<PAGE> 1
- -----------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 27, 1997
OR
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________.
Commission File No. 0-18033
EXABYTE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0988566
(State of Incorporation) (I.R.S. Employer Identification No.)
1685 38th Street
Boulder, Colorado 80301
(Address of principal executive offices, including zip code)
(303) 442-4333
(Registrant's Telephone Number, including area code)
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 / /
As of November 3, 1997, there were 22,380,689 shares outstanding of the
Registrant's Common Stock (par value $0.001 per share).
- -----------------------------------------------------------------------------
<PAGE> 2
EXABYTE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets --
September 27, 1997 and December 28, 1996......... 3
Consolidated Statements of Operations --
Three and Nine Months Ended September 27, 1997
and September 28, 1996 (Unaudited)............... 4-5
Consolidated Statements of Cash Flows --
Nine Months Ended September 27, 1997 and
September 28, 1996 (Unaudited)................... 6-7
Notes to Consolidated Financial Statements
(Unaudited)...................................... 8-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................... 10-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 16-30
<PAGE> 3
PART I Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 43,642 $ 46,223
Short-term investments.................... 4,000 20,600
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $7,397 and
$7,315, respectively.................... 54,062 56,414
Inventories, net.......................... 50,628 55,765
Deferred income taxes..................... 15,134 14,172
Income tax refund receivable.............. 13,954 --
Other current assets...................... 3,492 3,211
-------- --------
Total current assets................. 184,912 196,385
Property and equipment, net.................... 40,388 45,187
Deferred income taxes.......................... 8,228 10,055
Other assets................................... 2,083 4,499
-------- --------
$235,611 $256,126
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $16,264 $18,916
Accrued liabilities....................... 25,791 31,900
Accrued income taxes...................... 2,050 1,007
Current portion of long-term obligations.. 786 832
-------- --------
Total current liabilities............ 44,891 52,655
Long-term obligations.......................... 2,979 3,458
-------- --------
Total liabilities.................... 47,870 56,113
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; 22,372 and 22,184 shares
issued and outstanding, respectively.... 22 22
Capital in excess of par value............ 65,071 64,124
Treasury stock, at cost, 15 shares
outstanding for both periods............. (9) (9)
Retained earnings......................... 122,657 135,876
-------- --------
Total stockholders' equity........... 187,741 200,013
-------- --------
$235,611 $256,126
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 4
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
Sept. 27, Sept. 28,
1997 1996
------- -------
<S> <C> <C>
Net sales.................................... $78,474 $92,741
Cost of goods sold........................... 79,643 66,079
------- -------
Gross profit................................. (1,169) 26,662
Operating expenses:
Selling, general and administrative..... 15,612 11,921
Research and development................ 10,463 9,248
------- -------
Income (loss) from operations................ (27,244) 5,493
Other income, net............................ 38 293
------- -------
Income (loss) before income taxes............ (27,206) 5,786
Provision (benefit) for income taxes......... (11,914) 2,083
------- -------
Net income (loss)............................ $(15,292) $ 3,703
======= =======
Net income (loss) per share.................. $(0.68) $0.17
======= =======
Common and common equivalent shares used
in the calculation of net income (loss)
per share............................... 22,356 22,302
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 5
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
Sept. 27, Sept. 28,
1997 1996
------- -------
<S> <C> <C>
Net sales.................................... $261,043 $277,023
Cost of goods sold........................... 213,281 199,998
------- -------
Gross profit................................. 47,762 77,025
Operating expenses:
Selling, general and administrative..... 43,434 34,063
Research and development................ 28,702 27,420
------- -------
Income (loss) from operations................ (24,374) 15,542
Other income, net............................ 309 1,126
------- -------
Income (loss) before income taxes............ (24,065) 16,668
Provision (benefit) for income taxes......... (10,847) 6,000
------- -------
Net income (loss)............................ $(13,218) $ 10,668
======= =======
Net income (loss) per share.................. $(0.59) $0.48
======= =======
Common and common equivalent shares used
in the calculation of net income (loss)
per share............................... 22,308 22,288
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 6
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
Sept. 27, Sept. 28,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $263,842 $269,773
Cash paid to suppliers and employees.... (272,948) (265,324)
Interest received....................... 1,655 2,161
Interest paid........................... (469) (393)
Income taxes paid....................... (1,509) (2,609)
Income tax refund received.............. 432 4,160
Net cash provided (used) by -------- --------
operating activities............. (8,997) 7,768
-------- --------
Cash flows from investing activities:
Sale of short-term
investments, net...................... 16,600 21,800
Capital expenditures.................... (9,765) (12,704)
Net cash provided by -------- --------
investing activities............. 6,835 9,096
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock.......................... 824 3,826
Principal payments under long-term
obligations........................... (1,243) (698)
Net cash provided (used) by -------- --------
financing activities............. (419) 3,128
-------- --------
Net increase (decrease) in cash and cash
equivalents............................. (2,581) 19,992
Cash and cash equivalents at beginning
of period............................... 46,223 40,137
-------- --------
Cash and cash equivalents at end
of period............................... $ 43,642 $ 60,129
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 7
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
Sept. 27, Sept. 28,
1997 1996
---------- ---------
<S> <C> <C>
Reconciliation of net income (loss) to net cash
provided (used) by operating activities:
Net income (loss)......................... $(13,218) $10,668
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation, amortization
and other............................. 17,445 12,200
Deferred income tax provision........... 865 1,726
Provision for losses and reserves
on accounts receivable................ 10,720 6,867
Change in assets and liabilities:
Accounts receivable....................... (8,368) (14,552)
Inventories............................... 5,137 (12,323)
Income tax receivable..................... (13,954) --
Other current assets...................... (281) 5,240
Other assets.............................. 252 (1,545)
Accounts payable.......................... (2,652) 4,421
Accrued liabilities....................... (6,109) (3,571)
Accrued income taxes...................... 1,166 (1,363)
-------- -------
Net cash provided (used) by
operating activities................ $ (8,997) $ 7,768
======== =======
Supplemental schedule of non-cash
investing and financing activities:
Income tax benefit of disqualifying
dispositions of common stock............ $ 122 $ 186
Note payable issued to purchase
software licenses....................... 626 --
Capital lease obligations................. 137 --
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 8
EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1--ACCOUNTING PRINCIPLES
The consolidated balance sheet as of September 27, 1997, the consolidated
statements of operations for the three and nine months ended September 27,
1997 and September 28, 1996, as well as the consolidated statements of cash
flows for the nine months ended September 27, 1997 and September 28, 1996,
have been prepared by the Company without an audit. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation thereof, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with financial
statements and notes thereto included in the Company's December 28, 1996
annual report to stockholders heretofore filed with the Commission as Part
II to the Company's Annual Report on Form 10-K. The results of operations
for interim periods presented are not necessarily indicative of the operating
results for the full year.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." SFAS No. 128, which is effective for periods
ending after December 15, 1997, requires changes in the computation,
presentation, and disclosure of earnings per share. All prior period
earnings per share data must be restated to conform with the provisions of
SFAS No. 128. The Company will adopt SFAS No. 128 for the year ended
January 3, 1998, but does not expect the new accounting standard to have
a material impact on the Company's reported financial results.
Note 2--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
---------- ----------
(In thousands)
<S> <C> <C>
Raw materials and component parts............ $33,048 $34,865
Work-in-process.............................. 2,461 2,692
Finished goods............................... 15,119 18,208
------- -------
$50,628 $55,765
======= =======
</TABLE>
<PAGE> 9
Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
---------- ---------
(In thousands)
<S> <C> <C>
Wages and employee benefits.................. $ 8,320 $ 8,494
Warranty and other related costs............. 10,273 18,373
Other........................................ 7,198 5,033
------- -------
$25,791 $31,900
======= =======
</TABLE>
Note 4--NET INCOME (LOSS) PER SHARE
Net income per 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.
Note 5--RESTRUCTURING
During the third quarter of 1997, the Company incurred $17.9 million in
pre-tax charges related to global restructuring and repositioning. These
special charges resulted from a reduction in the size of the workforce, the
termination of certain development programs, and the phase-out of some
existing product lines. Charges include $16.2 million in inventory-frelated
charges and product repositioning, and $1.7 million related to workforce
reductions.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This Form 10-Q contains forward-looking statements within the context of
Section 21E of the Securities Exchange Act of 1934, as amended. Each and
every forward-looking statement involves a number of risks and uncertainties,
including those risk factors specifically delineated and described in Part 1,
Item 1 of the Company's 1996 Form 10-K, filed March 20, 1997 ("1996 Form
10-K"). The actual results that the Company achieves may differ materially
from any forward-looking statements due to such risks and uncertainties.
The Company has identified by *bold-face* various sentences within this Form
10-Q which contain such forward-looking statements, and words such as
"believes," "anticipates," "expects," "intends," and similar expressions
are intended to identify forward-looking statements, but are not the
exclusive means of identifying such statements. The Company undertakes no
obligation to revise any forward-looking statements in order to reflect events
or circumstances that may arise after the date of this report.
RESTRUCTURING CHARGES
During the third quarter of 1997, the Company incurred $17.9 million in
pre-tax charges related to global restructuring and repositioning. These
special charges resulted from a reduction in the size of the workforce, the
termination of certain development programs, and the phase-out of some
existing product lines. Charges include $16.2 million in inventory-related
charges and product repositioning, and $1.7 million related to workforce
reductions. These charges reduced earnings per share for the third quarter
and first nine months of 1997 by $0.41 in both periods. Further discussions
of these charges have been included elsewhere in management's discussion and
analysis as deemed necessary.
YEAR 2000 COMPLIANCE
The Company is currently evaluating the risks and costs associated with Year
2000 compliance. The Company is in the early stage of this evaluation and
there can be no assurance that the costs of compliance will not result in a
material charge to the Company.
RESULTS OF OPERATIONS
The following table sets forth unaudited operating results for the three and
nine month periods ended September 27, 1997 and September 28, 1996 as a
percentage of sales in each of these periods. This data has been derived
from the unaudited consolidated financial statements.
<PAGE> 11
<TABLE>
<CAPTION>
Three Months Ended
---------------------
Sept. 27, Sept. 28,
1997 1996
------ ------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 101.5 71.3
------ ------
Gross margin................................. (1.5) 28.7
Operating expenses:
Selling, general and administrative........ 19.9 12.8
Research and development................... 13.3 10.0
------ ------
Income (loss) from operations................ (34.7) 5.9
Other income, net............................ 0.0 0.3
------ ------
Income (loss) before income taxes............ (34.7) 6.2
Provision (benefit) for income taxes......... (15.2) 2.2
------ ------
Net income (loss)............................ (19.5)% 4.0%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
Sept. 27, Sept. 28,
1997 1996
------ ------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 81.7 72.2
------ ------
Gross margin................................. 18.3 27.8
Operating expenses:
Selling, general and administrative........ 16.6 12.3
Research and development................... 11.0 9.9
------ ------
Income (loss) from operations................ (9.3) 5.6
Other income, net............................ 0.1 0.4
------ ------
Income (loss) before income taxes............ (9.2) 6.0
Provision (benefit) for income taxes......... (4.1) 2.1
------ ------
Net income (loss)............................ (5.1)% 3.9%
====== ======
</TABLE>
<PAGE> 12
NET SALES
Net sales for the three and nine month periods ended September 27, 1997 were
$78.5 million and $261.0 million, respectively. Sales for these periods
represented decreases from the same periods in the prior year. Net sales for
the third quarter decreased by 15.3% from $92.7 million for the same period in
1996. Net sales for the year-to-date decreased 5.8% from $277.0 for the same
period in 1996.
During the first nine months of 1997, sales of the Company's half-high drives
and current library products represented 77.9% of revenue. This is a decrease
from 79.2% for the same period in 1996. Sales of minicartridge products
increased to 5.6% of revenue from 5.1% for the same period in the previous
year. Consumables and service revenues increased in absolute dollars and as
a percentage of sales for the first nine months of 1997 compared to the same
period in 1996.
The remainder of sales during the first nine months of 1997 and 1996, along
with a recap of the products described above are listed in the following
table.
PRODUCT MIX TABLE
(As a Percentage of Net Sales)
<TABLE>
<CAPTION>
Nine Months Ended
------------------
Sept. 27, Sept. 28,
1997 1996
------- -------
<S> <C> <C>
8mm half-high drives:
8205, 8505, 8700, Eliant(TM) 820
and Mammoth.......................... 58.7% 65.2%
Libraries:
10h, 210, 220, 440, 480 and DLT...... 19.2 14.0
Minicartridge products:
TR-3, TR-4i, Eagle(TM) 96, 2501
and Nest products.................... 5.6 5.1
Other end-of-life drives and libraries. 0.5 1.9
Consumables............................ 14.4 11.1
Service, spares and other.............. 6.5 5.8
Sales allowances....................... (4.9) (3.1)
------ ------
100.0% 100.0%
====== ======
</TABLE>
<PAGE> 13
In 1997, the Company recharacterized its customer base into the following
categories: original equipment manufacturers ("OEMs"), non-system OEMs
("NSOs"), resellers, retailers and end-users. Previously, the Company had
characterized its customers as OEMs, NSOs, distributors, solution providers
and end-users. All historical amounts presented herein have been
recharacterized to reflect the current classifications.
The customer mix during the third quarter of 1997 shifted to OEMs from NSOs,
resellers and retailers when compared to the same period in 1996. For the
first nine months of 1997, sales shifted to resellers from NSOs, OEMs and
end-users over the same period in the prior year. OEM and reseller customers
represented the majority of sales in the third quarter and first nine months
of both 1997 and 1996. The following table shows the customer mix for the
third quarter and first nine months of 1997 and 1996.
CUSTOMER MIX TABLE
(As a Percentage of Net Sales)
<TABLE>
<CAPTION>
Three Months Ended
------------------
Sept. 27, Sept. 28,
1997 1996
------- -------
<S> <C> <C>
Customer Type:
- ------------------
OEM.................................... 46.4% 38.8%
Reseller............................... 46.2 49.3
NSO.................................... 3.2 6.6
Retailer............................... (0.2) 1.3
End-user............................... 4.4 4.0
------ ------
100.0% 100.0%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
------------------
Sept. 27, Sept. 28,
1997 1996
------- -------
<S> <C> <C>
Customer Type:
- ------------------
OEM.................................... 43.0% 44.5%
Reseller............................... 47.6 44.9
NSO.................................... 4.4 6.8
Retailer............................... 0.8 0.4
End-user............................... 4.2 3.4
------ ------
100.0% 100.0%
====== ======
</TABLE>
<PAGE> 14
During the third quarter and first nine months of 1997, one OEM customer
accounted for 15% and 14% of sales, respectively, compared to 9% and 11%,
respectively for the comparable periods in 1996. For these same periods,
another OEM customer accounted for 12% and 11% of sales, respectively,
compared to 15% and 16%, respectively, for the comparable periods in 1996.
A third OEM customer accounted for 11% and 11% of sales during the third
quarter and first nine months of 1997. No other customers accounted for 10%
or more of sales in any of these periods. *Since these and other major
customers also sell competing products and continually review new
technologies, there can be no assurance that sales to these or any other
customers will continue to represent the same portion of the Company's future
revenue.*
GROSS MARGIN
Gross margin percentages for the third quarter and first nine months of 1997
decreased to -1.5% and 18.3%, respectively, compared to 28.7% and 27.8%,
respectively, for the comparable periods in 1996. The 1997 margins include
third quarter special charges of $15.7 million which reduced them to the
figures shown from 18.3% and 24.2%, respectively, for the third quarter and
first nine months of 1997. Decreases in gross margin percentages are due to
the impact of start-up manufacturing costs on several new products introduced
in 1997, increased sales of lower margin minicartridge products, and increased
program expenditures directed at the Company's reseller, NSO and retail
customers. These impacts were partially offset by lower warranty costs in
1997 versus 1996 and the impact of a stronger dollar versus the yen, which
reduced the cost of certain Japanese components.
OPERATING EXPENSES
Selling, general and administrative expenses increased as a percentage of
sales to 19.9% and 16.6%, respectively, for the third quarter and first nine
months of 1997 compared to 12.8% and 12.3%, respectively, for the same periods
in 1996. Represented in absolute dollars, the increases for the quarter and
year-to-date are $3.7 million and $9.4 million, respectively. The increases
in spending for the quarter and year-to-date periods are due to increased
marketing expenditures on products released during 1997 and a corporate
branding awareness program. These expenses were also modestly impacted
by the opening of subsidiaries in Singapore and Canada during the latter part
of 1996 and early part of 1997. Additionally, third quarter special charges
increased these expenses for the third quarter and first nine months of 1997
by 1.3% and 0.3%, respectively, as a percentage of revenue.
Research and development expenditures increased to 13.3% and 11.0% of sales,
respectively, for the third quarter and first nine months of 1997 compared to
10.0% and 9.9%, respectively, for the comparable periods in 1996. Represented
in absolute dollars, the increases for the quarter and year-to-date are $1.2
million and $1.3 million, respectively. These increases are due to increased
spending on new product development efforts. Third quarter special charges
increased these expenses for the third quarter and first nine months of 1997
by 2.0% and 0.6%, respectively.
OTHER INCOME (EXPENSE), NET
Other income (expense), net, consists primarily of interest income and
expense, state franchise taxes, foreign currency gains and losses, the
translation impact of the Company's foreign subsidiaries' balance sheets and
other miscellaneous items.
<PAGE> 15
TAXES
The provision for income taxes for the first nine months of 1997 was 45.1% of
income before taxes compared to 36.0% for the comparable period in 1996. The
tax rate in the third quarter was positively impacted by the effect of
additional research and experimentation tax credits claimed for the years
1993-1996. *The effective tax rate for fiscal 1997 is expected to be
approximately 45%.*
NET INCOME (LOSS)
Net loss per share was $0.68 and $0.59, respectively, for the third quarter
and first nine months of 1997. This compares to a net income per share of
$0.17 and $0.48, respectively, for the same periods in 1996. The decreases
are due to lower gross margins and higher operating expenses resulting, in
part, from the special charges related to a reduction in the size of the
workforce, the termination of certain development programs, and the phase-out
of some existing product lines. These charges increased the Company's net
loss per share for the third quarter and first nine months of 1997 by $0.41
for each period. Lower revenues were also a factor.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1997, the Company expended $9.0 million of
cash on operating activities, generated $800,000 in proceeds from the sale
of common stock and expended $9.8 million for capital equipment and $1.2
million on long-term obligations. Together, these activities resulted in a
net decrease in the combined balance of cash and short-term investments of
$19.2 million to a quarter-ending balance of $47.6 million. The Company's
working capital decreased to $140.0 million at September 27, 1997 from $143.7
million at December 28, 1996.
The Company has a $7.5 million bank line of credit which expires April 30,
1998. Under this agreement, borrowings under the line are limited to 80%
of eligible accounts receivable plus 25% of eligible inventory (limited to
$3,000,000). On November 3, 1997 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
maintain positive cash flow on a quarterly basis. As a result of the loss
for the quarter and year-to-date, the Company was in technical violation of
this cash flow covenant. This violation was subsequently waived by the
lender.
*The Company believes its existing sources of liquidity and funds expected to
be generated from operations will provide adequate cash to fund the Company's
anticipated working capital and other cash requirements through fiscal 1998.*
<PAGE> 16
PART II.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit
Number Description
------- -----------
**10.1 Incentive Stock Plan, as amended and restated
on January 16, 1997.
27.0 Financial Data Schedule
(b) Reports on Form 8-K: There were no reports on Form 8-K for the
three month period ended September 27, 1997.
**Indicates a compensation plan filed pursuant to Item 602(b)(10) of
Regulation S-K.
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXABYTE CORPORATION
Registrant
Date November 12, 1997 By /s/ William L. Marriner
----------------------- -----------------------------------
President, Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 27, 1997 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-27-1997
<CASH> 43,642
<SECURITIES> 4,000
<RECEIVABLES> 61,459
<ALLOWANCES> (7,397)
<INVENTORY> 50,628
<CURRENT-ASSETS> 184,912
<PP&E> 115,890
<DEPRECIATION> 75,502
<TOTAL-ASSETS> 235,611
<CURRENT-LIABILITIES> 44,891
<BONDS> 0
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0
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<SALES> 261,043
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<TOTAL-COSTS> 213,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,012
<INTEREST-EXPENSE> 469
<INCOME-PRETAX> (24,065)
<INCOME-TAX> (10,847)
<INCOME-CONTINUING> (13,218)
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</TABLE>
EXABYTE CORPORATION
INCENTIVE STOCK PLAN
AS AMENDED THROUGH JANUARY 16, 1997
1. PURPOSE OF PLAN. This Incentive Stock Plan is intended to encourage
ownership of Shares of Exabyte Corporation (the "Corporation") (i) by key
Employees and Consultants, thereby providing additional incentive for such
Employees and Consultants to promote the success of the business, and (ii) by
each director of the Corporation who is not an Employee of the Corporation or
an Affiliate of the Corporation, thereby securing the services of such
qualified directors and providing them with incentives to exert maximum
efforts for the success of the Corporation. Options granted hereunder to
Employees may be either Incentive Stock Options or Nonstatutory Stock Options,
at the discretion of the Board and as reflected in the terms of the written
Stock Option Agreement. Options granted hereunder to Consultants and
Directors who are not Employees shall be Nonstatutory Stock Options. The
Board also has the discretion to grant Stock Purchase Rights to Employees,
Directors and Consultants.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Affiliate" shall mean any Parent or Subsidiary, whether now or
hereafter existing.
(b) "Board" shall mean the Committee, if one has been appointed, or
the Board of the Corporation, if no Committee is appointed.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Corporation" shall mean Exabyte Corporation, a Delaware
corporation.
(e) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4 of the Plan, if one is appointed.
(f) "Consultant" shall mean any person, performing services for the
benefit of the Corporation (or of any Affiliate of the Corporation) as an
independent consultant or advisor; provided, however, that directors who
receive only directors' fees are not Consultants.
(g) "Continuous Status as an Employee, Director or Consultant" shall
mean the absence of any interruption or termination of service as an Employee,
Director or Consultant, as applicable. Continuous Status as an Employee,
Director or Consultant shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Board.
(h) "Covered Employee" shall mean the Chief Executive Officer and the
four other highest compensated officers of the Corporation for whom total
compensation is required to be reported to Stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
(i) "Director" shall mean a member of the Board of Directors.
<PAGE> 2
(j) "Employee" shall mean any person employed by the Corporation or by
any Affiliate of the Corporation. The payment of a director's fee by the
Corporation shall not be sufficient to constitute "employment" by the
Corporation.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Incentive Stock Option" shall mean an Option intended to qualify
as an Incentive Stock Option within the meaning of Section 422 of the Code.
(m) "Non-Insider Director" shall mean a director of the Corporation
who is not an Employee provided, however, such director may be a Consultant.
(n) "Non-Employee Director" shall mean a director of the Corporation
who either is not a current employee or officer of the company or its parent
or subsidiary, does not receive compensation (directly or indirectly) from the
Corporation or its parent or subsidiary for services rendered as a consultant
or in any capacity other than as a director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act of 1933 ("Regulation S-K"), does
not possess an interest in any other transaction as to which disclosure would
be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or is otherwise considered a "non-employee director"
for purposes of Rule 16b-3.
(o) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(p) "Option" shall mean a Stock Option granted pursuant to the Plan.
(q) "Optioned Stock" shall mean the Stock subject to an Option.
(r) "Optionee" shall mean an Employee, Consultant or Non-Insider
Director, as applicable, who receives an Option.
(s) "Outside Director" means a director who either (i) is not a
current Employee of the Corporation or an "affiliated corporation" (as defined
in the Treasury regulations promulgated under Section 162(m) of the Code), is
not a former Employee of the Corporation or of an affiliated corporation
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Corporation or of an
affiliated corporation at any time, and is not currently receiving direct or
indirect remuneration for services in any capacity other than as a director,
or (ii) is otherwise considered an "outside director" for purposes of Section
162(m) of the Code.
(t) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(u) "Plan" shall mean this Incentive Stock Plan.
(v) "Purchaser" shall mean an Employee, Director or Consultant who
exercises a Stock Purchase Right.
(w) "Share" shall mean a share of the Stock, as adjusted in accordance
with Section 14 of the Plan.
<PAGE> 3
(x) "Stock" shall mean the Common Stock of the Corporation.
(y) "Stock Option Agreement" shall mean the written agreement setting
forth the grant of an Option and terms and conditions relating thereto (which
need not be the same for each Option), in such form as the Board in its
discretion may approve and for Non-Employee Directors.
(z) "Stock Purchase Agreement" shall mean a written agreement (which
need not be the same for each Stock Purchase Right) setting forth the terms
and conditions relating to the purchase of Stock under a Stock Purchase Right,
in the form attached hereto or such other form as the Board in its discretion
may approve.
(aa) "Stock Purchase Right" shall mean a right to purchase Stock
pursuant to the Plan.
(ab) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. SHARES SUBJECT TO THE PLAN. There will be reserved for use from time
to time under the Plan, an aggregate of 9,500,000 shares of Stock of $0.001
par value of the Corporation. As the Board shall from time to time determine,
the Shares may be in whole or in part, authorized but unissued Shares or
issued Shares which shall have been reacquired by the Corporation. If an
Option or Stock Purchase Right should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which
were subject thereto shall become available for future grant or sale under the
Plan unless the Plan shall have been terminated.
4. ADMINISTRATION OF PLAN.
(a) COMMITTEE. The Plan shall be administered by the Board; provided
that the Board may appoint a Committee, which shall consist of not fewer than
two members of the Board. In the discretion of the Board, the Committee may
consist solely of two or more Outside Directors, in accordance with Code
Section 162(m), or solely of two or more Non-Employee Directors, in accordance
with Rule 16b-3. The Board may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed
and may fill vacancies, however caused, in the Committee. The Committee shall
select one of its members as its chairman and shall hold its meetings at such
times and places as it shall deem advisable. A majority of its members shall
constitute a quorum. All action of the Committee shall be taken by a majority
of its members. Any action may be taken by a written instrument signed by a
majority of the members and action so taken shall be fully as effective as if
it had been taken by a vote held. The Committee may appoint a secretary,
shall keep minutes of its meetings, and shall make such rules and regulations
for the conduct of its business as it shall deem advisable. The Committee's
interpretation and construction of any of the provisions of this Plan, or of
any rules promulgated under this Plan, or of any agreements entered into under
this Plan, shall be final and binding on all Optionees, Purchasers, and any
other holders of any Options or Stock Purchase Rights granted under the Plan.
No member of the Committee shall be liable for any action or determination
made in good faith in connection with this Plan. Notwithstanding anything in
this Section 4 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Options
and Stock Purchase Rights to eligible persons who (1) are not then subject to
Section 16 of the Exchange Act and/or (2) are either: (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option or Stock Purchase Right;
<PAGE> 4
or (ii) not persons with respect to whom the Corporation wishes to comply
with Section 162(m) of the Code.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive
Stock Options, Nonstatutory Stock Options or Stock Purchase Rights; (ii) to
determine, upon review of relevant information in accordance with Section 6 of
the Plan, the fair market value of the Stock; (iii) to determine the exercise
price per share of Options or Stock Purchase Rights to be granted, which
exercise price shall be determined in accordance with Section 6 of the Plan;
(iv) to determine the Employees, Directors and Consultants to whom, and the
time or times at which, Options, or Stock Purchase Rights shall be granted and
the number of Shares to be represented by each Option or Stock Purchase Right;
(v) to interpret the Plan; (vi) to prescribe, amend, and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions
of each Option granted (which need not be the same for each Option granted)
and, with the consent of the holder thereof, modify, terminate or amend each
Option provided, however, that the Board shall not have the power to lower the
Option price except pursuant to the terms of Section 13 of the Plan; (viii) to
accelerate or defer (with the consent of the Optionee) the exercise date of
any Option; (ix) to authorize any person to execute on behalf of the
Corporation any instrument required to effectuate the grant of an Option or
Stock Purchase Right previously granted by the Board; and (x) to make all
other determinations deemed necessary or advisable for the administration of
the Plan.
5. ELIGIBILITY OF EMPLOYEES, DIRECTORS AND CONSULTANTS. With respect to
Options and Stock Purchase Rights granted to Employees, Directors and
Consultants:
(a) GENERALLY. Options and Stock Purchase Rights may be granted to
Employees, Directors and Consultants, provided that Incentive Stock Options
may only be granted to Employees. An Employee, Director or Consultant who has
been granted an Option or Stock Purchase Right may, if he is otherwise
eligible, be granted additional Options or Stock Purchase Rights.
(b) CRITERIA. In making any determination as to Employees, Directors
and Consultants to whom Options and Stock Purchase Rights shall be granted,
the Committee shall take into account such factors as it shall deem relevant
in accomplishing the purpose of the Plan, including but not limited to the
Employee's, Director's or Consultant's loyalty, performance, and experience.
(c) ISO LIMITATIONS WITH RESPECT TO PRICE AND TERM. In no event shall
an Incentive Stock Option be granted to an Employee who, at the time such
Option is granted, owns (as defined in Section 422 of the Code) Shares
possessing more than 10% of the total combined voting power of all classes
of Shares of the Corporation or any of its Affiliates, unless the Option price
is at least 110% of the fair market value of the Stock subject to the Option,
and such Option is by its terms not exercisable after the expiration of five
years from date such Option is granted.
(d) ISO LIMITATIONS WITH RESPECT TO SHARES. Moreover, the aggregate
fair market value (determined as of the time that Option is granted) of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by any individual Employee during any single calendar year under
this Plan and all the incentive stock plans of the Corporation (and its
Affiliates, if any), shall not exceed $100,000.
<PAGE> 5
(e) Subject to the provisions of Section 13 relating to adjustments
upon changes in Stock, no person shall be eligible to be granted Options or
Stock Purchase Rights covering more than Five Hundred Thousand (500,000)
Shares in any calendar year.
6. PRICES FOR OPTIONS AND STOCK PURCHASE RIGHTS. With respect to Options
and Stock Purchase Rights:
(a) GENERALLY. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is
determined by the Board. However, the exercise price of the Shares which
shall be covered by each Stock Option shall be at least 100% of the fair
market value of the Shares at the time of granting the Stock Option.
(b) PAYMENT. The consideration to be paid for the Shares to be
issued upon exercise of an Option, or Stock Purchase Right, including the
method of payment, shall be determined by the Board and may consist entirely
of cash, check, or other Shares having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option or Stock Purchase Right shall be exercised, or any combination of such
methods of payment, or such other consideration and method of payment for the
issuance of Shares to the extent permitted under applicable law. In addition,
the Corporation may accept a promissory note issued by a person exercising an
Option or a Stock Purchase Right; provided that such person pay in cash at the
time of purchase at least the aggregate par value of the Shares purchased and
the promissory note be for an amount no greater than the full purchase price
less such aggregate par value amount. In making its determination as to the
type of consideration to accept, the Board shall consider if acceptance of
such consideration may be reasonably expected to benefit the Corporation.
7. OPTION PROVISIONS.
(a) GENERALLY. Subject to the provisions of the Plan, the Board shall
determine for each Option (which need not be identical) the number of Shares
for which the Option shall be granted, the exercise price of the Option, and
all other terms and conditions of the Option.
(b) TERM OF OPTION. The term of each Option may be up to 10 years
from the date of grant thereof or such shorter term as may be provided in
the Stock Option Agreement. However, in the case of an Incentive Stock Option
granted to an Employee who, at the time the Incentive Stock Option is granted,
owns Stock representing more than 10% of the voting power of all classes of
Stock of the Corporation or any Affiliate of the Corporation, the term of the
Incentive Stock Option shall be five years from the date of grant thereof or
such shorter time as may be provided in the Stock Option Agreement.
(c) EXERCISE OF OPTION.
(i) Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Board, including
performance criteria with respect to the Corporation or the Optionee, or
both, and as such shall be permissible under the terms of the Plan.
(ii) An Option may not be exercised for a fraction of a Share.
(iii) An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Corporation in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
<PAGE> 6
received by the Corporation. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 6
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Corporation or of a duly authorized transfer agent of the
Corporation) of the Stock certificate evidencing such Shares, no right to vote
or receive dividends or any other rights of a Stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock certificate is issued, except as provided
in Section 13 of the Plan.
(iv) Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(v) Except as otherwise specifically provided herein or in the
Stock Option Agreement, an Option may not be exercised at any time unless the
holder thereof shall have maintained Continuous Status as an Employee,
Director or Consultant of the Corporation or of one or more of its Affiliates,
from the date of the granting of the Option to the date of its exercise.
(d) TERMINATION OF EMPLOYMENT. In the event that an Optionee's
Continuous Status as an Employee, Director or Consultant shall be terminated
other than by reason of death or disability, such Option may be exercised (to
the extent that the Optionee shall have been entitled to do so at the
termination of Continuous Status as an Employee, Director or Consultant) at
any time within three months after such termination or such other longer or
shorter period as set forth in the Stock Option Agreement, but in any event
no later than the date of expiration of the Option term. So long as the
holder of an Option shall maintain Continuous Status as an Employee, Director
or Consultant, his Option shall not be affected by any change of duties or
position. To the extent that the holder of an Option was not entitled to
exercise his Option at the time of his termination, or insofar as he does not
exercise such Option to the extent he was entitled within the time specified
herein, the Option shall itself terminate at the time of such termination.
(e) DIABILITY OF OPTIONEE. Notwithstanding the provisions of Section
7(d) above, in the event an Optionee does not maintain Continuous Status as an
Employee, Director or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), he may, but only
within six months after termination due to such disability (or such other
longer or shorter period as set forth in the Stock Option Agreement), exercise
his Option to the extent he was entitled to exercise it at the date of such
disability. To the extent that he was not entitled to exercise the Option at
the date of disability, or insofar as he does not exercise such Option to the
extent he was entitled within the time specified herein, the Option shall
terminate.
(f) DEATH OF OPTIONEE. Unless otherwise set forth in the Stock Option
Agreement, in the event of the death of an Optionee who at the time of his
death is an Employee, Director or Consultant and who shall have been in
Continuous Status as an Employee, Director or Consultant since the date of
grant of the Option, or with respect to an Optionee who was such an Employee,
Director or Consultant within the preceding three months, the Option may be
exercised, at any time within six months following the date of death (or such
longer or shorter period as set forth in the Stock Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise
<PAGE> 7
that has accrued at the date of such termination or otherwise pursuant to the
terms of the Stock Option Agreement.
(g) OTHER. Notwithstanding any provision in this Plan to the
contrary, no Option shall terminate later than the original expiration date
set forth in any related Stock Option Agreement.
8. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. After the Board determines that it will offer
an Employee, Director or Consultant the right to purchase Shares (other than
pursuant to an Option) under the Plan, it shall advise the offeree in writing
of the terms, conditions, and restrictions relating to the offer, including
the number of Shares which such person shall be entitled to purchase, the
proposed Stock Purchase Agreement, and the time within which such person must
accept such offer, which shall in no event exceed nine months from the date
upon which the Board made the determination to grant the Stock Purchase Right.
The offer may be accepted by execution of the Stock Purchase Agreement and its
return to the Corporation (together with payment for the Stock being
purchased) within the time specified.
(b) ISSUANCE OF SHARES. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State
withholding obligations as a condition to the Purchaser purchasing such
Shares.
(c) REPURCHASE OPTION. Unless the Board determines otherwise, the
Stock Purchase Agreement shall (i) grant the Corporation a repurchase option
exercisable upon the voluntary or involuntary termination of the Purchaser's
Continuous Status as an Employee, Director or Consultant for any reason; and
(ii) set the purchase price for Shares repurchased at the original price paid
by the Purchaser (plus interest, if any, to be paid pursuant to the Stock
Purchase Agreement), which may be paid by cancellation of any indebtedness of
the Purchaser to the Corporation. The repurchase option shall lapse at such
rate as the Board may determine.
(d) OTHER PROVISIONS. The Stock Purchase Agreement shall contain such
other terms, provisions, and conditions not inconsistent with the Plan as may
be determined by the Board.
9. NON-DISCRETIONARY GRANTS TO NON-INSIDER DIRECTORS.
(a) NEW NON-INSIDER DIRECTORS. Each person who is on or after
January 27, 1993 elected for the first time to be a Non-Insider Director
shall, upon the date of his initial election to be a Non-Insider Director by
the Board or Stockholders of the Corporation, whichever shall first occur, be
granted a Nonstatutory Stock Option to purchase 10,000 Shares of Common Stock
of the Corporation on the terms and conditions set forth herein.
(b) ANNUAL GRANTS. On January 27th of each fiscal year, commencing
with January 27, 1993, each person who is then a Non-Insider Director and has
been a Non-Insider Director for at least three months shall be granted a
Nonstatutory Stock Option to purchase 5,000 Shares of Common Stock of the
Corporation on the terms and conditions set forth herein.
<PAGE> 8
10. PRICES FOR NON-INSIDER DIRECTORS.
(a) GENERALLY. The exercise price of each Option granted under
Section 9 shall be 100% of the fair market value of the Common Stock (which
shall be the closing sales price) subject to such Option on the date such
Option is granted; provided, however, that if such date of grant is not a
trading day, the exercise price of such Option shall be 100% of the fair
market value of the Common Stock subject to such Option on the trading day
immediately preceding the date such Option is granted.
(b) PAYMENT. Each Non-Insider Director may elect to make payment of
the exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash at the time
of exercise; or
(ii) Provided that at the time of the exercise the Corporation's
Common Stock is publicly traded and quoted regularly in The Wall Street
Journal, payment by delivery of Shares of Common Stock of the Corporation
already owned by the Non-Insider Director, held for the period required to
avoid a charge to the Corporation's reported earnings, and owned free and
clear of any liens, claims, encumbrances or security interest, which Common
Stock shall be valued at fair market value on the date preceding the date of
exercise; or
(iii) Payment by a combination of methods of payment specified in
subparagraph 10(b)(i) and 10(b)(ii) above.
11. NON-INSIDER DIRECTORS'OPTION PROVISIONS. Notwithstanding any
provisions in this Plan to the contrary, each Option issued to Non-Insider
Directors under Section 10 shall contain the following terms and conditions:
(a) TERM OF OPTION. The term of each Option commences on the date it
is granted and, unless sooner terminated as set forth herein, expires on the
date ("Expiration Date") ten years from the date of grant.
(b) TERMINATION OF SERVICE. In the event that the services of a
Non-Insider Director to whom a Non-Insider Director Option has been granted
terminate for any reason or no reason, other than by reason of death or
disability, such Option may be exercised (to the extent that the Non-Insider
Director shall have been entitled to do so at the termination of his service)
at any time within three months after such termination. To the extent that
such Non-Insider Director was not entitled to exercise his Option at the time
of his termination, or insofar as he does not exercise such Option to the
extent he was entitled within the time specified herein, the Option shall
itself terminate at the time of such termination. Notwithstanding any
provision in this Section 11(b) to the contrary, the services of a Non-Insider
Director shall not be deemed terminated if such Non-Insider Director
subsequently becomes an Employee, Director or Consultant.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section
11(b) above, in the event a Non-Insider Director is unable to perform services
as a Non-Insider Director for the benefit of the Corporation as a result of
his total and permanent disability (as defined in Section 22(e)(3) of the
Code), he may, but only within six months after termination due to such
disability, exercise his Option to the extent he was entitled to exercise it
at the date of such disability. To the extent that he was not entitled to
exercise the Option at the date of disability, or insofar as he does not
<PAGE> 9
exercise such Option to the extent he was entitled within the time specified
herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee who
at the time of his death is a Non-Insider Director of the Corporation and who
shall have continuously served as a Non-Insider Director since the date of
grant of the Option, or with respect to an Optionee who was a Non-Insider
Director within the preceding three months, the Option may be exercised, at
any time within six months following the date of death, by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that has
accrued at the date of such termination or otherwise pursuant to the terms of
the Stock Option Agreement.
(e) NO EXTENSION. Notwithstanding any provision in this Plan to the
contrary, no Option granted to a Non-Insider Director under Section 9 shall
terminate later than its original Expiration Date.
(f) EXERCISABILITY. Options granted under Section 9 shall become
exercisable from the date of grant at the rate of 2% per month over a period
of 50 months; provided that the Optionee has, during the entire period prior
to such vesting date, continuously served as a Non-Insider Director or
subsequent to serving as a Non-Insider Director continuously served as an
Employee, Director or Consultant, whereupon such Option shall become fully
exercisable in accordance with its terms with respect to that portion of the
Shares represented by that installment.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. The Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee or Purchaser, only by the Optionee or Purchaser, provided that the
Board may grant a Nonstatutory Stock Option that is transferable to the extent
provided in the Stock Option Agreement.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) PROPORTIONAL ADJUSTMENTS. Subject to any required action by the
Stockholders of the Corporation, the number of Shares covered by each
outstanding Option and Stock Purchase Right, the number of Shares which have
been authorized for issuance under the Plan but as to which no Options or
Stock Purchase Rights have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option or Stock Purchase Right, and
the maximum number of Shares subject to award to any person during any
calendar year period pursuant to Section 5(e), as well as the price per Share
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, the payment of a stock dividend with
respect to the stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Corporation;
provided, however, that conversion of any convertible securities of the
Corporation shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Corporation of shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to an Option
or Stock Purchase Right.
<PAGE> 10
(b) REORGANIZATION. With respect to Options granted other than to
Non-Insider Directors pursuant to Section 9, in the event of the proposed
dissolution or liquidation of the Corporation, or in the event of a proposed
sale of all or substantially all of the assets of the Corporation, or the
merger of the Corporation with or into another corporation, at the sole
discretion of the Board and to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Options outstanding under the Plan or
shall substitute similar Options for those outstanding under the plan;
(ii) such Options shall continue in full force and effect; or (iii) each
Option held by an Optionee then performing services as an Employee, Director
or Consultant will become fully exercisable with respect to all of the Shares
subject to the Option prior to the consummation of such proposed action at
such time as the Board in its discretion may determine and the Option
terminated if not exercised prior to such event. The Board may also in its
discretion require that all of the Shares purchased pursuant to the
foregoing clause (iii) which would not otherwise be purchasable at such time
except by operation of such clause (iii) shall be subject to a repurchase
right of the Corporation (or its successor) which repurchase right shall
expire at the same (or earlier) times and to the same (or greater) extent as
such Shares would have become purchasable under the Option had the Option not
become fully exercisable pursuant to clause (iii). For this purpose, the
Board may require that the Optionee and the Corporation (or its successor)
execute an agreement (in such form as determined by the Board) with respect
to such Shares to reflect the Corporation's (or its successor's) repurchase
right. If such Option is to be assumed or substituted, then such Option shall
be appropriately adjusted to apply to the kind, class and number of securities
or other property which would have been issuable to the Optionee in the
consummation of such transaction had the Option been exercised immediately
prior to such transaction and appropriate adjustments shall also be made to
the price payable per share, provided that the aggregate Option price payable
thereunder shall remain the same. With respect to Options granted to
Non-Insider Directors pursuant to Section 9, in the event of the proposed
dissolution or liquidation of the Corporation, or in the event of a proposed
sale of all or substantially all of the assets of the Corporation, or the
merger of the Corporation with or into another corporation, to the extent
permitted by applicable law, each Option held by an Optionee then performing
services as a Non-Insider Director will become fully exercisable with respect
to all of the Shares subject to the Option immediately prior to the
consummation of such proposed action and the Option terminated if not
exercised prior to such event.
14. EFFECTIVENESS OF PLAN. The Plan became effective on January 22, 1987.
15. TIME OF GRANTING OPTIONS. Unless otherwise specifically determined by
the Board, the granting of an Option shall be deemed to occur at such time as
final corporate action necessary to authorize the grant shall have occurred.
16. NO EMPLOYEE CONTRACT. The Plan shall not confer upon any holder of
an Option or holder of a Stock Purchase Right any right with respect to
continuation of employment by or the rendition of consulting or director
services to the Corporation or any Affiliate of the Corporation, nor shall it
interfere in any way with his right or the Corporation's or its Affiliates'
(and in the case of directors, the Stockholders') right to terminate his
employment or services as a Consultant or director at any time.
17. WITHHOLDING. To the extent provided by the terms of a Stock Option
Agreement or Stock Purchase Agreement, any Optionee or Purchaser may satisfy
any federal, state or local tax withholding obligation relating to the
purchase of Stock by any of the following means or by a combination of such
<PAGE> 11
means: (1) tendering a cash payment; (2) authorizing the Corporation to
withhold from the Shares otherwise issuable to the purchaser a number of
Shares having a fair market value less than or equal to the amount of the
withholding tax obligation; or (3) delivering to the Corporation owned and
unencumbered Shares having a fair market value less than or equal to the
amount of withholding tax obligation.
18. TERMINATION AND AMENDMENT OF PLAN.
(a) TERMINATION. The Plan shall terminate on January 16, 2007, and
no Option or Stock Purchase Right shall be granted under the Plan after that
date.
(b) AMENDMENT. Except as otherwise set forth in Section 11(g), the
Board at any time, and from time to time, may amend the Plan. However, except
as provided in Section 13(a) relating to adjustments upon changes in Stock, no
amendment shall be effective unless approved by the Stockholders of the
Corporation to the extent stockholder approval is necessary to satisfy the
requirements of Section 422(b) of the Code, to comply with the requirements of
Rule 16b-3 promulgated under the Exchange Act, or to satisfy any Nasdaq or
securities exchange listing requirements. The Board may, in its sole
discretion, submit any other amendment to the Plan for Stockholder approval,
including, but not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations promulgated
thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to certain executive
officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with
the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee Incentive
Stock Options and/or to bring the Plan and/or Incentive Stock Options granted
under it into compliance therewith.
(d) Rights and obligations under any Option granted before amendment
or termination of the Plan shall not be altered or impaired by any amendment
of the Plan unless:
(i) the Corporation requests the consent of the person to whom
the Option was granted; and (ii) such person consents in writing.
19. ISSUANCE OF SHARES.
(a) The Corporation shall not be required to issue Shares pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
Stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Corporation with respect to such
compliance; provided, however, that this provision shall not require the
Corporation to register under the Securities Act of 1933, as amended, either
the Plan, any Option or Stock Purchase Right, or any Stock issued or issuable
pursuant to such Option or Right.
(b) As a condition to the exercise of an Option or Stock Purchase
Right, the Corporation may impose various conditions, including a requirement
<PAGE> 12
that the person exercising such Option represent and warrant, at the time of
any such exercise, that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares.
20. RESERVATION OF SHARES. The Corporation, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Corporation to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Corporation's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the
Corporation of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
