment and furniture under capital
leases is included in depreciation expense.
NOTE 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 30, December 31,
1995 1994
-------- --------
(In thousands)
Wages and employee benefits.................. $ 5,603 $ 7,917
Warranty and related costs................... 20,068 11,839
Loss on purchase committments................ 4,212 --
Other........................................ 3,062 1,589
------- -------
$32,945 $21,345
======= =======
<PAGE> 46
NOTE 4--DEBT
Line of Credit
As of December 30, 1995, the Company maintained a $7,500,000 unsecured line of
credit. No borrowings were outstanding under the line as of that date.
Under the terms of the agreement, the Company may borrow the lesser of
$7,500,000 or 80% of eligible accounts receivable plus 25% of eligible
inventories (limited to $3,000,000). Borrowings made under the agreement bear
interest at the lower of the bank's prime rate or LIBOR + 2%. The Company's
bank line of credit prohibits the payment of dividends without prior bank
approval. The line of credit agreement also includes certain financial and
other covenants. The agreement is currently scheduled to expire in April 1996.
Long-Term Obligations
In 1995, the Company entered into a note payable for $1,055,000 to purchase
certain software licenses. The note payable requires quarterly installments
of interest (7.5%) and principal through February 1998. The Company has also
entered into capital lease obligations related to the acquisition of certain
equipment and leasehold improvements. The following represents future
payments pursuant to these obligations as of December 30, 1995:
Capital Lease
Note Payable Obligations Total
------------ ------------- -----
(In thousands)
1996............................ $345 $1,051 $1,396
1997............................ 481 709 1,190
1998............................ 131 654 785
1999............................ -- 637 637
2000............................ -- 637 637
Thereafter...................... -- 2,389 2,389
---- ------ ------
957 6,077 7,034
Less: amount representing interest... (79) (1,874) (1,953)
---- ------ ------
Present values of payments........... 878 4,203 5,081
Less: current portion................ (295) (605) (900)
---- ------ ------
$583 $3,598 $4,181
==== ====== ======
Interest expense aggregated $330,000, $156,000 and $159,000 in 1995, 1994 and
1993, respectively.
NOTE 5--CAPITAL STOCK AND STOCK OPTIONS
Stock Options
The Company authorized, under its 1987 incentive stock plan as amended,
8,000,000 shares of common stock for issuance to employees, including
officers and directors. Under the plan, options are granted at an
exercise price not less than the fair market value of the stock on the
date of grant. Outstanding options vest over periods up to 50 months and
expire 10 years after the date of grant, except in the event of the
termination or death of the employee whereupon vested shares must be
exercised within 90 days.
<PAGE> 47
The following is a summary of stock option transactions:
Shares Price per share
------ ---------------
(In thousands)
Outstanding at January 2, 1993....... 2,103 $0.10 - $35.63
Granted............................ 721 $8.88 - $17.50
Exercised.......................... (163) $0.10 - $16.88
Forfeited.......................... (366) $0.75 - $35.63
-----
Outstanding at January 1, 1994....... 2,295 $0.10 - $35.63
Granted............................ 888 $15.38 - $21.75
Exercised.......................... (392) $0.10 - $20.63
Forfeited.......................... (177) $8.88 - $35.63
-----
Outstanding at December 31, 1994..... 2,614 $0.10 - $35.63
Granted............................ 898 $12.63 - $17.88
Exercised.......................... (85) $0.10 - $18.38
Forfeited.......................... (279) $8.88 - $35.63
-----
Outstanding at December 30, 1995..... 3,148 $0.10 - $35.63
=====
Vested stock options outstanding at
December 30, 1995.................. 1,632
=====
At December 30, 1995, there were 1,651,000 shares available for future grants
of options.
Employee Stock Purchase Plan
On May 1, 1990, the stockholders approved an Employee Stock Purchase Plan
which is qualified under Section 423 of the Internal Revenue Code. Under the
Plan, employees may elect to have up to 10% of their gross salaries withheld by
payroll deductions and applied to the purchase of common stock at a price equal
to 85% of the lower of the market value at the beginning or the end of each six-
month participation period during which the payroll deductions are accumulated
to purchase the shares. The Company has authorized 500,000 shares of common
stock for issuance under this plan of which 85,000, 75,000 and 87,000 were
issued to participants during 1995, 1994 and 1993, respectively.
Stockholder Rights Plan
The Board of Directors adopted on January 24, 1991 and amended on August 23,
1995 a Stockholder Rights Plan ("Rights Plan") in which preferred stock
purchase rights were distributed as a dividend at the rate of one right for
each share of Exabyte common stock held as of February 15, 1991. The Rights
Plan is designed to deter coercive or unfair takeover tactics and to prevent
an acquiring entity from gaining control of the Company without offering a
fair price to all of the Company's stockholders.
Each right will entitle the holders of the Company's common stock to purchase
one one-hundredth of a share of preferred stock at an exercise price of $75,
subject to adjustment in certain cases to prevent dilution. The rights are
evidenced by the common stock certificates and are not exercisable or
transferable apart from the common stock until the earlier of ten days after
the date on which a person or group has acquired beneficial ownership of 15%
<PAGE> 48
or more of the common stock (an "Acquiring Entity") or ten business days after
the public announcement of the commencement of a tender or exchange offer that
would result in the Acquiring Entity owning 15% or more of the common stock.
Further, the rights generally entitle each right holder (except the Acquiring
Entity) to purchase that number of shares of the Company's common stock which
equals the exercise price of the right divided by one-half of the current
market price of the common stock if any person becomes the beneficial owner
of 15% or more of the common stock. If an Acquiring Entity purchases at least
15% of the Company's common stock, but has not acquired 50%, the Board of
Directors may exchange the rights (except those of the Acquiring Entity) for
one share of common stock per right. In addition, under certain circumstances,
if the Company is involved in a merger or other business combination in which
the Company is not the surviving corporation, the rights entitle the holder to
buy common stock of the Acquiring Entity with a market value of twice the
exercise price of each right.
The Company is generally entitled to redeem the rights for $.01 per right at
any time until ten days following a public announcement that a 15% stock
position has been acquired and in certain other circumstances. The rights,
which do not have voting rights, will expire on February 15, 2001, unless
redeemed or exchanged earlier by the Company pursuant to the Rights Plan.
NOTE 6--INCOME TAXES
Pretax income (loss) was taxed in the following jurisdictions:
1995 1994 1993
------- ------- -------
(In thousands)
Domestic...... $(27,647) $43,865 $22,918
Foreign....... 4,619 3,940 1,014
------- ------- -------
$(23,028) $47,805 $23,932
======= ======= =======
The provision (benefit) for income taxes consist of the following:
1995 1994 1993
------- ------- -------
(In thousands)
Current:
Federal..... $ (275) $17,214 $ 9,366
State....... 205 2,737 1,938
Foreign..... 1,739 1,661 321
Deferred:
Federal..... (11,396) (5,891) (3,528)
State....... (866) (321) (347)
------- ------- -------
$(10,593) $15,400 $ 7,750
======= ======= =======
Total income tax provision (benefit) differs from the amount computed by
applying the U.S. federal income tax rate of 35% to income (loss) before
income taxes for the following reasons:
<PAGE> 49
1995 1994 1993
------- ------- -------
(In thousands)
U.S. federal income tax
at statutory rate.......... $(8,060) 16,732 $ 8,376
State income taxes, net
of federal benefit......... (998) 1,776 788
Purchased research and
development................ -- 909 --
Research and development
credits.................... (420) (875) (856)
Tax exempt interest.......... (414) (419) (326)
Foreign Sales Corporation.... (215) (534) (413)
Enacted future rate changes.. -- -- (113)
Net operating loss
carryforwards recognized... -- (2,650) --
Other........................ (486) 461 294
------- ------- -------
$(10,593) $15,400 $ 7,750
======= ======= =======
Deferred tax assets are attributable to the following:
December 30, December 31,
1995 1994
-------- --------
(In thousands)
Warranty reserves $ 5,349 $ 3,725
Depreciation 3,995 3,406
Acquired net operating loss carryforwards 2,343 2,587
Bad debt and revenue reserves 2,142 1,462
Goodwill 1,365 465
Vacation costs 504 623
Inventory reserves 8,532 511
Other 1,068 1,008
------- -------
$25,298 $13,787
======= =======
At December 30, 1995, net operating loss carryforwards of $6,695,000 are
available to offset future taxable income. Utilization of the carryforwards
are subject to an annual limitation of $670,000 through 2005.
NOTE 7--RELATED PARTY TRANSACTIONS
The Company maintained a product license agreement with Kubota Corporation
of Japan ("Kubota"), a former stockholder of the Company, which granted
Kubota the exclusive right to manufacture and market certain Company
products in Japan and other specific territories in exchange for quarterly
royalties. Royalty income aggregated $241,000 and $463,000 in 1994 and 1993,
respectively. Through June 30, 1993, Kubota and the Company maintained an
OEM purchase agreement, under which the Company was required to purchase a
minimum of 58% of its annual product requirements of specified products.
Product pricing was subject to periodic negotiation. The OEM purchase
agreement was terminated by mutual consent of Kubota and the Company in 1993.
Purchases from Kubota aggregated approximately $32,763,000 in 1993.
<PAGE> 50
NOTE 8--LEASE COMMITMENTS
The Company leases its office, production and sales facilities under various
operating lease arrangements. Most of the leases contain various provisions
for rental adjustments including, in certain cases, a provision based on
increases in the Consumer Price Index. In addition, most of the leases require
the Company to pay property taxes, insurance and normal maintenance costs.
Future minimum lease payments under these arrangements are as follows:
(In thousands)
1996................................... $ 5,380
1997................................... 5,173
1998................................... 4,616
1999................................... 4,597
2000................................... 3,944
After 2001............................. 22,859
-------
$46,569
=======
Rent expense aggregated $6,061,000, $4,942,000 and $5,368,000 in 1995, 1994
and 1993, respectively.
NOTE 9--EMPLOYEE BENEFIT PLAN
Effective January 1988, the Company established a qualified Section 401(K)
Savings Plan. The Plan allows eligible employees to contribute up to 15%
of their salaries on a pre-tax basis. Company contributions to the Plan are
discretionary. The Company recorded as expense matching contributions
totaling $691,000, $652,000 and $461,000 in 1995, 1994 and 1993, respectively.
Company contributions are fully vested after six years of employment.
NOTE 10--ACQUISITIONS
On October 4, 1994, the Company acquired from Grundig AG all the outstanding
common shares of Grundig Data Scanner GmbH, subsequently renamed Exabyte
Magnetics GmbH ("EMG") for a purchase price of $3.1 million. EMG is engaged
in the design and manufacture of heads and scanners for incorporation in high-
performance helical-scan tape drives and is located in Nuremberg, Germany.
On February 19, 1993, the Company acquired the assets of the Mass Storage
Division ("MSD") of Everex Systems, Inc., a designer of quarter-inch cartridge
tape drives, for a purchase price of $5 million in cash. On February 16,
1993, the Company acquired all of the assets and certain liabilities of
Tallgrass Technologies Corp. ("Tallgrass"), a value-added reseller of
computer magnetic tape subsystems, for a purchase price of $1.5 million
in cash.
The results of operations of each of these entities have been included in
the accompanying Consolidated Financial Statements since their dates of
acquisition. In addition, each of the acquisitions was accounted for using
the purchase method; accordingly, assets and liabilities were recorded at
their estimated fair values at the dates of acquisition. The excess of the
purchase price over the net assets acquired of EMG ($2,597,000) was charged
to operations as purchased research and development. The excess of the
purchase price over the net assets acquired of Tallgrass ($1,353,000) and MSD
($3,046,000) were assigned to goodwill (see Note 1). The pro forma impact of
the acquisitions on the Company's results of operations was not significant.
<PAGE> 51
NOTE 11-FOREIGN OPERATIONS AND GEOGRAPHIC INFORMATION
The following table summarizes the Company's operations in different
geographic areas:
<TABLE>
<CAPTION>
Year Ended December 30, 1995 United
(In thousands) States Europe Elimination Consolidation
-------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers..... $309,532 $64,615 $ -- $374,147
Transfers between geographic areas.. 23,151 9,854 (33,005) --
-------- ------- -------- --------
Total net sales..................... $332,683 $74,469 $(33,005) $374,147
======== ======= ======== ========
Net Income.......................... $(15,085) $ 2,650 $ -- $(12,435)
======== ======= ======== ========
Identifiable Assets................. $233,740 $40,017 $(23,421) $250,336
======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994 United
(In thousands) States Europe Elimination Consolidation
-------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers..... $354,904 $26,940 $ -- $381,844
Transfers between geographic areas.. 26,679 5,533 (32,212) --
-------- ------- -------- --------
Total net sales..................... $381,583 $32,473 $(32,212) $381,844
======== ======= ======== ========
Net Income.......................... $ 30,906 $ 1,499 $ -- $ 32,405
======== ======= ======== ========
Identifiable Assets................. $236,354 $32,665 $(26,254) $242,765
======== ======= ======== ========
</TABLE>
Sales and transfers between geographic areas are accounted for at arm's length
prices, which generally provide a profit after coverage of all operating
costs. The identifiable assets by geographic areas are those assets used in
the Company's operations in each area. The Company's Far East operations have
not been disclosed as a separate geographic area because revenues from Far
East sales are recorded by entities in other geographic areas and Far East
identifiable assets are less than 10% of consolidated assets. Revenues
generated by, and identifiable assets of, foreign operations were not
material in 1993.
<PAGE> 52
United States export sales, which exclude revenues generated by European
operations, were made to the following geographic areas:
1995 1994 1993
-------- -------- --------
(In thousands)
Europe............ $18,426 $46,878 $40,930
Other............. 31,086 27,732 15,588
------- ------- --------
$49,512 $74,610 $56,518
======= ======= ========
<PAGE> 53
Item 9.
DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
<PAGE> 54
PART III
Item 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's directors is incorporated by reference
from the information contained in the Section entitled "Election of Directors"
and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in
the Company's definitive Proxy Statement for the Company's 1995 Annual
Meeting of Stockholders to be filed within 120 days after December 30, 1995,
the close of its fiscal year ("Proxy Statement"). Information concerning the
executive officers of the Company is set forth in Part I of this Form 10-K.
Item 11.
EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference from the Section
entitled "Executive Compensation," contained in the Proxy Statement.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is incorporated by reference from the Section
entitled "Security Ownership of Certain Beneficial Owners and Management"
contained in the Proxy Statement.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is incorporated by reference from the Section
entitled "Certain Transactions" contained in the Proxy Statement.
<PAGE> 55
PART IV
Item 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Exabyte Corporation and
Subsidiaries are included in Part II, Item 8.
Consolidated Financial Statements as of December 30, 1995 and December 31,
1994 and for each of the three fiscal years in the period ended December
30, 1995.
Page
-----
Report of Independent Accountants............................... 36
Consolidated Balance Sheets..................................... 37
Consolidated Statements of Operations........................... 38
Consolidated Statements of Changes in Stockholders' Equity...... 39
Consolidated Statements of Cash Flows........................... 40-41
Notes to Consolidated Financial Statements...................... 42-52
(a) 2. Financial Statement Schedules
Schedules- Years ended December 30, 1995, December 31, 1994 and January 1, 1994
VIII - Valuation and Qualifying Accounts and Reserves..... 59
All other schedules are omitted because they are inapplicable, not required
under the instructions, or the information is included in the financial
statements or notes thereto.
<PAGE> 56
(a) 3. Exhibit Index
Exhibit
Number Description
- ------------------------------
3.1 Restated Certificate of Incorporation. (1)
3.2 Certificate of Determination of Preference of Series
A Junior Participating Preferred Stock. (2)
3.3 By-laws of the Company, as amended.
**10.1 Incentive Stock Plan, as amended and restated on
February 4, 1995. (16)
**10.2 Stock Option Agreements used in connection with the
Incentive Stock Plan. (3)
**10.3 1990 Employee Stock Purchase Plan. (3)
**10.4 Employee Stock Purchase Plan Offering used in
connection with the 1990 Employee Stock Purchase
Plan. (3)
**10.5 Form of participation agreement used in connection
with the 1990 Employee Stock Purchase Plan. (3)
**10.6 Stock Option Agreement, dated January 31, 1989,
between the Company and Bruce M. Holland, a director
of the Company. (1)
10.7 Form of Indemnity Agreement entered into by the Company
with each director and executive officer of the Company.
(15)
10.8 8mm Mechanical Components Supply Agreement, dated as of
April 1, 1990, among Sony Corporation, the Company and
Nihon Exabyte Corporation. (5)
10.9 First Amendment, 8mm Mechanical Components Supply
Agreement, dated July 9, 1992, among Sony Corporation,
the Company and Nihon Exabyte Corporation. (11)
10.10 Agreement, dated November 8, 1990, between Sony
Corporation and the Company.(6)
10.11 Loan Agreement, dated April 30, 1993, between the Company
and First National Bank in Boulder. (12)
10.12 Lease Agreement, dated December 1, 1989, between the
Company and Eastpark Associates. (4)
10.13 First and Second Addenda, dated May and July 16, 1990
respectively, to the Lease Agreement, dated December 1,
1989, between the Company and Eastpark Associates. (5)
10.14 Lease Agreement, dated July 2, 1990, between the Company
and SBR Investments. (5)
10.15 Lease Agreement, dated July 2, 1990, between the Company
and The First National Bank in Boulder, Trustee for the
Barrell Family Trust and Frank R. Drexel. (5)
*10.16 Lease Agreement, dated December 9, 1991, between the
Company and Eastpark Technology Center, Ltd. (7)
10.17 Option Contract, dated December 9, 1991, between the
Company and Eastpark Technology Center, Ltd. (7)
10.18 Lease Agreement, dated May 8, 1992, between the Company
and Eastpark Associates, Ltd. (8)
**10.19 1996 Officer Bonus Plan.
10.20 Rights Agreement, dated January 24, 1991, between the
Company and The First National Bank of Boston, as Rights
Agent. (2)
<PAGE> 57
10.21 Amendment to the Rights Agreement, dated August 4, 1995,
between the Company and The First National Bank of Boston
as Rights Agent. (14)
10.22 Vail/Steamboat 8mm Mechanical Components Supply Agreement,
dated as of January 1, 1992, among Sony Corporation, Nihon
Exabyte Corporation and the Company. (9)
10.23 First Amendment of Vail/Steamboat 8mm Mechanical Components
Supply Agreement, dated as of April 1, 1994. (15)
10.24 Agreement and Plan of Reorganization By and Among Exabyte
Corporation, EXB Merger Corporation, and R-Byte, Inc. (10)
10.25 Asset Purchase Agreement dated as of February 19, 1993 By
and Among Exabyte Corporation, Exabyte Acquisition
Subsidiary Corporation and Everex Systems, Inc. (11)
10.26 Asset Purchase Agreement dated February 12, 1993 By and
Among Exabyte Corporation, Tallgrass Corporation, a
Delaware corporation, and Tallgrass Technologies
Corporation, a Kansas corporation. (11)
10.27 Agreement for the sale and transfer of all shares in
Grundig Data Scanner GmbH dated September 13, 1994. (13)
21.1 List of Subsidiaries.
23.0 Consent of Price Waterhouse LLP.
* Confidential treatment requested for parts of this
agreement.
** Indicates management contracts or compensation plans or
arrangements filed pursuant to Item 601(b)(10) of
Regulation S-K.
==============
(1) Filed as an Exhibit to the Company's Registration Statement on Form
S-1 (Registration No. 33-30941) filed with the Securities and
Exchange Commission (the "SEC") on September 8, 1989 or Amendments
Nos. 1 and 2 thereto (filed on October 12, 1989 and October 16, 1989
respectively), and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Report on Form 8-K, as filed
with the SEC on January 26, 1991 and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's Registration Statement on Form
S-8 (Registration No. 33-33414), as filed with the SEC on February 9,
1990 and incorporated herein by reference.
(4) Filed as an Exhibit to the Company's 1989 Annual Report on Form 10-K,
as filed with the SEC on March 27, 1990 and incorporated herein by
reference.
(5) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q,
as filed with the SEC on November 9, 1990 and incorporated herein
by reference.
(6) Filed as an Exhibit to the Company's 1990 Annual Report on Form 10-K,
as filed with the SEC on February 27, 1991 and incorporated herein
by reference.
(7) Filed as an Exhibit to the Company's 1991 Annual Report on Form 10-K,
as filed with the SEC on March 6, 1992 and incorporated herein by
reference.
<PAGE> 58
(8) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q,
as filed with the SEC on May 9, 1992 and incorporated herein by
reference.
(9) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q,
as filed with the SEC on August 11, 1992 and incorporated herein by
reference.
(10) Filed as an Exhibit to the Company's Report on Form 8-K, as filed
with the SEC on October 15, 1992 and incorporated herein by reference.
(11) Filed as an Exhibit to the Company's 1992 Annual Report on Form 10-K,
as filed with the SEC on March 24, 1993 and incorporated herein by
reference.
(12) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q,
as filed with the SEC on May 14, 1993 and incorporated herein by
reference.
(13) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q,
as filed with the SEC on November 17, 1994 and incorporated herein
by reference.
(14) Filed as an Exhibit to the Company's Report on Form 8-K, as filed
with the SEC on August 23, 1995 and incorporated herein by reference.
(15) Filed as an Exhibit to the Company's 1994 Annual Report 10-K, filed
with the SEC on March 17, 1995 and revised and filed on March 24,
1995, incorporated herein by reference.
(16) Filed as an Exhibit to the Company's Report on Form S-8 (Registration
No. 33-64591), as filed with the SEC on November 27, 1995 and
incorporated herein by reference.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the fiscal quarter ended December 30,
1995.
<PAGE> 59
EXABYTE CORPORATION AND SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts and Reserves
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
- ----------------- ------------ -------- ------------ --------- ----------
Balance Charged
at to Charged Balance
Beginning Costs to at End
of and Other of
Description Period Expenses Accounts Deduction Period
- ----------------- ------------ -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended January 1, 1994:
Allowance for Doubtful Accounts $ 725 $ 353 $ -- $ (243) (1) $ 835
Reserves for Sales Programs -- -- 1,445 (22) (2) 1,423
Inventory Valuation Reserves 2,980 (650) -- (930) (4) 1,400
Deferred Tax Valuation Allowance 2,650 -- -- -- 2,650
------ ------ ------ ------ ------
$6,355 $(297) $1,445 $(1,195) $6,308
====== ====== ====== ====== ======
Year Ended December 31, 1994:
Allowance for Doubtful Accounts $ 835 $ 36 $ -- $ 152 (1) $1,023
Reserves for Sales Programs 1,423 -- 5,406 (3,398) (2) 3,431
Inventory Valuation Reserves 1,400 3,938 -- (2,578) (4) 2,760
Deferred Tax Valuation Allowance 2,650 -- -- (2,650) (3) --
------ ------ ------ ------ ------
$6,308 $3,974 $5,406 $(8,474) $7,214
====== ====== ====== ====== ======
Year Ended December 30, 1995:
Allowance for Doubtful Accounts $1,023 $ 88 $ -- $ (263) (1) $848
Reserves for Sales Programs 3,431 -- 8,635 (6,082) (2) 5,984
Inventory Valuation Reserves 2,760 32,656 -- (25,647) (4) 9,769
------ ------ ------ ------ ------
$7,214 $32,744 $8,635 $(31,992) $16,601
====== ====== ====== ====== ======
</TABLE>
(1) Accounts written off, net of recoveries.
(2) Net credits issued to customers for sales programs.
(3) Reduction in income tax expense related to the liquidation of R-Byte.
(4) Use of inventory reserves against inventory.
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Boulder, State of Colorado, on March 21, 1996.
EXABYTE CORPORATION
By: /s/ William L. Marriner
-----------------------
William L. Marriner
Title: Executive Vice President and Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter D. Behrendt and William L. Marriner, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments to this
report, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons in the capacities
and on the dates indicated.
/s/ Peter D. Behrendt Chairman of the March 21, 1996
- --------------------- Board, President and
Peter D. Behrendt Chief Executive Officer
(Principal Executive Officer)
/s/ William L. Marriner Executive Vice President March 21, 1996
- ----------------------- and Chief Financial Officer
William L. Marriner (Principal Financial and
Accounting Officer)
/s/ David L. Riegel Executive Vice President March 21, 1996
- ------------------- and Chief Operating Officer
David L. Riegel
<PAGE> 61
/s/ Bruce M. Holland Director March 21, 1996
- --------------------
Bruce M. Holland
/s/ James M. McCoy Director March 21, 1996
- ------------------
James M. McCoy
/s/ Thomas E. Pardun Director March 21, 1996
- ---------------------
Thomas E. Pardun
/s/ Mark W. Perry Director March 21, 1996
- -----------------
Mark W. Perry
/s/ Ralph Z. Sorenson Director March 21, 1996
- ---------------------
Ralph Z. Sorenson
/s/ Thomas G. Washing Director March 21, 1996
- ---------------------
Thomas G. Washing
<PAGE> 1
BY-LAWS
OF
EXABYTE CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1 - Stockholders 1
1.1 Place of Meetings 1
1.2 Annual Meeting 1
1.3 Special Meetings 2
1.4 Notice of Meetings 3
1.5 Voting List 3
1.6 Quorum 3
1.7 Adjournments 3
1.8 Voting and Proxies 4
1.9 Action at Meeting 4
1.10 Action without Meeting 4
ARTICLE 2 - Directors 4
2.1 General Powers 4
2.2 Number; Election and Qualification;
Classes of Directors 5
2.3 Enlargement of the Board 6
2.4 Term of Office 6
2.5 Resignation 6
2.6 Regular Meetings 6
2.7 Special Meetings 6
2.8 Notice of Special Meetings 6
2.9 Meetings by Telephone Conference Calls 7
2.10 Quorum 7
2.11 Action at Meeting 7
2.12 Action by Consent 7
2.13 Removal 7
2.14 Committees 7
2.15 Compensation of Directors 8
ARTICLE 3 - Officers 8
3.1 Enumeration 8
3.2 Election 8
3.3 Qualification 8
3.4 Tenure 8
3.5 Resignation and Removal 9
3.6 Vacancies 9
3.7 Chairman of the Board and Vice-Chairman
of the Board 9
3.8 President 9
3.9 Vice Presidents 10
3.10 Secretary and Assistant Secretaries 10
3.11 Treasurer and Assistant Treasurers 10
3.12 Salaries 11
<PAGE> 2
ARTICLE 4 - Capital Stock 11
4.1 Issuance of Stock 11
4.2 Certificates of Stock 11
4.3 Transfers 12
4.4 Lost, Stolen or Destroyed Certificates 12
4.5 Record Date 12
ARTICLE 5 - Indemnification 13
ARTICLE 6 - Restrictions on Transfer of
Common Stock 17
6.1 Restrictions on Transfer 17
6.2 Notice and Offer 17
6.3 Effect of Failure to Purchase
Shares and of Tender of Purchase
Price; Prohibited Transfers 18
6.4 Exceptions to Transfer Restrictions 19
6.5 Termination of Restrictions 19
6.6 Stock Restriction Agreements 19
6.7 Restrictive Legend 20
6.8 Waiver 20
ARTICLE 7 - General Provisions 20
7.1 Fiscal Year 20
7.2 Corporate Seal 20
7.3 Waiver of Notice 20
7.4 Voting of Securities 20
7.5 Evidence of Authority 20
7.6 Certificate of Incorporation 21
7.7 Transactions with Interested Parties 21
7.8 Severability 21
7.9 Pronouns 21
ARTICLE 8 - Amendments 22
8.1 By the Board of Directors 22
8.2 By the Stockholders 22
<PAGE> 3
PAGE (1)
- --------
BY-LAWS
OF
EXABYTE CORPORATION
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time
to time by the Board of Directors or the President or, if not so designated,
at the registered office of the corporation.
1.2 Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for the purpose
of election of directors and for such other business as may lawfully come
before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C)
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the corporation. To be timely, a stockholder's notice must be delivered
to or mailed and received at the principal executive offices of the
corporation not less than one hundred twenty (120) calendar days in advance
of the date of the corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders; provided,
however, that in the event that no annual meeting was held in the previous
year or the date of the annual meeting has been changed by more than thirty
(30) days from the date contemplated at the time of the previous year's
proxy statement, notice by the stockholder to be timely must be so received
a reasonable time before the solicitation is made. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting: (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name and address, as they appear
on the corporation's books, of the stockholder proposing such business, (iii)
the class and number of shares of the corporation which are beneficially owned
by the stockholder, (iv) any material interest of the stockholder in such
business and (v) any other information that is required to be provided by the
stockholder pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended, in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect
to a stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the Securities and Exchange Act of 1934, as
amended. Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at any annual meeting except in accordance with
the procedures set forth in this paragraph (b). The chairman of the annual
meeting shall, if the facts warrant, determine and declare at the meeting that
<PAGE> 4
business was not properly brought before the meeting and in accordance with
the provisions of this paragraph (b), and, if he should so determine, he shall
so declare at the meeting that any such business not properly brought before
the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction
of the Board of Directors or by any stockholder of the corporation entitled
to vote in the election of directors at the meeting who complies with the
notice procedures set forth in this paragraph (c). Such nominations, other
than those made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary of the corporation
in accordance with the provisions of paragraph (b) of this Section 1.2. Such
stockholder's notice shall set forth (i) as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as director: (A)
the name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number
of shares of the corporation which are beneficially owned by such person,
(D) a description of all arrangements of understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nominations are to be made by the
stockholder, and (E) any other information relating to such person that is
required, in each case pursuant to Regulation 14A under the 1934 Act
(including without limitation such person's written consent to being named
in the proxy statement, if any, as a nominee and to serving as a director if
elected); and (ii) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 1.2. At
the request of the board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
PAGE (2)
- --------
1.3 Special Meetings.
(a) Special meetings of the stockholders of the corporation may be called,
for any purpose or purposes, by (i) the Chairman of the Board, (ii) the
President, or (iii) the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any
such resolution is presented to the Board for adoption) or (iv) by the
holders of shares entitled to cast not less than ten percent (10%) of the
votes at the meeting, and shall be held at such place, on such date, and at
such time as they or he shall fix.
(b) If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the Chairman of the Board, the President,
<PAGE> 5
any Vice President, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice.
The officer receiving the request shall cause notice to be promptly given to
the stockholders entitled to vote, in accordance with the provisions of
Section 7 of these By-Laws, that a meeting will be held not less than thirty-
five (35) nor more than sixty (60) days after the receipt of the request. If
the notice is not given within twenty (20) days after the receipt of the
request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph (b) shall be construed as limiting,
fixing, or affecting the time when a meeting of stockholders called by action
of the Board of Directors may be held.
PAGE (3)
- --------
1.4 Notice of Meetings. Except as otherwise provided by law, written notice
of each meeting of stockholders, whether annual or special, shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the
meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as
it appears on the records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
a period of at least 10 days prior to the meeting, at a place within the city
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time of the meeting, and
may be inspected by any stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares
of the capital stock of the corporation issued and outstanding and entitled
to vote at the meeting, present in person or represented by proxy, shall
constitute a quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any other
time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of
such meeting. It shall not be necessary to notify any stockholder of any
adjournment of less than 30 days if the time and place of the adjourned
meeting are announced at the meeting at which adjournment is taken, unless
after the adjournment a new record date is fixed for the adjourned meeting.
At the adjourned meeting, the corporation may transact any business which
might have been transacted at the original meeting.
PAGE(4)
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1.8 Voting and Proxies. Each stockholder shall have one vote for each share
of stock entitled to vote held of record by such stockholder and a
<PAGE> 6
proportionate vote for each fractional share so held, unless otherwise
provided in the Certificate of Incorporation. Each stockholder of record
entitled to vote at a meeting of stockholders, or to express consent or
dissent to corporate action in writing without a meeting, may vote or express
such consent or dissent in person or may authorize another person or persons
to vote or act for him by written proxy executed by the stockholder or his
authorized agent and delivered to the Secretary of the corporation. No such
proxy shall be voted or acted upon after three years from the date of its
execution, unless the proxy expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the holders
of a majority of the stock present or represented and voting on a matter (or
if here are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority
of the stock of that class present or represented and voting on a matter)
shall decide any matter to be voted upon by the stockholders at such meeting,
except when a different vote is required by express provision of law, the
Certificate of Incorporation or these By-Laws. Any election by stockholders
shall be determined by a plurality of the votes cast by the stockholders
entitled to vote at the election.
1.10 Action without Meeting.
(a) Any action required or permitted to be taken at any annual or special
meeting of stockholders of the corporation may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled
to vote on such action were present and voted. Prompt notice of the taking
of corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
(b) Notwithstanding the foregoing, no such action by written consent may be
taken following the effectiveness of the registration of any class of
securities of the corporation under the Securities Exchange Act of 1934,
as amended.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the corporation except as otherwise provided by law,
the Certificate of Incorporation or these By-Laws. In the event of a
vacancy in the Board of Directors, the remaining directors, except as
otherwise provided by law, may exercise the powers of the full Board until
the vacancy is filled.
PAGE(5)
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2.2 Number; Election and Qualification; Classes of Directors.
(a) The number of directors which shall constitute the whole Board of
Directors shall be determined by resolution of the stockholders or the Board
of Directors, but in no event shall be less than one. The number of directors
may be decreased at any time and from time to time either by the stockholders
or by a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or expiration
<PAGE> 7
of the term of one or more directors. The directors shall be elected at the
annual meeting of stockholders by such stockholders as have the right to vote
on such election. Directors need not be stockholders of the corporation.
(b) The Board of Directors shall be divided into three classes: Class I,
Class II,and Class III, which shall be as nearly equal in number as possible.
Each director shall serve for a term ending on the date of the third annual
meeting of stockholders following the annual meeting at which the director
was elected; provided, however, that each initial director in Class I shall
hold office until the annual meeting of stockholders in 1990; each initial
director in Class II shall hold office until the annual meeting of
stockholders in 1991; and each initial director in Class III shall hold office
until the annual meeting of stockholders in 1992. Notwithstanding the
foregoing provisions of this section, each director shall serve until his
successor is duly elected and qualified or until his death, resignation or
removal.
(c) In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal in
number as possible. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Newly
created directorships resulting from any increase in the number of directors
and any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled either (i) by the
affirmative vote of the holders of a majority of the voting power of the then
outstanding shares of the corporation's capital stock; or (ii) by the
affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the authorized Board of Directors. Any
director elected in accordance with the preceding sentence shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successors shall have been elected and qualified.
PAGE(6)
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2.3 Enlargement of the Board. The number of directors may be increased at
any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 Term of Office. If for any cause, the Directors shall not have been
elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose
in the manner provided in these By-Laws. No reduction of the authorized
number of Directors shall have the effect of removing any Director before
the Director's term of office expires, unless such removal is made pursuant
to the provisions of Section 2.4 hereof.
2.5 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President
or Secretary. Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of
some other event.
2.6 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board
<PAGE> 8
of Directors; provided that any director who is absent when such a
determination is made shall be given notice of the determination. A regular
meeting of the Board of Directors may be held without notice immediately after
and at the same place as the annual meeting of stockholders.
2.7 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board, President, two or more
directors, or by one director in the event that there is only a single
director in office.
2.8 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of
the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone
at least 48 hours in advance of the meeting, (ii) by sending a telegram or
telex, or delivering written notice by hand, to his last known business or
home address at least 48 hours in advance of the meeting, or (iii) by mailing
written notice to his last known business or home address at least 72 hours
in advance of the meeting. A notice or waiver of notice of a meeting of the
Board of Directors need not specify the purposes of the meeting.
PAGE(7)
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2.9 Meetings by Telephone Conference Calls. Directors or any members of any
committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation by such means shall
constitute presence in person at such meeting.
2.10 Quorum. A majority of the total number of the whole Board of Directors
shall constitute a quorum at all meetings of the Board of Directors. In the
event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such
director so disqualified; provided, however, that in no case shall less than
one-third (1/3) of the number so fixed constitute a quorum. In the absence
of a quorum at any such meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice other than
announcement at the meeting, until a quorum shall be present.
2.11 Action at Meeting. At any meeting of the Board of Directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.
2.12 Action by Consent. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the
written consents are filed with the minutes of proceedings of the Board or
committee.
2.13 Removal. Any director, or the entire Board of Directors, may be removed
from office, (a) with cause by the affirmative vote of the holders of a
majority of the voting power of all of the then-outstanding shares of the
Company's capital stock, voting together as a single class; or (b) without
<PAGE> 9
cause, by the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the voting power of the Company's capital
stock.
2.14 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
the place of any such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the Board of Directors and subject
to the provisions of the General Corporation Law of the State of Delaware,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers
which may require it. Each such committee shall keep minutes and make such
reports as the Board of Directors may from time to time request. Except as
the Board of Directors may otherwise determine, any committee may make rules
for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-Laws for the Board of
Directors.
PAGE(8)
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2.15 Compensation of Directors. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment
shall preclude any director from serving the corporation or any of its parent
or subsidiary corporations in any other capacity and receiving compensation
for such service.
ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of
the Board, a Vice-Chairman of the Board, and one or more Vice Presidents,
Assistant Treasurers, and Assistant Secretaries. The Board of Directors
may appoint such other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the
Board of Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in
the vote choosing or appointing him, or until his earlier death, resignation
or removal.
<PAGE> 10
PAGE(9)
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3.5 Resignation and Removal. Any officer may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer
for any period following his resignation or removal, or any right to damages
on account of such removal, whether his compensation be by the month or by
the year or otherwise, unless such compensation is expressly provided in a
duly authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any
office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President,
Treasurer and Secretary. Each such successor shall hold office for the
unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate the
Chairman of the Board as Chief Executive Officer. If the Board of
Directors appoints a Chairman of the Board, he shall perform such duties
and possess such powers as are assigned to him by the Board of Directors.
If the Board of Directors appoints a Vice-Chairman of the Board, he shall,
in the absence or disability of the Chairman of the Board, perform the
duties and exercise the powers of the Chairman of the Board and shall perform
such other duties and possess such other powers as may from time to time be
vested in him by the Board of Directors.
3.8 President. The President shall be the Chief Operating Officer of the
corporation. Unless the Board of Directors has designated the Chairman
of the Board as Chief Executive Officer, the President shall also be the
Chief Executive Officer of the corporation. The President shall, subject
to the direction of the Board of Directors, have general charge and
supervision of the business of the corporation. Unless otherwise provided
by the Board of Directors, he shall preside at all meetings of the
stockholders, if he is a director, at all meetings of the Board of Directors.
The President shall perform such other duties and shall have such other powers
as the Board of Directors may from time to time prescribe.
PAGE(10)
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3.9 Vice Presidents. Any Vice President shall perform such duties and possess
such powers as the Board of Directors or the President may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform
the duties of the President and when so performing shall have all the powers
of and be subject to all the restrictions upon the President. The Board of
Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors.
<PAGE> 11
3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
duties and shall have such powers as the Board of Directors or the President
may from time to time prescribe. In addition, the Secretary shall perform
such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices
of all meetings of stockholders and special meetings of the Board of
Directors, to attend all meetings of stockholders and the Board of Directors
and keep a record of the proceedings, to maintain a stock ledger and prepare
lists of stockholders and their addresses as required, to be custodian of
corporate records and the corporate seal and to affix and attest to the same
on documents.
Any Assistant Secretary shall perform such duties and possess such powers as
the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate
a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him
by the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these By-Laws,
to disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers as
the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
PAGE(11)
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3.12 Salaries. Officers of the corporation shall be entitled to such salaries,
compensation or reimbursement as shall be fixed or allowed from time to time
by the Board of Directors.
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and subject
to the provisions of the Certificate of Incorporation, the whole or any part
of any unissued balance of the authorized capital stock of the corporation or
the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for
such consideration and on such terms as the Board of Directors may determine.
<PAGE> 12
4.2 Certificates of Stock. Every holder of stock of the corporation shall be
entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the
name of the corporation by, the Chairman or Vice-Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction on
transfer pursuant to the Certificate of Incorporation, the By-Laws, applicable
securities laws or any agreement among any number of shareholders or among
such holders and the corporation shall have conspicuously noted on the face or
back of the certificate either the full text of the restriction or a statement
of the existence of such restriction.
PAGE(12)
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4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to
the corporation or its transfer agent of the certificate representing such
shares properly endorsed or accompanied by a written assignment or power of
attorney properly executed, and with such proof of authority or the
authenticity of signature as the corporation or its transfer agent may
reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the corporation shall
be entitled to treat the record holder of stock as shown on its books as
the owner of such stock for all purposes, including the payment of dividends
and the right to vote with respect to such stock, regardless of any transfer,
pledge or other disposition of such stock until the shares have been
transferred on the books of the corporation in accordance with the
requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity
as the Board of Directors may require for the protection of the corporation or
any transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a record
date for the determination of the stockholders entitled to notice of or to
vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights in respect
of any change, conversion or exchange of stock, or for the purpose of any
other lawful action. Such record date shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior
to any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the
day on which the meeting is held. The record date for determining
<PAGE> 13
stockholders entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is necessary,
shall be the day on which the first written consent is expressed. The record
date for determining stockholders for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the resolution
relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
PAGE (13-16)
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ARTICLE 5 - Indemnification
5.1 Directors. The corporation shall indemnify its directors and executive
officers to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may limit the
extent of such indemnification by individual contracts with its directors
and executive officers; and, provided, further, that the corporation shall
not be required to indemnify any director or executive officer in connection
with any proceeding (or part thereof) initiated by such person or any
proceeding by such person against the corporation or its directors, officers,
employees or other agents unless (a) such indemnification is expressly
required to be made by law, (b) the proceeding was authorized by the Board
of Directors of the corporation or (c) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in
the corporation under the Delaware General Corporation Law.
5.2 Officers, Employees and Other Agents. The corporation shall have power
to indemnify its other officers, employees and other agents as set forth in
the Delaware General Corporation Law.
5.3 Good Faith.
(a) For purposes of any determination under this By-Law, a director or
executive officer shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
to have had no reasonable cause to believe that his conduct was unlawful,
if his action is based on information, opinions, reports and statements,
including financial statements and other financial data, in each case
prepared or presented by:
(i) one or more officers or employees of the corporation whom the director
or executive officer believed to be reliable and competent in the
matters presented;
(ii) counsel, independent accountants or other persons as to matters which
the director or executive officer believed to be within such person's
professional competence; and
(iii) with respect to a director, a committee of the Board upon which such
director does not serve, as to matters within such Committee's
designated authority, which committee the director believes to merit
confidence;
<PAGE> 14
so long as, in each case, the director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.
(b) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding,
that he had reasonable cause to believe that his conduct was unlawful.
(c) The provisions of this Section 5.3 shall not be deemed to be exclusive
or to limit in any way the circumstances in which a person may be deemed to
have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
5.4 Expenses. The corporation shall advance, prior to the final disposition
of any proceeding, promptly following request therefor, all expenses incurred
by any director or executive officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not
entitled to be indemnified under this By-Law or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 5.5 of this By-Law, no advance shall be made by the corporation if
a determination is reasonably and promptly made (a) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties
to the proceeding, or (b) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, that the facts known to the decision
making party at the time such determination is made demonstrate clearly and
convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.
5.5 Enforcement. Without the necessity of entering into an express contract,
all rights to indemnification and advances to directors and executive officers
under this By-Law shall be deemed to be contractual rights and be effective
to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to
indemnification or advances granted by this By-Law to a director or
executive officer shall be enforceable by or on behalf of the person
holding such right in any court of competent jurisdiction if
(a) the claim for indemnification or advances is denied, in whole or in part,
or
(b) no disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole
or in part, shall be entitled to be paid also the expense of prosecuting his
claim. The corporation shall be entitled to raise as a defense to any such
action that the claimant has not met the standards of conduct that make it
permissible under the Delaware General Corporation Law for the corporation
to indemnify the claimant for the amount claimed. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel
or its stockholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination
by the corporation (including its Board of Directors, independent legal
<PAGE> 15
counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct.
5.6 Non-Exclusivity of Rights. The rights conferred on any person by this
By-Law shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or
all of its directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
5.7 Survival of Rights. The rights conferred on any person by this
By-Law shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
5.8 Insurance. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this By-Law.
5.9 Amendments. Any repeal or modification of this By-Law shall only be
prospective and shall not affect the rights under this By-Law in effect at
the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
5.10 Saving Clause. If this By-Law or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each director and executive
officer to the full extent not prohibited by any applicable portion of this
By-Law that shall not have been invalidated, or by any other applicable law.
5.11 Certain Definitions. For the purposes of this By-Law, the following
definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall include,
without limitation, the investigation, preparation, prosecution, defense,
settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines, amounts
paid in settlement or judgment and any other costs and expenses of any nature
or kind incurred in connection with any proceeding.
(c) The term the "corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
<PAGE> 16
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this By-Law with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(d) References to a "director," "officer," "employee," or "agent" of the
corporation shall include, without limitation, situations where such
person is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(e) References to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the corporation" as referred to in this By-Law.
PAGE(17)
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ARTICLE 6 - Restrictions on Transfer of Common Stock
6.1 Restrictions on Transfer. No stockholder shall sell, pledge, transfer,
donate, assign or otherwise dispose of (collectively "transfer"), whether
voluntarily or by operation of law, any shares of Common Stock of the
corporation held by such stockholder, or any beneficial interest therein,
except as permitted by this Article 6. The provisions of this Article 6
shall not apply to any shares of Preferred Stock of the corporation or any
shares of Common Stock of the corporation issued upon the conversion of
such Preferred Stock.
6.2 Notice and Offer.
(a) If any stockholder intends to transfer any shares of Common Stock of
the corporation ("Shares"), he shall deliver to the corporation a written
notice ("Notice") of his intention to transfer such Shares, setting forth
in reasonable detail: (i) the proposed price, (ii) the identity of the
proposed transferee, (iii) the other terms and conditions of the proposed
transfer of such Shares, and (iv) an offer to sell such Shares to the
corporation as provided in this Article 6. The stockholder intending to
transfer such Shares is hereinafter referred to as the "Offering Stockholder"
and the shares so offered are hereinafter referred to as the "Offered Shares".
(b) The corporation shall have the right to accept the Offering Stockholder's
offer, in whole or in part, at any time during the 30-day period following its
receipt of the Offering Stockholder's Notice. If the corporation fails to
respond to such offer within such 30-day period, it shall be deemed to have
rejected the offer. The corporation shall be entitled to purchase all or
any of the Offered Shares from the Offering Stockholder at the same price and
on the same terms and conditions as the Offering Stockholder proposes to
transfer the Offered Shares to the proposed transferee identified in the
Notice.
<PAGE> 17
(c) Unless the Offering Stockholder and the corporation otherwise agree, the
closing of the purchase of the Offered Shares to be purchased by the
corporation shall take place at the principal offices of the corporation at
10:00 a.m. on the tenth day after the expiration of the 30-day period
referred to in subsection (b) above. At such closing, the Offering
Stockholder shall tender the Shares to be sold to the corporation, together
with appropriate instruments of transfer endorsed to the corporation, and the
corporation shall tender a bank check in the amount of the purchase price
therefor.
(d) If all of the Offered Shares offered by the Offering Stockholder are not
purchased by the corporation pursuant to this Article 6, the remaining
Offered Shares not purchased by the corporation may be transferred by the
Offering Stockholder to the proposed transferee identified by the Offering
Stockholder in his Notice on terms and conditions which are no more favorable
to such transferee than the terms stated in such Notice, any time within a
period of 120 days after the earlier of the rejection by the corporation of
the Offering Stockholder's offer or the expiration of the 30-day period
referred to in subsection (b) above. If any such Offered Shares are
transferred to the transferee named in the Offering Stockholder's Notice,
provided in this Article 6, the restrictions on transfer contained in this
Article 6 shall again be applicable to the Shares so acquired by such
transferee, and such transferee shall not again transfer such Shares without
first offering such Shares to the corporation in accordance with this
Article 6.
PAGE(18)
6.3 Effect of Failure to Purchase Shares and of Tender of Purchase Price;
Prohibited Transfers.
(a) Any portion of the Offered Shares which is not purchased by the
corporation or by the proposed transferee pursuant to Section 6.2 above
may be retained by the Offering Stockholder, but shall remain subject to
the restrictions on transfer set forth herein and may not thereafter be
transferred unless they are again offered to the corporation pursuant to
this Article 6.
(b) After tender to an Offering Stockholder of the purchase price of any
Shares by the corporation in accordance with the provisions of this Article
6, the corporation shall not pay any dividends to the Offering Stockholder or
permit it to exercise any privileges of a stockholder of the corporation with
respect to such Shares, but shall treat the corporation as the owner of the
Shares to the extent permitted by law.
(c) If any transfer of Shares is made or attempted by a stockholder contrary
to the terms of this Article 6, the corporation shall have the right to
purchase the Shares from the transferee at any time before or after the
transfer, at the price and on the terms established herein and, in such
event, the transferee shall be bound by all the terms and provisions of this
Article 6. In addition to any other legal or equitable rights which it may
have, the corporation may enforce its rights by specific performance to the
extent permitted by law. The corporation may refuse for any purpose to
recognize any transferee who receives Shares contrary to the provisions of
this Article 6 as a stockholder of the corporation any may retain and/or
recover all dividends on such Shares which were paid or payable subsequent
to the date on which the prohibited transfer was made or attempted.
<PAGE> 18
PAGE(19)
- --------
6.4 Exceptions to Transfer Restrictions. Notwithstanding anything to the
contrary in this Article 6, the restrictions upon transfer set forth in this
Article 6 shall not apply to any transfer of Shares by a stockholder to (i)
such stockholder's heirs, executors, administrators or other personal
representatives upon the death of such stockholder; (ii) the spouse, children
or grandchildren of the stockholder of a trust or trusts for the benefit of
such spouse, children or grandchildren, or (iii) if such stockholder is a
partnership, any partner or partners of such partnership, provided that these
restrictions on transfer shall continue to apply to any Shares received by
any such permitted transferee and such permitted transferee shall not again
transfer such Shares without first offering such Shares to the corporation
in accordance with this Article 6 (except as otherwise provided in this
Section 6.4).
6.5 Termination of Restrictions. All restrictions contained in this
Article 6 shall terminate in their entirety on (and shall not apply to
any transfer of Shares in connection with) the earliest to occur of the
following: (i) the merger or consolidation of the corporation with or into
another corporation if the corporation is not the survivor of such merger
or consolidation, or the sale of all or substantially all of the assets of
the corporation, or (ii) the completion of the first underwritten public
offering of Common Stock pursuant to an effective registration statement
under the Securities Act of 1933 resulting in at least $2,000,000 of gross
proceeds to the corporation.
6.6 Stock Restriction Agreements. Notwithstanding anything to the contrary
herein, the restrictions contained in this Article 6 shall not apply to any
sale of Shares by an employee of the corporation to the corporation pursuant
to a Stock Restriction Agreement between the corporation and such employee,
and the restrictions contained in any such Agreement are in addition to,
and not in lieu of, any restrictions on transfer set forth in this Article 6.
PAGE(20)
- --------
6.7 Restrictive Legend. Until the termination of the restrictions set forth
in this Article 6, all certificates representing outstanding shares of
Common Stock of the Corporation shall have affixed thereto a legend
substantially in the following form:
"The shares of stock represented by this certificate are subject to certain
restrictions on transfer set forth in the By-Laws of the corporation, said
By-Laws being available for inspection without charge at the offices of the
Treasurer or the Company.
6.8 Waiver. The restrictions on transfer set forth in this Article 6 may be
waived in any particular instance or instances by a majority of the Board of
Directors of the corporation.
ARTICLE 7 - General Provisions
7.1 Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in
each year.
<PAGE> 19
7.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
7.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or
any other available method, whether before, at or after the time stated in
such waiver, or the appearance of such person or persons at such meeting in
person or by proxy, shall be deemed equivalent to such notice.
7.4 Voting of Securities. Except as the directors may otherwise designate,
the President or Treasurer may waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for this corporation
(with or without power of substitution) at, any meeting of stockholders or
shareholders of any other corporation or organization, the securities of
which may be held by this corporation.
7.5 Evidence of Authority. A certificate by the Secretary, or an Assistant
Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of
the corporation shall as to all persons who rely on the certificate in good
faith be conclusive evidence of such action.
PAGE(21)
- --------
7.6 Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to
time.
7.7 Transactions with Interested Parties. No contract or transaction between
the corporation and one or more of the directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors
or officers, or have a financial interest, shall be void or voidable solely
for this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors
or the committee, and the Board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less
than a quorum;
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
<PAGE> 20
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
7.8 Severability. Any determination that any provision of these By-Laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
7.9 Pronouns. All pronouns used in these By-Laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of
the person or persons may require.
PAGE(22)
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ARTICLE 8 - Amendments
8.1 By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
8.2 By the Stockholders. These By-Laws may be altered, amended or repealed
or new by-laws may be adopted by the affirmative vote of the holders of a
majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or
at any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
Exhibit 10.19 - 1996 OFFICER BONUS PLAN
The Company has adopted a 1996 Officer Bonus Plan under which all executive
officers are awarded cash bonuses based on the Company's operating results.
The respective bonus payments are calculated with reference to the actual
pre-tax income (and revenue for the Senior Vice President Sales and Customer
Support) results as measured against the 1995 Operating Plan presented
and approved at the Board of Directors meeting on January 26, 1996. The
pre-tax income level is measured prior to any accruals reflecting the
Company's bonus payments. The pre-tax income bonus payments are calculated
on a linear basis and are not capped at the "on-plan" level. Revenue
commissions are calculated at .04% of annual revenue without regard to a cap.
Payment of the pre-tax income bonuses are payable in February 1997 and
payment of the revenue commissions is made monthly at the above rate upon the
qualification of the revenue amount.
Exhibit 21.1 - LIST OF SUBSIDIARIES
1. Exabyte FSC Ltd.
2. Nihon Exabyte Corporation
3. Exabyte (Scotland) Ltd.
4. Exabyte (Europe) B.V.
5. Exabyte Magnetics GmbH
Exhibit 23.0 - CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-33414 and
33-42182) of Exabyte Corporation of our report dated January 17, 1996 appearing
on page 36 of this Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Boulder, Colorado
March 21, 1996
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<ALLOWANCES> 6,832
<INVENTORY> 44,169
<CURRENT-ASSETS> 196,932
<PP&E> 88,665
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0
<COMMON> 22
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<TOTAL-LIABILITY-AND-EQUITY> 250,336
<SALES> 374,147
<TOTAL-REVENUES> 374,147
<CGS> 311,891
<TOTAL-COSTS> 311,891
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<LOSS-PROVISION> 41,379
<INTEREST-EXPENSE> 330
<INCOME-PRETAX> (23,028)
<INCOME-TAX> (10,593)
<INCOME-CONTINUING> (12,435)
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