SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________________ to
_______________.
Commission file number: 0-27122
ADEPT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
California 94-29000635
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
150 Rose Orchard Way, San Jose, California 95134
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: (408) 432-0888
Securities registered pursuant to Section 12(b) of the Act:
________________________________________ ___________________________________
Title of each class Name of each exchange
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
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 the 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 aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the closing sale price of the Common Stock on
September 5, 1997 as reported on the Nasdaq National Market, was approximately
$88,500,720. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of September 5, 1997, registrant had outstanding 8,271,955 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant has incorporated by reference into Part III of this Form
10-K portions of its Proxy Statement for the Annual Meeting of Shareholders to
be held November 7, 1997. Portions of the Registrant's Annual Report to
Shareholders for the fiscal year ended June 30, 1997 are incorporated by
reference into Parts II and IV of this Form 10-K.
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PART I
Special Note Regarding Forward-Looking Statements
Certain statements in this Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: the potential fluctuations in the Company's
quarterly and annual results of operations; the cyclicality of capital spending
of the Company's customers; the Company's dependence on the continued growth of
the intelligent automation market; the risks associated with sole or single
sources of supply and lengthy procurement lead times; the Company's highly
competitive industry; rapid technological change within the Company's industry;
the lengthy sales cycles for the Company's products; the risks associated with
reliance on system integrators; the risks associated with international sales
and purchases; the risks associated with potential acquisitions and the need to
manage growth; the risks associated with new product development and the need to
manage product transitions, including any difficulties or delays in the
development, production, testing and marketing of the Company's new products
under development; the Company's dependence on retention and attraction of key
employees; the risks associated with product defects; the Company's dependence
on third-party relationships; the uncertainty of patent and proprietary
technology protection and third party intellectual property claims; changes in,
or failure or inability to comply with, government regulations; general economic
and business conditions; the failure of any new products to be accepted in the
marketplace; decreased investment in robotics generally, and in the Company's
intelligent automation products particularly, as a result of general or specific
economic conditions or conditions affecting any of the Company's primary
markets; decreased acceptance of the Company's current products in the
marketplace, and the other factors discussed in or incorporated by reference in
this Report. The following discussion of the Company's business should be read
in conjunction with the Company's Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, including the section entitled "Significant Fluctuations in
Operating Results," which information is incorporated by reference herein.
SILMA, SoftMachines and the Company's logo are registered trademarks of
Adept Technology, Inc. Adept, AdeptModules, AdeptMotion, Adept MV-5, Adept MV-8,
Adept MV-19, AdeptOne, AdeptThree, AdeptThree-XL, AdeptVision VME, Adept 1850,
Adept 550, Adept Flexible Feeder, Adept FlexFeedware, AIM, CimStation,
MotionWare, PalletWare, AdeptRAPID, SoftAssembly, V+ and VisionWare are
trademarks of Adept Technology, Inc. This Report also includes trademarks of
companies other than Adept Technology, Inc.
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ITEM 1. BUSINESS
Introduction
Adept Technology, Inc. ("Adept" or the "Company") designs, manufactures
and markets intelligent automation software and hardware products for
manufacturers in the electronics, telecommunications, appliances,
pharmaceutical, food processing and automotive components industries. The
Company provides a broad, flexible line of software intensive, computer-driven,
automation products for assembly, material handling and packaging applications.
The Company's products include machine controllers for robot mechanisms and
other flexible automation equipment, machine vision systems, simulation software
and a family of mechanisms including robots, a vision-based flexible part feeder
and linear modules.
Adept's Rapid Deployment Automation ("RDA") approach addresses many of
the challenges facing manufacturers seeking to implement intelligent automation
systems. The goal of RDA is to significantly reduce the total time required to
conceptualize, justify, quote, sell, implement, and change over an intelligent
automation system, and thereby eliminate significant barriers to the broad
deployment of intelligent automation technology.
The Company sells, markets and supports its products on a worldwide
basis through more than 200 system integrators, its direct sales force and
original equipment manufacturers ("OEMs"). The system integrators, OEMs or end
users combine various components of Adept's standard product line with material
handling devices, peripheral equipment, application software and tooling into
flexible automation workcells or production lines.
Industry Background
Industrial robots provided the foundation for the development of the
intelligent automation industry. In the 1970s, robots with simple controllers
that lacked sensing capabilities became widely used in the automotive industry
for technologically simple, low precision applications such as spot welding. By
the late 1970s, industrial robots with more advanced capabilities became
commercially available. These new capabilities included computer-based motion
controllers which enabled flexible, programmable motion, and machine vision
systems which enabled computer analysis of camera images. With these technical
advances, robots gained increased acceptance, but their use remained limited
because their rudimentary software and sensing capabilities were insufficient to
support more demanding tasks such as those required on flexible assembly lines.
During the early 1980s, technical advances enabled robots to perform a
wide range of functions in new applications such as assembly, material handling
and packaging. These advances included sophisticated sensing for robot guidance
that allowed robots to locate, correctly orient and pick up parts, conveyor
tracking that made it possible to handle parts from moving conveyors and
direct-drive robots that were faster and more accurate than gear-driven robots.
In addition, real-time multitasking software enabled the coordination of the
many asynchronous tasks required in assembly, material handling and packaging.
This greater functionality made robots viable in a broad range of production
environments. The development of advanced software and sensory products, coupled
with high level programming languages and computer-based controller
architectures, contributed to the establishment of the intelligent automation
industry.
The ability of intelligent automation to address new applications such
as assembly, material handling and packaging is reflected in the growth of the
intelligent automation industry in the 1990s. According to the
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Robotic Industries Association, shipments by U.S. robot suppliers grew from $455
million in 1992 to $934 million in 1996. In addition, according to the Automated
Imaging Association, shipments by North American machine vision suppliers grew
from $638 million in 1992 to $1.3 billion in 1996.
Market Forces
Market forces in certain manufacturing industries have contributed to
the growth of the intelligent automation industry. These market forces include:
World class product quality. Manufacturers competing in global markets
must provide products that meet the highest quality standards of their
customers. Manufacturers across a wide range of industries have found that
replacing manual production lines with automated lines has resulted in a
significant reduction in product defects and has enabled volume production of
high quality, technologically advanced products.
Time-to-volume production. Rapid achievement of full volume production
is critical to increasing or simply retaining market share in most markets
today. As a result, the financial return a manufacturer achieves on a new
product depends in significant part on quickly achieving volume production.
Miniaturization. Many products, such as camcorders, disk drives and
portable audio products, have been steadily shrinking in size and are now at an
advanced state of miniaturization. Human eyes and hands are inherently
inaccurate and can generate particles that destroy certain miniature parts and
circuits and, as a result, automation is often required to improve accuracy and
maintain a clean environment. In addition, because certain parts exhibit high
part-to-part variability, the assembly of these products can often only be
successfully performed with the aid of real-time sensory feedback to accurately
acquire, inspect and align parts.
Declining automation costs, rising labor costs. The price performance
ratio of automation products has improved over time, while labor costs have
risen in most industrial regions of the world. According to the U.S. Bureau of
Labor Statistics, total manufacturing compensation rates in the U.S., including
wages, salaries and employer costs for employee benefits, have increased an
average of 3% per annum from 1990 to 1996. Moreover, the appeal of offshore
manufacturing is waning for some manufacturers who previously moved operations
offshore but have more recently increased their domestic manufacturing
operations.
Challenges Facing Manufacturers
Despite the expanding use and application of intelligent automation in
numerous industries, significant challenges nonetheless remain for manufacturers
who seek to implement intelligent automation systems.
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Increasing need for flexibility. To achieve widespread deployment,
intelligent automation must become as flexible as traditional manual production
lines. Rapidly contracting product life cycles, shrinking batch sizes,
increasing miniaturization, product line proliferation and the high cost of
capital equipment are causing manufacturers to seek flexible manufacturing
techniques. These techniques must allow manufacturers to quickly and
cost-effectively change over production lines so that such production lines can
be used for multiple products and over multiple product life cycles. In
addition, these techniques must enable manufacturers to adapt to part and
process variability.
High risk custom engineering content. A significant amount of custom
content is engineered into most automated manufacturing lines. Custom content is
time consuming to develop and implement, and makes it difficult to predict
system throughput, yield and cost. Manufacturing managers who are new to
automation are reluctant to implement an automation line when these key
performance factors are at risk, and often have automated their production lines
only after competitors have established a new manufacturing standard and a
proven approach. In addition, custom hardware and software increase the cost and
difficulty associated with training personnel and supporting automated systems
and also make product changeover another engineering task.
Shortage of manufacturing engineers. The implementation of most
automation lines requires both mechanical engineering and advanced computer
programming skills. As a result, experience with software programming and
workcell architecture has been critical to the design of systems that perform to
expectations. However, there is a shortage of manufacturing engineers who have
the combination of skills and experience needed to implement intelligent
automation systems. Moreover, many manufacturers are decreasing their
manufacturing engineering staff, thereby reducing the available pool of
experienced manufacturing engineers.
Long sales and implementation cycle. It can be several years from the
time a manufacturer first considers establishing an automated line to the time
the automation system is installed and operating satisfactorily. The sales and
implementation cycle includes conceptualizing, justifying, quoting, selling and
implementing the automation line. This long sales and implementation cycle
increases the perceived risk of automation and fails to address time-to-volume
production requirements in industries with short product life cycles. In
addition, the Company believes that because users typically purchase subsequent
systems only after they are satisfied with their initial systems, the long sales
and implementation cycle has limited the growth of the intelligent automation
industry.
All of the challenges set forth above contribute to higher risks and
costs in implementing intelligent automation. Eliminating or significantly
reducing these potential problems improves the economic and technological
justifications for utilizing intelligent automation. The intelligent automation
suppliers that are best able to meet these challenges will be better positioned
to achieve significant competitive advantages.
The Adept Solution
The Company's RDA approach addresses many of the challenges faced today
by manufacturers seeking to implement intelligent automation systems. The goal
of RDA is to significantly reduce the total time required to conceptualize,
justify, quote, sell and implement an intelligent automation system, and thereby
eliminate significant barriers to the broad deployment of intelligent automation
technology. RDA is implemented through a line of hardware and software products,
including machine controllers for robot mechanisms and other flexible automation
equipment, machine vision systems, vision-based flexible part
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feeders, simulation software, and a family of mechanisms including robots and
linear modules. The following diagram illustrates the Company's RDA approach:
[GRAPHIC OMITTED]
[Depiction of Adept's Rapid Deployment Automation Approach which includes the
RDA System Design Layer, the RDA Process Knowledge Layer, the RDA Real-Time
Control Layer and the RDA Mechanical Component Layer.]
The Company seeks to provide the following key benefits to
manufacturers through its RDA approach:
Increased flexibility. Adept believes that software and sensory
products are the key elements of flexible automation solutions. Through its
software intensive, computer-driven approach to intelligent automation, the
Company distinguishes itself from companies that attempt to address the
challenges of automation solely with hardware solutions. Software and sensory
products provide the flexibility to quickly reconfigure production lines for
product change-overs and to respond to product or process variations. For
example, the Company's machine vision products minimize the need for time
consuming set ups and enable inspection of critical part dimensions. In
addition, the Company's scalable controller hardware is highly configurable,
includes local area networking capability and can control a simple, stand alone
robot or be expanded to control multiple robots.
Reduced custom engineering. Adept provides a broad range of modular
components which are designed to significantly reduce the custom engineering
required to implement intelligent automation. The Company's scalable controller
is the foundation of this architecture, allowing these modular components to be
quickly configured into complex systems and reconfigured as needs change. In
addition, Adept has established relationships with automation vendors who offer
components which complement the Company's
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RDA product line. Adept believes that the combination of its modular scalable
product line and relationships with other automation vendors significantly
reduces custom engineering and its associated support risks.
Reduced dependence on manufacturing engineers. Adept believes that
programming an automation workcell should not require extensive software
programming expertise. The Company has developed smart application software
products which utilize icon-based programming and are based on its Assembly and
Information Management ("AIM") software technology. In addition, the Company
works closely with over 200 system integrators worldwide which provide end users
with outside engineering resources to deliver application specific solutions
incorporating the Company's products.
Shortened implementation cycle. The combination of flexibility, ease of
implementation and modularity allows Adept products to be quickly integrated
into standard workcells or production lines. Ease of integration is further
enhanced by providing industry standard networking and communication interfaces.
The Company's simulation software products further shorten the implementation
cycle by reducing the time required to design and test automation concepts.
Adept believes that its RDA approach combined with the expertise of system
integrators and customer support and training can significantly reduce
implementation time.
Strategy
The Company's objective is to become the leading supplier worldwide of
a broad line of intelligent automation products for assembly, material handling
and packaging applications. The Company's strategy to achieve this objective
includes the following elements:
Expand Rapid Deployment Automation. Adept's goal is to compress the
sales and implementation cycle of intelligent automation systems through the
expansion of its RDA approach. Adept is pursuing this goal through new
developments including simulation software, AIM software technology, robot
mechanisms and unique flexible feeding products. The Company believes that a
shorter sales and implementation cycle will contribute to increased demand for
intelligent automation as the Company's products enable manufacturers to meet
time-to-volume requirements using the Company's RDA products.
Extend technology leadership. Adept's expertise in machine controllers
for robots and other flexible automation equipment, machine vision systems and
simulation software has enabled it to be a leading innovator in the development
of intelligent automation products. Adept seeks to leverage its existing
technology base to accelerate the development of new and enhanced products and
to lower costs. The Company intends to continue to make significant investments
in research and development in order to broaden its technology.
Continue to focus on higher growth application segments. Adept's
strategy is to continue to target the higher growth segments of the intelligent
automation market, such as assembly, material handling and packaging
applications. These applications are used in a broad range of industries,
including electronics, telecommunications, appliances, pharmaceuticals, food
processing and automotive components. Diversification across a broad range of
industries should maximize the Company's opportunities for growth and should
reduce Adept's dependence on the capital spending cycles of any one industry.
Maximize sales through complementary channels. Adept's strategy is to
build end user demand for its products through its direct sales force while
utilizing a network of experienced system integrators and OEMs to provide
turnkey intelligent automation systems. The Company's direct sales force
provides a
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strong ongoing presence at the end user level by providing product information,
assistance in designing solutions to production issues and referrals to
application-specific system integrators. Adept seeks to continually strengthen
its important channel relationships by providing certain system integrators with
qualified leads and by working with its system integrators to jointly build
demand for the Company's products rather than competing with them in their
systems business.
Increase global market presence. A key element of Adept's strategy is
to increase its presence in the global intelligent automation market by further
expansion in markets which the Company believes represent substantial
opportunities, including Europe, Japan and the Pacific Rim. The Company seeks to
increase its market share in these areas by emphasizing its advanced software
and sensing technology and broad, flexible product line. In addition, Adept
intends to continue to make significant investments in marketing, sales and
support in international markets.
Leverage manufacturing strength. Adept seeks to focus its manufacturing
resources on activities which enable the Company to differentiate its product
line and add distinctive value. Adept's manufacturing activities include the
assembly, test and configuration of its products. This strategy enables the
Company to leverage product development, manufacturing and management resources
while retaining greater control over product delivery, final product
configuration and the timing of new product introductions, all of which are
critical to meeting customer expectations.
Technology
The Company's technology integrates the following key elements of RDA:
mechanical design, machine controller design, advanced servo systems, motion
control software, machine vision software, real-time database management
software and simulation software. The following table lists the Company's
technology by RDA layer:
[GRAPHIC OMITTED]
[Chart Illustrating Adept's technology with respect to the four levels of its
Rapid Deployment Automation approach]
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Hardware
Direct-drive robot technology. The Company was the first to develop and
market a robot incorporating direct-drive motor technology. Direct-drive
technology eliminates gears and linkages from the drive train of the mechanism,
thereby significantly increasing robot speed and improving the robot's product
life, reliability and accuracy.
Controller technology. The Company has applied its expertise in high
performance motion control to the design of an open architecture, VME bus-based
scalable machine controller. The scalability of this architecture allows the
same basic components to be combined into a number of controller configurations
that cost-effectively address a range of requirements from low end systems which
control a single robot to high end, complex systems which control multiple
mechanisms and incorporate machine vision. In addition, all of the Company's
controller products support the same Windows NT-based graphical user interface
and can execute the same application programs, thereby allowing software
development investments to be leveraged across a number of applications.
The controller includes a number of technologically advanced
capabilities designed specifically to address the intelligent automation market,
including: special ASICs for controlling direct-drive motors, reading encoders
and controlling power up sequencing of complex high power systems; safety
circuits that meet domestic and international specifications; technology to
protect the controller from voltage spikes, electrical noise and power
brownouts; and high wattage (6000 watt) switching power amplifiers.
Software
Servo software. The most basic level in Adept's software architecture
is the servo software which directs individual motors to follow motion commands
generated from the higher V+ software level. This software has been designed to
provide closed-loop control for the Company's robots as well as other vendors'
robots. The servo software layer includes algorithms for adaptive feed-forward
control, direct-drive motor control, force control and position control, and a
number of safety and diagnostic features.
Real-time programming language and operating system software. The next
level in the software architecture is the V+ programming language and operating
system layer. V+ allows software developers to create automation software
systems and is the key enabling technology for the Company's intelligent
automation approach. This automation programming environment provides a high
level language coupled with a multitasking operating system and built in
capability for integrating robots, machine vision, sensors, workcell control and
general communications. These capabilities enable the development of
sophisticated application software that can adoptively control mechanical
systems based upon real-time sensory input while simultaneously maintaining
communication with other factory equipment.
V+ offers the user approximately 300 instructions for programming an
intelligent automation workcell. It includes a trajectory generator and
continuous path planner which compute the path of the robot's tool in real time
based upon predefined data or sensory input. V+ also includes a number of
network communication facilities and supports RS232, RS422, Ethernet, TCP/IP,
FTP and NFS. In addition, this software includes a multitasking, multiprocessor,
time-sliced, deterministic, real-time operating system. This operating system
allows V+ to execute dozens of tasks concurrently and permits control to pass
between tasks in a predictable manner, often several times per millisecond. The
V+ operating system also allows the installation of additional processors into
the controller and automatically reassigns tasks to optimize overall
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system performance, providing a key scalability feature not found in other
controllers. The development environment for V+ is Windows NT-based and allows
the customer to utilize industry standard PCs.
Machine vision. The real-time control layer of the software also
includes machine vision software technology, which quickly recognizes parts that
are randomly positioned and have an unknown orientation ranging up to 360
degrees, as compared with other solutions which simply locate translated images
with very limited rotation. The ability to quickly recognize parts which have
large variations in orientation is crucial for high speed part feeding where the
part orientation is not known, such as in flexible part feeders. The Company's
machine vision software can also measure part dimensions for inspection
purposes. Vision can be used to acquire parts from stationary locations or from
conveyors. Cameras can be stationary, fixed in the workcell or attached to a
robot.
Data driven module software. The next level in the Company's software
hierarchy is the AIM layer. AIM simplifies the implementation of intelligent
automation workcells by combining a point and click graphical user interface
with an icon-based programming method that does not require advanced computer
programming skills. This method combines task level statements with a high
performance real-time database, and a structure for representing process
knowledge.
The AIM task-level statements allow the developer to specify at a very
high level what operations the workcell is to perform, such as "insert a
component into a socket using vision to correct for part irregularities." This
command is automatically coupled to data contained in the real-time database
that specifies the physical aspects of the workcell, such as the location of a
part. The information contained in the databases can be created or downloaded
from a computer or simulation system at any time. Finally, the AIM system
automatically invokes the routines that capture the process knowledge and
dictate how the specified operation will be performed. In this way, an AIM
workcell can be "programmed" by a person who understands as few as ten process
actions rather than hundreds of programming instructions or thousands of lines
of conventional code.
The Company provides application-specific versions of AIM that have
built in process knowledge to address general motion, vision and part
palletizing applications. In addition, process knowledge can be added by end
users and system integrators, many of whom have developed their own AIM
application-specific packages. AIM is available in the Windows NT environment.
Simulation software. The highest level in the Company's software
architecture is the simulation software layer, developed by the Company's Silma
division, a leader in the field of simulation software. Silma's core product,
CimStation, allows machines to be modeled with 3D graphics, and then animated in
response to software control programs. Mechanisms can be defined graphically and
the mathematics necessary to animate them (kinematic models) are generated
automatically. CimStation also allows the dynamics of mechanisms to be modeled,
which enables machine cycle times to be accurately predicted. Recently Silma has
added additional CAD interfaces to this core technology for certain markets.
CimStation is available on several UNIX workstation platforms as well as Windows
NT on the PC.
New Technology
During fiscal year 1997 the Company introduced certain products,
including AdeptWindows which will allow the Company's customers to do all
development work, including vision applications, on the PC in the Windows 95 and
NT operating systems. This open architecture product allows customers to combine
the features of the Company's AIM and V+ software products with other PC-based
software products. Shipments
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of AdeptWindows commenced in Q4 of fiscal 1997. In addition, the Company has
introduced FlexFeedWare, an extension of Adept AIM MotionWare, which enables
customers faster and easier implementation of the Company's Flexible Feeder. The
Company has also introduced MV Controller Integration Kits which provide an
integrated plug and play solution for connecting AdeptModules with the MV
Controller. Shipments of MV Controller Integration Kits began in the second half
of fiscal 1997.
Products
The Company's core product families include robot mechanisms and other
mechanical products, guidance and inspection vision products, vision based
flexible part feeders, machine controllers, machine control software and
simulation software. The following diagram depicts the Company's products by RDA
layer:
[GRAPHIC OMITTED]
[Depiction of Adept's products with respect to the four layers of its Rapid
Deployment Automation approach.]
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Robot Mechanisms and Other Mechanical Products
The Company designs and manufactures two SCARA (Selective Compliance
Assembly Robot Arm) style robot mechanisms called the AdeptOne and the recently
introduced AdeptThree-XL, which are both designed for assembly, material
handling and packaging tasks. The links and joints of a SCARA robot are somewhat
analogous to the shoulder, elbow and wrist of a human. This configuration is
well suited to a large number of assembly and material handling tasks. The
AdeptOne is the faster model, while the Adept Three-XL offers a larger work
envelope and handles a larger payload. The AdeptThree-XL provides improved
performance specifications over its predecessor, the AdeptThree. The improved
performance specifications address the needs in the packaging market as well as
other markets. This product has been designed to deliver increased performance
and ease-of-use, thereby furthering the Company's RDA strategy. Each of these
robots utilize direct-drive motor technology.
The Company also sources and markets two robot mechanisms, which are
built to the Company's specifications by Hirata Corporation ("Hirata"). The
Adept 550 robot is a light-duty SCARA robot that can be table mounted and offers
a small work envelope when space is at a premium. The Adept 1850 robot is a
palletizing robot which is used to palletize completed product assemblies or
packaged products at the end of an assembly line and allows customers to perform
this task with a robot that uses the same control and software architecture as
the upstream assembly line.
The Company also offers a line of linear modules, called AdeptModules,
which the Company purchases from NSK Ltd. ("NSK"). These single axis devices can
be coupled together by the user to form a custom robot mechanism for
applications requiring a robot with fewer than four axes.
Guidance and Inspection Vision Products
The Company offers a line of machine vision products, the AdeptVision
VME line, which are used for robot guidance and inspection applications. For the
guidance applications, AdeptVision VME is added into the controller by inserting
a printed circuit board and enabling the vision system software. For inspection
applications such as gauging and dimensioning, the AdeptVision VME product is
sold as an integrated inspection vision system comprised of a controller with
the vision board and software.
Machine Controllers
The Company's controller products are based on the VME bus architecture
standard. A large array of controller configurations are possible depending on
the features selected by the customer. The Company's controllers are configured
on a five slot chassis, called the Adept MV-5, or a ten slot chassis, called the
Adept MV-10 All controllers include a system processor board and a system
input/output module. Additional functionality can be incorporated by adding
printed circuit boards and additional software. For example, motion control is
added by inserting a motion control board. Printed circuit boards can be added
for machine vision, graphical user interface capability and additional
communication inputs and outputs. The controller products are sold independently
for machine control and inspection vision applications and are also sold as a
component of the robot systems.
Machine Control Software
Adept's V+ programming language and operating system software includes
specific instructions for motion control, machine vision, force sensing,
workcell control and general communications. These
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capabilities are integrated to perform real-time machine control. The basic V+
software is included in the price of the system.
The Company's AIM software simplifies the integration, programming and
operation of automation workcells and lines. AIM accomplishes this goal by
providing a formal method for capturing application specific process knowledge
and then allowing users lacking advanced programming expertise to use this
embedded knowledge to accomplish a specific task. Several application specific
versions of AIM are sold by the Company, including MotionWare, which addresses
motion applications such as those requiring sophisticated conveyor tracking,
VisionWare, which simplifies the use of vision in both guidance and inspection
applications, and PalletWare, which includes special knowledge of box
palletizing strategies.
Simulation Software
Adept's simulation software products simulate the layout and throughput
of workcells and other equipment and generate the programs to run the workcells.
The CimStation Robotics product simulates robot workcells for the Company's
robot products as well as a number of other robot vendors' products. This
product is used to test layouts and cycle times and to generate robot
application programs. The CimStation Inspection product simulates the operation
of coordinate measurement machines and generates programs that would be tedious
to program manually given the complex inspection tasks these machines perform.
The SoftMachines product tests programs for machine tool operations. This is a
productivity tool for machine tool users who would otherwise have to perform the
time consuming task of testing programs on the machine tool itself. A new
product called SoftAssembly is used to simulate and test product assembly and to
develop assembly sequences and procedures. Finally, AdeptRAPID is a robotic
simulation product tailored specifically for Adept robots, standard industry
peripherals, and Adept's AIM software, that is designed to quickly generate
alternative conceptual layouts and cycle time estimates for implementing an
intelligent automation system. It can also be used to create AIM databases
automatically. Both CimStation Inspection and AdeptRAPID have been expanded to
operate under Windows NT with the functionality of the Company's UNIX products.
The Company anticipates the new PC based products will generate new
opportunities within manufacturing organizations that are more accustomed to
working in a PC versus UNIX environment. The Company commenced UNIX-based
shipments of AdeptRAPID to beta sites during fiscal year 1996 and shipped
production units throughout fiscal year 1997. Shipments of PC-based AdeptRAPID
and CimStation Inspection products commenced in the second half of fiscal 1997.
Vision-Based Flexible Feeder
Part feeding has historically been accomplished by designing custom
devices that could only accommodate a single part or class of parts. The Company
has developed a new flexible feeder, the Adept Flexible Feeder, which can be
rapidly reconfigured through software to accommodate new products and a wide
variety of parts ranging from simple rectangular objects to complex molded or
machined parts, thus preserving the flexibility of the workcell or production
line. The Adept Flexible Feeder integrates machine vision, software, and motion
control technology with a simple mechanical device. The Adept Flexible Feeder
recirculates the parts and separates them, relying on vision to identify
individual parts. This product is currently in low-volume production, and
additional design work must be performed in order to optimize end user cost and
performance. There can be no assurance that the development of this product will
be completed in a timely manner or that this product will achieve widespread
market acceptance.
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Customers and Applications
The Company sells its products to system integrators, end users and
OEMs. End users of the Company's products include a broad range of manufacturing
companies in the electronics, telecommunications, appliances, pharmaceutical,
food processing and automotive components industries. These companies use
Adept's products to perform a wide variety of functions in assembly, material
handling and packaging applications, including mechanical assembly, printed
circuit board assembly, dispensing, palletizing and inspection. No customer
accounted for more than 10% of the Company's net revenues in fiscal 1997, 1996
or 1995.
Sales, Distribution and Marketing
Sales and Distribution
The Company markets its products through system integrators, its direct
sales force and OEMs.
System Integrators. A substantial portion of the Company's shipments is
through system integrators, and the Company views its relationships with these
organizations as important to the Company's success. The Company has established
relationships with over 200 system integrators worldwide that provide expertise
and process knowledge for a wide range of specific applications. These
relationships are generally not regional and are mutually nonexclusive, although
the Company continuously works to earn voluntary exclusive use of its products
through product performance and support. The greater the investment in equipment
and training and the higher the purchase volume, the greater the discount the
system integrator receives. In certain international markets, the system
integrators perform marketing and support functions directly.
A substantial portion of the Company's sales are to system integrators
that specialize in designing and building production lines for manufacturers.
Many of these companies are small operations with limited financial resources,
and the Company has on occasion experienced difficulty in collecting payments
from certain of these companies. As a result, the Company performs ongoing
credit evaluations of its customers and does not require collateral. However,
the Company may require customers to make payments in advance of shipment or to
provide a letter of credit. The Company provides reserves for potential credit
losses, and such losses have been within the Company's expectations. To the
extent the Company is unable to mitigate this risk of collections from system
integrators, the Company's results of operations may be materially adversely
affected. Furthermore, there can be no assurance that any of these system
integrators will not discontinue their relationships with the Company or enter
into competing arrangements with the Company's competitors. In the event a
number of the Company's system integrators experience financial problems,
terminate their relationships with the Company or substantially reduce the
amount of the Company's products they sell, or in the event the Company fails to
build an effective systems integrator channel in any new markets, the Company's
business, financial condition and results of operations could be materially
adversely affected.
Direct Sales Force. The Company employs a direct sales force which
calls on end users to communicate the capabilities of the Company's products and
support services and obtain up-to-date information on market requirements.
Adept's sales force possesses specific expertise in automation solutions and
advises end users on alternative production line designs, special application
techniques, equipment sources and system integrator selection. This sales force
works closely with system integrators and OEMs to integrate the Adept product
line into their systems, provides sales leads to certain system integrators and
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obtains intelligent automation system quotes from system integrators for end
users. As of June 30, 1997, the Company's North American sales organization
included 15 individuals. The Company has four sales and customer support offices
in North America, located in San Jose, California; Southbury, Connecticut;
Southfield, Michigan; and Cincinnati, Ohio. As of June 30, 1997, the Company's
international sales organization included eleven persons covering Europe, Japan,
Singapore, and South Korea. The Company has seven international sales and
customer support offices located in Dortmund, Germany; Massy, France; Arezzo,
Italy; Toyohashi, Japan; Kenilworth, the United Kingdom; Seoul, South Korea; and
Singapore.
Some of the Company's larger manufacturing end user customers have
in-house engineering departments that are comparable to a captive system
integrator. These captive engineering groups can establish a corporate
integrator relationship with the Company that offers benefits similar to those
provided to the Company's system integrators.
OEMs. The Company's OEM customers typically purchase one standard
product configuration, which the OEM integrates with additional hardware and
software and sells under the OEM's label to other resellers and end users.
The sale of the Company's products generally involves the delays
frequently associated with large capital expenditures. The Company's net
revenues depend in significant part upon the decision of a prospective customer
to upgrade or expand existing manufacturing facilities or to construct new
manufacturing facilities, all of which typically involve a significant capital
commitment. In the event one or more large orders fails to close as forecasted
for a quarter, the Company's net revenues and operating results for such quarter
could be materially adversely affected.
International sales for the fiscal years ended June 30, 1997, 1996 and
1995 were $29.6 million, $32.2 million and $24.0 million, respectively,
representing 35.8%, 39.4%, and 40.6% of net revenues for the respective periods.
The Company anticipates that international sales will continue to account for a
significant portion of its net revenues; however, there can be no assurance that
international sales will increase or that the current level of international
sales will be sustained. The Company's operating results are subject to the
risks inherent in international sales and purchases, including, but not limited
to, various regulatory requirements, political and economic changes and
disruptions, transportation delays, foreign currency fluctuations, export/import
controls, tariff regulations, higher freight rates, difficulties in staffing and
managing foreign sales operations, greater difficulty in accounts receivable
collection and potentially adverse tax consequences.
Marketing
Adept's marketing organization, which consisted of 46 persons as of
June 30, 1997, supports the Company's various channels in a number of ways.
Product management works with end users, system integrators, corporate
integrators, and the Company's sales engineers to continuously gather input on
product performance and end user needs. This information is used to enhance
existing products and to develop new products. A marketing programs group
generates and qualifies new business through industrial trade shows, various
direct marketing programs such as direct mail and telemarketing, public
relations efforts and advertising in industry periodicals. This marketing group
is responsible for tracking customers and prospects through the Company's
marketing database. The marketing group also publishes a document called the MVP
catalog, which lists software and hardware components that have been certified
by Adept to be compatible with the Company's product line. The Company also
expends considerable effort on the development of thorough technical
documentation and user manuals for the Adept product line, and views
well-designed
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manuals as critical to simplifying the installation, programming, use and
maintenance of the Company's products.
Backlog
The Company's product backlog at June 30, 1997 was approximately $20.5
million, as compared with approximately $13.0 million at June 30, 1996. The
Company includes in its backlog customer orders for products for which it has
accepted signed purchase orders with assigned delivery dates within nine months
in the case of sales to end users and system integrators, and one year in the
case of sales to OEMs. The Company's business is characterized by short term
order and shipment schedules. Because orders constituting the Company's current
backlog are subject to changes in delivery schedules and in certain instances
may be subject to cancellation without significant penalty, and because the
Company utilizes its backlog to balance seasonal fluctuations in its bookings,
and the sales cycle has continued to shorten, the Company's backlog at any date
may not be indicative of demand for the Company's products or actual net
revenues for any period in the future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," which is incorporated by
reference into this Annual Report on Form 10-K, including the section titled
"Significant Fluctuations in Quarterly Operating Results."
Services and Support
The Company's service and support organization, which consisted of 73
persons as of June 30, 1997, is designed to support the customer from the design
of the automation line through ongoing support of the installed system. This
organization included 32 application engineers/programmers as of June 30, 1997
based in a number of the Company's sales offices in the U.S., Europe and Asia.
This team is experienced in applying the Company's product line to solve a wide
array of application issues, and operates toll-free telephone support lines
called "the Hotline" to provide advice on issues such as software programming
structure, layout problems and system installation. End users and system
integrators can also hire these experts on a consulting basis to help resolve
new or difficult application issues.
The Company also maintains a team of instructors, consisting of seven
instructors as of June 30, 1997, which develops training courses on subjects
ranging from basic system maintenance to advanced programming. These courses are
geared both for manufacturing engineers who design and implement automation
lines and for operators who operate and maintain equipment once it is in
production.
The Company's field service organization, which consisted of 41 persons
as of June 30, 1997, is based in six service centers located in San Jose,
California; Cincinnati, Ohio; Massy, France; Dortmund, Germany; Arezzo, Italy,
Toyohashi, Japan; Seoul, South Korea and Singapore. The field-based service
engineers maintain and repair Adept products at the end user's facilities.
Personnel based at these service centers also provide advice to customers on
spare parts, product upgrades, and preventative maintenance.
Research and Development
The Company's research and development efforts are focused on the
design of intelligent automation products which address the challenges of
designing, implementing, installing, operating and modifying automated
production lines. The Company intends to focus its research and development
efforts on the development of an integrated product line which further
implements the Company's RDA approach and which reduces cost, enhances
performance and improves ease of use.
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The Company has devoted, and intends to devote in the future, a
significant portion of its resources to research and development programs. As of
June 30, 1997, the Company had 78 persons, including four temporary or contract
personnel, engaged in research, development, and engineering. The Company's
research, development and engineering expenses for fiscal 1997, 1996 and 1995
were approximately $9.0 million, $8.1 million and $6.6 million, respectively,
and represented 10.9%, 9.9% and 11.2%, respectively, of net revenues.
The Company's future success will depend on its ability to enhance its
existing products and to develop and introduce, on a timely and cost-effective
basis, new products and enhancements that keep pace with technological
developments and address the needs of its customers. The Company is currently
developing a number of new products intended to further implement RDA's goal of
providing easy to use intelligent automation systems to the end user.
The development and commercialization of new products involve many
risks, including the identification of new product opportunities, the retention
and hiring of appropriate research and development personnel, the definition of
the product's technical specifications, the successful completion of the
development process and the successful marketing of the product. The development
of these products has required, and will require, the Company to expend
significant financial and management resources.
The markets in which the Company competes are characterized by rapid
technological change and new product introductions and enhancements. The
Company's ability to remain competitive and its future success will depend in
significant part upon the technological quality of its products and processes
relative to those of its competitors and its ability both to develop new and
enhanced products and to introduce such products at competitive prices and on a
timely and cost effective basis. There can be no assurance that the Company will
be successful in selecting, developing and manufacturing new products or in
enhancing its existing products on a timely basis or at all, or that such
products will achieve market acceptance. The success of the Company in
developing, introducing, selling and supporting new and enhanced products
depends upon a variety of factors, including timely and efficient completion of
hardware and software design and development, timely and efficient
implementation of manufacturing processes, and effective sales, marketing and
customer service. In addition, because of the complexity of the Company's
products, significant delays can occur between a product's initial introduction
in the market and commencement of volume production. In addition, new or
existing software products or enhancements may contain errors or performance
problems when first introduced, when new versions or enhancements are released,
or even after such products or enhancements have been used in the marketplace
for a period of time. Despite testing by the Company, such defects may be
discovered only after a product has been installed and used by customers. There
can be no assurance that such errors or performance problems will not be
discovered in future shipments of the Company's products, resulting in expensive
and time consuming design modifications or large warranty charges, damaging
customer relationships and resulting in loss of market share, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Manufacturing
Adept seeks to focus its manufacturing resources on activities which
enable the Company to differentiate its product line and add distinctive value.
Adept's manufacturing activities include the assembly, test, and configuration
of its products. The Company believes that by performing these operations it can
better ensure the quality and performance of its products. The Company
outsources low unit volume, low value-added manufacturing operations, including
standard and build-to-print fabricated parts such as
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machinery, sheet metal fabrication and assembled printed circuit boards. The
Company also sources some robot mechanisms. The purchased robot mechanisms are
tested to meet defined quality standards and then configured into complete
products which are tested again prior to shipment to the customer. This strategy
enables the Company to leverage product development, manufacturing and
management resources while retaining greater control over product delivery,
final product configuration and the timing of new product introductions, all of
which are critical to meeting customer expectations.
The Company's manufacturing organization has expertise in mechanical,
electrical, electronic and software assembly and test. In addition, because
outstanding quality and reliability over the life of the Company's products are
key to customer satisfaction and customers' repeat purchases of automation
products, the Company believes its quality assurance plans and organization are
a key part of its business strategy. The Company's quality assurance
organization develops detailed instructions for all manufacturing and test
operations. These instructions are established in writing, implemented through
training of the manufacturing work force, and monitored to assure compliance. In
addition, the Company's quality assurance organization works closely with
vendors to develop instructions and to remedy quality problems if they arise.
The Company obtains many key components and materials and some
significant mechanical subsystems from sole or single source suppliers. The
Company purchases components, materials and mechanical subsystems from sole or
single source suppliers pursuant to purchase orders placed from time to time in
the ordinary course of business and has no guaranteed supply arrangements with
such suppliers. Certain of these components and mechanical subsystems have long
procurement lead times. The Company's reliance on sole or single source
suppliers involves several significant risks, including loss of control over the
manufacturing process, the potential absence of adequate supplier capacity,
potential inability to obtain an adequate supply of required components,
materials or mechanical subsystems and reduced control over manufacturing
yields, costs, timely delivery, reliability and quality of components, materials
or mechanical subsystems. In the event that any significant sole or single
source supplier were unable or unwilling to manufacture certain components,
materials or mechanical subsystems in required volumes, the Company would be
required to identify and qualify acceptable replacements. The process of
qualifying suppliers could be lengthy, and there can be no assurance that any
additional sources would be available to the Company on a timely basis or on
acceptable terms. If supplies of such items were not available from sole or
single source suppliers and a relationship with an alternative supplier could
not be timely developed, shipments of the Company's products could be
interrupted and reengineering of the affected product could be required. In
particular, the Company buys some significant mechanical subsystems from certain
sole source suppliers with lengthy procurement lead times, including robot
mechanisms from Hirata and NSK, image processing circuit boards from Imaging
Technology Incorporated and power transistors from International Rectifier
Corporation. Although to date the Company has not experienced any difficulty in
obtaining robot mechanisms or image processing circuit boards, from time to time
the Company has not obtained sufficient amounts of power transistors on a timely
basis, and has been required to use inventory scheduled for shipment in future
quarters to meet product demand. There can be no assurance that the Company will
not face shortages of one or more of these subsystems or components in the
future. Any failure by the Company to obtain sufficient robot mechanisms or
components on a timely basis could delay shipments of its products and could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company could experience quality control problems with certain key
components provided by sole source suppliers, and may have to design around the
particular flawed item. The Company may also experience delays in filling
customer orders due to the failure of certain suppliers to meet the Company's
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volume and schedule requirements. Certain suppliers of the Company may also
cease manufacturing components which the Company requires for its products, and
the Company may be required to purchase sufficient supplies for the estimated
life of its product line. There can be no assurance that these or additional
problems will not occur in the future with the Company's suppliers. Disruption
or termination of the Company's supply sources could require the Company to pay
more for components, materials or mechanical subsystems, or to seek alternative
sources of supply, and could delay the Company's product shipments and damage
relationships with current and prospective customers, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. If the Company incorrectly forecasts product mix for a
particular period and the Company is unable to obtain sufficient supplies of any
components or mechanical subsystems on a timely basis due to long procurement
lead times, the Company's business, financial condition and results of
operations could be materially adversely affected. Moreover, if demand for a
product for which the Company has purchased a substantial amount of components
fails to meet the Company's expectations, the Company would be required to write
off the excess inventory, thereby materially adversely affecting the Company's
results of operations. A prolonged inability to obtain adequate timely
deliveries of key components would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's hardware products are required to comply with European
Union ("EU") electrical and safety Directives and Standards in certain European
countries, including France, Germany, Italy and Switzerland. EU certification
mandates a rigorous examination of the Company's products by certain European
agencies for adherence to a number of stringent electrical and safety
requirements, and products must be designed to meet these standards. These
standards can change and are subject to varying interpretation. The Company has
certified that its current VME controller products and the Adept-550,
AdeptOne-MV and AdeptThree-MV and AdeptThree-XL robot products meet applicable
EU Directives and Standards. The Flexible Feeder has not yet been certified in
Europe, and there can be no assurance that the Company will receive such
certification. In the event any of the Company's robot products or any other
major hardware products were refused EU certification, the Company's European
sales and its business, financial condition and results of operations could be
materially adversely affected.
The Company is subject to a variety of environmental regulations
relating to the use, storage, handling, and disposal of certain hazardous
substances used in the manufacturing and assembly of the Company's products. The
Company believes that it is currently in compliance with all material
environmental regulations in connection with its manufacturing operations, and
that it has obtained all necessary environmental permits to conduct its
business. Any failure by the Company to comply with present or future
regulations could subject the Company to the imposition of substantial fines,
suspension of production, alteration of manufacturing processes or cessation of
operations, any of which could have a material adverse effect on the Company's
business, financial condition, and results of operations. Compliance with such
regulations could require the Company to acquire expensive remediation equipment
or to incur substantial expenses. Any failure of the Company to control the use,
disposal, removal, or storage of, or to adequately restrict the discharge of, or
assist in the cleanup of, hazardous or toxic substances, could subject the
Company to significant liabilities, including joint and several liability under
certain statutes. The imposition of such liabilities could materially adversely
affect the Company's business, financial condition, and results of operations.
Competition
The market for intelligent automation products is highly competitive.
The Company competes with a number of robot companies, motion control companies,
machine vision companies and simulation software
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companies. Many of the Company's competitors have substantially greater
financial, technical, marketing and other resources than the Company. Although
to date the Company's competitors have not offered a broad range of intelligent
automation products, it is possible that one or more of these competitors may in
the future, through acquisitions or otherwise, offer a more comprehensive line
of products which are competitive with a broader range of the Company's products
or with the Company's entire product line. In addition, the Company may in the
future face competition from new entrants in one or more of its markets. The
principal competitive factors affecting the market for the Company's products
are product functionality and reliability, customer service, price, and product
features such as flexibility, programmability and ease of use. The Company
believes that it competes favorably with respect to these factors. In addition,
to date the Company's competitors have been unable to successfully commercialize
direct drive technology, although there can be no assurance that one or more of
them will not do so in the future.
The Company's principal competitors in the U.S. robot market include
U.S. subsidiaries of Japan-based Fanuc Ltd. ("Fanuc"), Seiko Instruments
("Seiko"), Yamaha Corporation ("Yamaha"), Sony Corporation ("Sony"), Sankyo
Company Limited ("Sankyo"), and other Japanese robot companies. In the European
robot market, the Company principally competes with Robert Bosch GmbH, which to
date has sold most of its products in Germany, and with Fanuc, Seiko, Yamaha,
Sony, Sankyo, and other Japanese companies. In the Japanese robot market, over a
dozen robot companies compete with the Company, including Fanuc, Nippon Denso,
Panasonic Company, Sankyo, Seiko, Sony, Toshiba Corporation and Yamaha. Certain
of these large manufacturing companies have greater flexibility in pricing than
the Company, because they generate substantial unit volumes of robots for
internal demand and may have access through their parent companies to large
sources of capital. There can be no assurance that any of the Company's
competitors will not seek to expand its presence in other markets in which the
Company competes. In addressing the Japanese market, the Company is at a
competitive disadvantage as compared to Japanese suppliers, many of who have
long-standing collaborative relationships with Japanese manufacturers. Although
the Company expects to continue to invest significant resources in the Japanese
market in the future, there can be no assurance that the Company will be able to
achieve significant sales growth in the Japanese intelligent automation market.
The Company's principal competitors in the market for motion control
systems include Allen-Bradley Co. ("Allen-Bradley"), a subsidiary of Rockwell
International Corporation, in the United States, and Siemens AG in Europe. In
addition, the Company faces motion control competition from two major suppliers
of motion control boards, Galil Motion Control, Inc. and Delta Tau Data Systems,
Inc. These motion control boards are purchased by end users which engineer their
own custom motion control systems. In the simulation software market, the
Company's competitors include Tecnomatix Technologies, Inc., an Israel-based
company which sells mostly to major automotive manufacturers, and Deneb Robotics
Inc. In the machine vision market, the Company faces competition from Cognex
Corporation, Robotic Vision Systems Inc., and Allen-Bradley.
There can be no assurance that current or potential competitors of the
Company will not develop products comparable or superior in terms of price and
performance features to those developed by the Company or adapt more quickly
than the Company to new or emerging technologies and changes in customer
requirements. In addition, no assurance can be given that the Company will not
be required to make substantial additional investments in connection with its
research, development, engineering, marketing and customer service efforts in
order to meet any competitive threat, or that the Company will be able to
compete successfully in the future. The Company expects that in the event the
intelligent automation market expands, competition in the industry will
intensify, as additional competitors enter the Company's markets and current
competitors expand their product fines. Increased competitive pressure could
result in a loss of sales or
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market share, or cause the Company to lower prices for its products, any of
which could materially adversely affect the Company's business, financial
condition and results of operations.
Proprietary Technology and Intellectual Property
The Company relies on a combination of patent, copyright and trade
secret protection, and nondisclosure agreements to protect its proprietary
rights. In the U.S. the Company holds four hardware patents and two software
patents. The Company also holds one hardware patent issued in France, Germany,
Great Britain, Italy and Sweden, and relies on trade secrets principles to
protect its proprietary technology in real-time multi-tasking software
structure, continuous path motion control and assembly of robot mechanisms.
There can be no assurance, however, that patent law, copyright law and trade
secret protection will be adequate to deter misappropriation of its technology,
that any patents issued to the Company will not be challenged, invalidated or
circumvented, that the rights granted thereunder will provide competitive
advantages to the Company, or that the claims under any patent application will
be allowed.
The process of seeking patent protection can be time consuming and
expensive, and there can be no assurance that patents will issue from currently
pending or future applications or that the Company's existing patents or any new
patents that may be issued will be sufficient in scope or strength to provide
meaningful protection or any commercial advantage to the Company. Furthermore,
there can be no assurance that others will not independently develop similar
products, duplicate the Company's products or design around any patents issued
to the Company. The Company may be subject to or may initiate interference
proceedings in the U.S. Patent and Trademark Office, which can demand
significant financial and management resources. In addition, a substantial
amount of the Company's sales are in international markets, and there can be no
assurance that foreign intellectual property law will adequately protect the
Company's intellectual property rights.
The Company has from time to time received communications from third
parties asserting that the Company is infringing certain patents and other
intellectual property rights of others or seeking indemnification against such
alleged infringement. As claims arise, the Company evaluates their merits. No
assurance can be given that any of these claims will not result in protracted
and costly litigation, that damages for infringement will not be assessed or
that should it be necessary or desirable to obtain a license relating to one or
more of the Company's products or current or future technologies, the Company
will be able to do so on commercially reasonable terms or at all. Litigation,
which could result in substantial cost to and diversion of resources of the
Company, may be necessary to enforce patents or other intellectual property
rights of the Company or to defend the Company against claimed infringement of
the rights of others. Any such litigation and the failure to obtain necessary
licenses or other rights could have a material adverse effect on the Company's
business, financial condition, and results of operations. In particular, one end
user of the Company's products has notified the Company that it has received a
claim of patent infringement from Jerome H. Lemelson, alleging that its use of
the Company's machine vision products infringe certain patents issued to Mr.
Lemelson. This end user of the Company's products is currently engaged in
litigation with Mr. Lemelson involving certain of these patents, and the
validity, enforceability and infringement of those patents have been placed in
issue. The Company has not been named in this litigation, although certain
products sold by the Company, as well as products of others, were identified in
connection with this litigation as part of an allegedly infringing use. Although
a recent magistrate report and recommendation concluded that Mr. Lemelson's
claims in such litigation should not be enforced because of laches, the federal
district court more recently determined that laches is not available as a
defense. The district court has also certified the decision for interlocutory
appeal and stayed the litigation pending the outcome of the appeal process. In
addition, the Company has been notified that other end users of the Company's
AdeptVision VME line and the
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predecessor line of Multibus machine vision products have received letters from
Mr. Lemelson which refer to Mr. Lemelson's patent portfolio and offer the end
user a license to the particular patents. Certain end users, including the end
user currently in litigation with Mr. Lemelson, have notified the Company that
they may seek indemnification from the Company for damages or expenses resulting
from these matters. The Company may incur significant costs if it is required to
indemnify any purchasers or users of the Company's products for damages or
expenses resulting from the litigation or if Mr. Lemelson elects to seek damages
directly from the Company. The Company cannot predict the outcome of this or any
similar litigation which may arise in the future, and although such products
have not represented a material portion of the Company's net revenues in fiscal
1997, 1996 or 1995, there can be no assurance that any such litigation will not
have a material adverse effect on the business, financial condition or results
of operations of the Company.
Employees
At June 30, 1997, the Company had 354 full-time employees, including
100 in operations, 150 in sales and marketing, 74 in engineering, and 30 in
administration. In addition, at June 30, 1997, the Company utilized the services
of 30 temporary or contract personnel, including 14 in operations, 10 in sales
and marketing, four in engineering and two in administration. The Company's
employees are not represented by any collective bargaining organization, and the
Company has never experienced a work stoppage. The Company believes that its
relationships with its employees are good.
The Company is highly dependent upon the continuing contributions of
its key management, sales, and product development personnel. In particular, the
Company would be materially adversely affected if it were to lose the services
of Brian Carlisle, Chief Executive Officer and Chairman of the Board of
Directors of the Company, who has provided significant leadership to the Company
since its inception, or Bruce Shimano, Vice President, Research and Development
and a Director of the Company, who has guided the Company's research and
development programs since its inception. In addition, the loss of the services
of any of the Company's senior managerial, technical or sales personnel could
materially adversely affect the Company's business, financial condition, and
results of operations. The Company's future success also heavily depends on its
continuing ability, to attract, retain, and motivate highly qualified
managerial, technical and sales personnel. Competition for qualified technical
personnel in the intelligent automation industry is intense. The Company's
inability to recruit and train adequate numbers of qualified personnel on a
timely basis would adversely affect the Company's ability to design,
manufacture, market and support its products. The Company does not have
employment contracts with any of its executive officers and does not maintain
key man life insurance on the lives of any of its key personnel.
ITEM 2. PROPERTIES
The Company's headquarters and principal research and development and
manufacturing facilities are located in a 92,448 square foot leased building in
San Jose, California. The lease expires in December 2000 and provides for annual
lease payments of approximately $665,000 in calendar year 1997 and $1,110,000 in
calendar year 1998. The Company leases an additional 10,000 square feet in an
adjacent building in San Jose for its Silma division, which lease expires in
April 1998. The Company also leases a 3,596 square foot facility in City of
Industry, California at which the Company's software development group is based.
The City of Industry lease is in the process of being renewed for an additional
four year term and is subject to final negotiations and agreement. The Company
also leases facilities for sales and customer training in Southbury,
Connecticut; Southfield, Michigan; Cincinnati, Ohio; Massy, France; Dortmund,
Germany; Arezzo, Italy; Toyohashi, Japan; Kenilworth, the United Kingdom; Seoul,
South Korea; and Singapore. The Company anticipates seeking expanded facilities
for its headquarters at the termination of its
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<PAGE>
headquarters lease and expects that it may need additional facilities to
accommodate its proposed expansion of operations. The Company believes that
suitable additional or substitute facilities will be available as required in
the future on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is party to various legal proceedings or
claims, either asserted or unasserted, which arise in the ordinary course of the
Company's business. Management has reviewed pending legal matters and, except to
the extent set forth below, believes that the resolution of such matters will
not have a material adverse effect on the Company's business, financial
condition, or results of operations.
One end user of the Company's products has notified the Company that it
has received a claim of patent infringement from Jerome H. Lemelson, alleging
that its use of the Company's machine vision products infringe certain patents
issued to Mr. Lemelson. This end user of the Company's products is currently
engaged in litigation with Mr. Lemelson involving certain of these patents, and
the validity, enforceability and infringement of those patents have been placed
in issue. The Company has not been named in this litigation, although certain
products sold by the Company, as well as products of others, were identified in
connection with this litigation as part of an allegedly infringing use. Although
a recent magistrate report and recommendation concluded that Mr. Lemelson's
claims in such litigation should not be enforced because of laches, the federal
district court more recently determined that laches is not available as a
defense. The district court has also certified the decision for interlocutory
appeal and stayed the litigation pending the outcome of the appeal process. In
addition, the Company has been notified that other end users of the Company's
AdeptVision VME line and the predecessor line of Multibus machine vision
products have received letters from Mr. Lemelson which refer to Mr. Lemelson's
patent portfolio and offer the end user a license to the particular patents.
Certain end users, including the end user currently in litigation with Mr.
Lemelson, have notified the Company that they may seek indemnification from the
Company for damages or expenses resulting from these matters. The Company may
incur significant costs if it is required to indemnify any purchasers or users
of the Company's products for damages or expenses resulting from the litigation
or if Mr. Lemelson elects to seek damages directly from the Company. The Company
cannot predict the outcome of this or any similar litigation which may arise in
the future, and although such products have not represented a material portion
of the Company's net revenues in fiscal 1997, 1996 or 1995, there can be no
assurance that any such litigation will not have a material adverse effect on
the business, financial condition or results of operations of the Company.
-23-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
The executive officers of the Company are as follows:
<CAPTION>
Name Age Position
<S> <C> <C>
Brian R. Carlisle.................... 46 Chairman of the Board of Directors and Chief
Executive Officer
Charles S. Duncheon.................. 46 Senior Vice President, Marketing and Sales
Bruce E. Shimano..................... 48 Vice President, Research and Development, Secretary
and Director
Richard J. Casler, Jr................ 45 Vice President, Engineering
James E. Kuhl........................ 56 Vice President, Operations
Betsy A. Lange....................... 37 Vice President, Finance and Chief Financial Officer
</TABLE>
Brian R. Carlisle has served as the Company's Chief Executive Officer
and Chairman of the Board of Directors since he co-founded the Company in June
1983. From June 1980 to June 1983, he served as General Manager and from June
1977 to June 1980, he served as project manager of the West Coast Division of
Unimation, Inc. ("Unimation"), where he was responsible for new product strategy
and development for Unimation's electric robots, control systems, sensing
systems and other robotics applications. Mr. Carlisle received a B.S. and M.S.
in mechanical engineering from Stanford University.
Charles S. Duncheon has served as the Company's Senior Vice President
of Marketing and Sales since September 1988. From May 1984 to May 1987, he
served as General Sales Manager and from May 1987 to September 1988 as Vice
President of North American Sales. Prior to that time, Mr. Duncheon served in
various marketing positions with Fared Robot Systems, Inc., a robot company, and
in various engineering and manufacturing positions at Monsanto Corporation, an
international chemicals company. Mr. Duncheon received a B.S. in industrial
engineering from Purdue University and a M.B.A. from Southern Illinois
University.
Bruce E. Shimano has served as the Company's Vice President, Research
and Development, and as a director since he co-founded the Company in June 1983.
Prior to that time, he was Director of Software Development at Unimation. Mr.
Shimano received a B.S., a M.S. and a Ph.D. in mechanical engineering from
Stanford University.
Richard J. Casler, Jr. has served as the Company's Vice President of
Engineering since April 1993 and from October 1992 to March 1993 served as
Director of Robot Interface Development. In October 1986, Mr. Casler co-founded
Genesis Automation, Inc., a developer of robots and automation for the service
industry, and served as its president until October 1992. From October 1981 to
October 1986, Mr. Casler was manager of product development at Unimation and at
Unimation's parent company, Westinghouse Electric Corporation. Mr. Casler
received a B.S. and a M.S. in mechanical engineering from the Massachusetts
Institute of Technology.
-24-
<PAGE>
James E. Kuhl has served as the Company's Vice President of Operations
since November 1992. In September 1997, Mr. Kuhl announced his intention to
resign as the Company's Vice President of Operations as soon as the Company
employs a successor. The Company has initiated a search for a new Vice President
of Operations and believes a successor will be identified and hired in late 1997
or early 1998. From July 1991 to June 1992, Mr. Kuhl was Director of Operations
for PolyFlex Circuits, Inc., a manufacturer of flexible membrane printer
circuits. From February 1991 to June 1991, he served as manager of mechanical
engineering at Honeywell, Inc., an industrial automation company. Prior to that
time, Mr. Kuhl held various manufacturing and marketing management positions in
the microcomputer group of Motorola, Inc. Mr. Kuhl received a B.S. in electrical
engineering from Pennsylvania State University and a M.B.A. from the University
of Rochester.
Betsy A. Lange has served as the Company's Vice President, Finance and
Chief Financial Officer since July 1993. Ms. Lange joined the Company as an
accounting manager in December 1987 and became its controller in May 1991. Prior
to that time, Ms. Lange served in various accounting positions for five years at
Avantek, Inc., a manufacturer of microwave components. Ms. Lange received a B.S.
in business administration from California PolyTechnic State University (San
Luis Obispo) and a M.B.A. from Santa Clara University.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference from
the section captioned "Market and Stock Price Data" contained in the Company's
1997 Annual Report to Shareholders for the fiscal year ended June 30, 1997,
portions of which are filed as Exhibit 13.1 hereto (the "Annual Report to
Shareholders").
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to page
16 of the Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated by reference to page
19 of the Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to page
25 of the Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-25-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning the Company's directors is
incorporated by reference from the section captioned "Election of Directors"
contained in the Company's Proxy Statement related to the Annual Meeting of
Shareholders to be held November 7, 1997, to be filed by the Company with the
Securities and Exchange Commission within 120 days of the end of the Company's
fiscal year pursuant to General Instruction G(3) of Form 10-K (the "Proxy
Statement"). The information required by this item concerning executive officers
is set forth in Part I of this Report. The information required by this item
concerning compliance with Section 16(a) of the Exchange Act is incorporated by
reference from the section captioned "Section 16(a) Beneficial Ownership
Reporting Compliance" contained in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
section captioned "Executive Compensation and Other Matters" contained in the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
section captioned "Security Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
sections captioned "Compensation Committee Interlocks and Insider Participation"
and "Certain Transactions" contained in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
The following financial statements are incorporated by
reference in Item 8 of this Report:
Independent Auditors' Report
Consolidated Balance Sheets at June 30, 1997 and 1996
Consolidated Statements of Income for the years ended June 30,
1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended June
30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
-26-
<PAGE>
II - Valuation and Qualifying Accounts
Additional schedules are not required under the related
schedule instructions or are inapplicable, and therefore have been omitted.
(a)(3) Exhibits
3.1(1) Restated Articles of Incorporation of the
Registrant.
3.2(1) Bylaws of the Registrant, as amended to date.
10.1(1) 1983 Stock Incentive Program, and form of
Agreement thereto.
10.2 1993 Stock Plan as amended, and form of
agreement thereto.
10.3 1995 Employee Stock Purchase Plan as amended, and
form of agreements thereto.
10.4 1995 Director Option Plan as amended, and
form of agreement thereto.
10.5(1) Form of Indemnification Agreement between the
Registrant and its officers and directors.
10.6.1(1) Lease Agreement between the Registrant and
Technology Associates I dated July 18, 1986, as
amended.
10.6.2(1) Office Building Lease between Registrant and
Puente Hills Business Center II dated May 20,
1993, as amended.
10.6.3(1) Standard Office Lease - Gross between SILMA
Incorporated and South Bay/Copley Joint Venture
dated November 11, 1992.
10.6.4 Fifth Amendment to Lease between Registrant and
Metropolitan Life Insurance Company dated as of
December 5, 1996.
10.7(1) Loan Payoff Plan dated August 3, 1993 between
Registrant and Charles Duncheon.
11.1 Statement regarding computation of per share
earnings.
13.1 Portions of Registrant's Annual Report to
Shareholders for the fiscal year ended June 30,
1997.
22.1(1) Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
24.1 Power of Attorney (See Page 28).
27.1 Financial Data Schedule.
- ------------------
1 Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S- 1 (Reg. No. 33-98816) as declared
effective by the Commission on December 15, 1995.
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended June 30, 1997.
(c) Exhibits. See Item 14(a)(3) above.
(d) Financial Statement Schedules. See Item 14(a)(2) above.
-27-
<PAGE>
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.
ADEPT TECHNOLOGY, INC.
By: /s/ Brian R. Carlisle
--------------------------------------------
Brian R. Carlisle
Chairman of the Board of Directors and Chief
Executive Officer
Date: September 26, 1997
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Brian R. Carlisle and Betsy A. Lange and
each of them, his or her true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, to sign any and all amendments
(including post-effective amendments) to this Annual Report on Form 10-K 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 or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, or any of
them, shall do or cause to be done by virtue hereof.
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Brian R. Carlisle Chairman of the Board of Directors and Chief September 26, 1997
- --------------------------------------- Executive Officer (Principal Executive Officer)
(Brian R. Carlisle)
/s/ Besty A. Lange Vice President, Finance and Chief Financial September 26, 1997
- --------------------------------------- Officer (Principal Financial and Accounting
(Betsy A. Lange) Officer)
28
<PAGE>
/s/ Bruce E. Shimano Vice President, Research and Development, September 26, 1997
- --------------------------------------- Secretary and Director
(Bruce E. Shimano)
/s/ Michael P. Kelly Director September 26, 1997
- ---------------------------------------
(Michael P. Kelly)
/s/ Cary R. Mock Director September 26, 1997
- ---------------------------------------
(Cary R. Mock)
/s/ John E. Pomeroy Director September 26, 1997
- ---------------------------------------
(John E. Pomeroy)
</TABLE>
29
ADEPT TECHNOLOGY, INC.
1993 STOCK PLAN
(as amended September, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants of the
Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in accordance
with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Adept Technology, Inc., a California corporation.
(h) "Consultant" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render services and is compensated
for such services.
(i) "Continuous Status as an Employee, Director or Consultant" means
that the employment relationship, directorship or consulting relationship is not
interrupted or terminated by the Company, any Parent or Subsidiary. Continuous
Status as an Employee, Director or Consultant shall not be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
<PAGE>
including sick leave, military leave, or any other personal leave; provided,
however, that for purposes of Incentive Stock Options, any such leave may not
exceed ninety (90) days, unless reemployment upon the expiration of such leave
is guaranteed by contract (including certain Company policies) or statute; or
(ii) transfers between locations of the Company or between the Company, its
Parent, its Subsidiaries or its successor.
(j) "Director" means a member of the Board.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported, as quoted on such exchange or system for
the last market trading day prior to the time of determination) as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "Notice of Grant" means a written notice evidencing certain terms
and conditions of an individual Option grant. The Notice of Grant is part of the
Option Agreement.
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<PAGE>
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Optioned Stock" means the Common Stock subject to an Option.
(u) "Optionee" means an Employee, Director or Consultant who receives
an Option.
(v) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1993 Stock Plan.
(x) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(y) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.
(z) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,462,500. The Shares may be authorized, but unissued, or
reacquired Common Stock. However, should the Company reacquire Shares which were
issued pursuant to the exercise of an Option, such Shares shall not become
available for future grant under the Plan.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
-3-
<PAGE>
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Employees, Directors
and Consultants.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Employees, Directors and Consultants to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of Shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options may be exercised (which may be based on performance criteria), and any
restriction or limitation regarding any Option or the Shares of
-4-
<PAGE>
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(x) to modify or amend each Option (subject to Section 13(b) of
the Plan);
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously granted by
the Administrator;
(xiii) to determine the terms and restrictions applicable to
Options; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees, Directors
and Consultants. Incentive Stock Options may be granted only to Employees. An
Employee, Director or Consultant who has been granted an Option may, if
otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such
-5-
<PAGE>
designations, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of Optionee's employment relationship, directorship or
consulting relationship with the Company, nor shall it interfere in any way with
his or her right or the Company's right to terminate his or her employment
relationship, directorship or consulting relationship at any time, with or
without cause.
(e) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 200,000 Shares, provided, however, that
in connection with his or her initial employment, an Employee may be granted
Options to purchase up to 400,000 Shares. To the extent such a new Employee is
granted Options to purchase more than 200,000 shares, he or she shall not be
entitled to additional grants during such fiscal year.
(ii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.
(iii) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the
limits set forth in subsection (i) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the shareholders of the Company
as described in Section 17 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Notice of Grant. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the
-6-
<PAGE>
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Notice of Grant.
8. Option Exercise Price and Consideration.
(a) 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, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) At the time an Option is granted, the Administrator shall fix the
period within which the Option may be exercised and shall determine any
conditions which must be satisfied before the Option may be exercised. In so
doing, the Administrator may specify that an Option may not be exercised until
the completion of a service period.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an
-7-
<PAGE>
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, (6) any combination of the foregoing methods
of payment, or (7) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws. 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 Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. 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
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company 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 received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon 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 11 of the Plan.
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.
(b) Termination of Continuous Status as an Employee, Director or
Consultant. In the event of termination of an Optionee's Continuous Status as an
Employee, Director or Consultant with the Company, such Optionee may, but only
within such period of time as is determined by the Administrator, of at least
thirty (30) days, with such determination in the case of an Incentive Stock
Option not exceeding three (3) months after the date of such termination (but in
no event later than the expiration date of the term of such Option as set forth
in the Notice of Grant), exercise his or her Option to the extent that Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
-8-
<PAGE>
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's 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), Optionee may, but only
within six (6) months from the date of such termination (but in no event later
than the expiration date of the term of such Option as set forth in the Notice
of Grant), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(d) Death of Optionee. In the event of termination of an Optionee's
Continuous Status as an Employee, Director or Consultant as a result of the
death of an Optionee, the Option may be exercised, at any time within six (6)
months following the date of death (but in no event later than the expiration
date of the term of such Option as set forth in the Notice of Grant), 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 the Optionee was entitled to
exercise the Option at the date of death. To the extent that Optionee was not
entitled to exercise the Option at the date of death, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option 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, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
11. Adjustments Upon Changes in Capitalization; Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option, and the number of Shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued Shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not
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<PAGE>
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 Company of Shares of stock of any class, or securities
convertible into 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
of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Board shall have the discretion either
(i) to permit each Optionee to exercise the Option as to all of the Optioned
Stock, including Shares as to which it would not otherwise be exercisable or
(ii) to terminate the Option with respect to unvested Shares. If an Option is
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or asset sale, the option confers the right to purchase,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or asset sale, the consideration (whether stock, cash, or other
securities or property) received in the merger or asset sale by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or asset sale was not
solely common stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per Share consideration received by holders of Common Stock in the
merger or asset sale.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee, Director or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
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<PAGE>
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Applicable Laws, the Company
shall obtain shareholder approval of any Plan amendment in such a manner and to
such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option 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 Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to 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 if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, 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 Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company 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.
16. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
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ADEPT TECHNOLOGY, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
(as amended September, 1997)
The following constitute the provisions of the 1995 Employee Stock Purchase
Plan of Adept Technology, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Adept Technology, Inc. and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings,
commissions, and payments for overtime.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship will be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sale price for the Common Stock (or the
mean of the closing bid and asked prices, if no sales were reported), as quoted
on such exchange (or the exchange with the greatest volume of trading in Common
Stock) or system on the date of such determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable; or
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(k) "Offering Period" shall mean the period of approximately twelve
(12) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 and November 1
of each year and terminating on the last Trading Day in the period ending twelve
months later. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(o) "Reserves" shall mean the number of shares of Common Stock covered
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
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<PAGE>
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be employed by
the Company on a given Enrollment Date shall be eligible to participate in the
Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase such stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Subsidiary, or (ii) which
permits his or her rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue at a rate which exceeds
twenty-five thousand dollars ($25,000) worth of stock (determined at the fair
market value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The Board shall have the power to change the
duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed fifteen percent (15%) of the participant's Compensation during
said Offering Period.
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<PAGE>
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and will be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof by completing or filing with the Company a new
subscription agreement authorizing a change in payroll deduction rate. The Board
may, in its discretion, limit the number of participation rate changes during
any Offering Period. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's receipt of
the new subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to 0% at such time during any Purchase
Period which is scheduled to end during the current calendar year (the "Current
Purchase Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Purchase Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of Shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof, and
shall expire on the last day of the Offering Period.
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<PAGE>
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account will be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions will not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, he or she will be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option will be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option will be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be Eight Hundred Thousand
(800,000) shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18 hereof. If, on
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<PAGE>
a given Exercise Date, the number of shares with respect to which options are to
be exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
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<PAGE>
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company 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
Company of shares of stock of any class, or securities convertible into 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 of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Periods then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Offering
Periods then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for his option has been changed to the New Exercise Date and that his
option will be exercised automatically on the New Exercise Date, unless prior to
such date he has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each
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<PAGE>
share of Common Stock held on the effective date of the transaction (and if such
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of assets or
merger was not solely common stock of the successor corporation or its parent
(as defined in Section 424(e) of the Code), the Board may, with the consent of
the successor corporation, provide for the consideration to be received upon
exercise of the option to be solely common stock of the successor corporation or
its parent equal in fair market value to the per share consideration received by
holders of Common Stock and the sale of assets or merger.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law or regulation), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, 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 Company with respect to such
compliance.
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<PAGE>
As a condition to the exercise of an option, the Company may require
the person exercising such option to 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 if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations or stock exchange or quotation
system rules, if the Fair Market Value of the Common Stock on any Exercise Date
in an Offering Period is lower than the Fair Market Value of the Common Stock on
the Enrollment Date of such Offering Period, then all participants in such
Offering Period shall be automatically withdrawn from such Offering Period
immediately after the exercise of their option on such Exercise Date and
automatically re-enrolled in the immediately following Offering Period as of the
first day thereof.
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<PAGE>
EXHIBIT A
ADEPT TECHNOLOGY, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ___________________________________ hereby elects to participate in the
Adept Technology, Inc. 1995 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement
and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday [(0-15%)] during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete "Adept Technology, Inc. 1995
Employee Stock Purchase Plan." I understand that my participation in
the Employee Stock Purchase Plan is in all respects subject to the
terms of the Plan. I understand that my ability to exercise the option
under this Subscription Agreement is subject to obtaining shareholder
approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and spouse only):
_________________________________.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at
the time such shares were purchased over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for Federal,
<PAGE>
state or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to
meet any applicable withholding obligation including any withholding
necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by
me. If I dispose of such shares at any time after the expiration of the
2-year and 1-year holding periods, I understand that I will be treated
for federal income tax purposes as having received income only at the
time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of
(1) the excess of the fair market value of the shares at the time of
such disposition over the purchase price which I paid for the shares,
or (2) 15% of the fair market value of the shares on the first day of
the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) __________________________________________________________
(First) (Middle) (Last)
____________________________ __________________________________________
Relationship
__________________________________________
(Address)
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<PAGE>
Employee's Social
Security Number: __________________________________________
Employee's Address: __________________________________________
__________________________________________
__________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: _________________________ __________________________________________
Signature of Employee
__________________________________________
Spouse's Signature
(If beneficiary other than spouse)
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<PAGE>
EXHIBIT B
ADEPT TECHNOLOGY, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Adept Technology,
Inc. 1995 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:__________________________
ADEPT TECHNOLOGY, INC.
1995 DIRECTOR OPTION PLAN
(as amended August, 1997)
1. Purposes of the Plan. The purposes of this 1995 Director Option Plan are
to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means Adept Technology, Inc., a California corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not
<PAGE>
reported, the Fair Market Value of a Share of Common Stock shall be the mean
between the high bid and low asked prices for the Common Stock on the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(i) "Inside Director" means a Director who is an Employee.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1995 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 150,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable 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 has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
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<PAGE>
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 15,000 Shares (the "First Option") on the date on which the
later of the following events occurs: (A) the effective date of this Plan, as
determined in accordance with Section 6 hereof, or (B) the date on which such
person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 3,000 Shares (a "Subsequent Option") at the next meeting of
the Board of Directors following the Annual Meeting of Shareholders in each year
commencing with the 1996 Annual Meeting of Shareholders provided he or she is
then an Outside Director and if as of such date, he or she shall have served on
the Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the First Option. In the event
that the date of grant of the First Option is not a trading day, the exercise
price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall
become exercisable as to twenty-five percent (25%) of the Shares subject to the
First Option one year after its date of grant and as to 1/48th of the shares
each month thereafter so that the first Option shall be fully exercisable four
(4) years after the date of grant, provided that the Optionee continues to serve
as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of the Subsequent Option shall be ten (10)
years.
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<PAGE>
(B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Subsequent Option. In the
event that the date of grant of the Subsequent Option is not a trading day, the
exercise price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable as to 1/48th of the Shares subject to the Subsequent
Option on each monthly anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the shareholders of the Company
as described in Section 16 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (v) any combination of the foregoing methods of payment.
-4-
<PAGE>
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4
hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company 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 received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall 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 10 of
the Plan.
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.
(b) Termination of Continuous Status as a Director. Subject to Section
10 hereof, in the event an Optionee's status as a Director terminates (other
than upon the Optionee's death or total and permanent disability (as defined in
Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option, but
only within three (3) months following the date of such termination, and only to
the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such termination, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the
-5-
<PAGE>
Option, but only within twelve (12) months following the date of death, and only
to the extent that the Optionee was entitled to exercise it on the date of death
(but in no event later than the expiration of its ten (10) year term). To the
extent that the Optionee was not entitled to exercise an Option on the date of
death, and to the extent that the Optionee's estate or a person who acquired the
right to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
9. Non-Transferability of Options. Unless determined otherwise by the
Board, an Option 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, only by
the Optionee. If the Board makes an Option transferable, such Option shall
contain additional terms and conditions as the Board deems appropriate.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option may be assumed or an equivalent option may
be substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. If such successor corporation assumes or substitutes an
equivalent option for the Option, the Option or equivalent option shall continue
to become exercisable as provided in Section 4 hereof for so long as Optionee
remains a Director or the Optionee serves as a director of the successor
corporation or a Parent or Subsidiary of the successor corporation. Upon the
Optionee's termination of status as a Director of the Company or of the
successor (or Parent or Subsidiary thereof), as applicable, Optionee's
outstanding Option(s) shall become fully exercisable,
-6-
<PAGE>
including as to Shares as to which such Option(s) would not otherwise be
exercisable, and shall remain exercisable in accordance with Sections 8(c)
through (e) above.
In the event that the successor corporation does not agree to assume
the Option or to substitute an equivalent option, each outstanding Option shall
become fully vested and exercisable, including as to Shares as to which it would
not otherwise be exercisable. If an Option becomes fully vested and exercisable
in the event of a merger or sale of assets, the Board shall notify the Optionee
that the Option shall be fully exercisable for a period of thirty (30) days from
the date of such notice, and the Option shall terminate upon the expiration of
such period. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section 4, the
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply
with any applicable law, regulation or stock exchange or quotation system rule,
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option 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,
state securities laws, 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 Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to 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, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
-7-
<PAGE>
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company 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.
14. Reservation of Shares. The Company, 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.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
-8-
FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE (the "Fifth Amendment") is dated as of
December 5, 1996 by and between METROPOLITAN LIFE INSURANCE COMPANY, a New York
corporation ("Landlord") and ADEPT TECHNOLOGY, INC., a California corporation
("Tenant"), with reference to the following facts:
A. Landlord's predecessor in interest and Tenant entered into that certain
Lease dated July 18, 1986 as amended by a First Amendment dated January 14,
1987, a Second Amendment dated June 1, 1987, a Third Amendment dated September
13, 1991 and a Fourth Amendment dated November 7, 1994 (collectively, the
"Original Lease") with respect to certain premises (the "Premises") more
particularly described in the Original Lease.
B. Landlord and Tenant now desire to modify and amend the Original Lease to
reflect, among other provisions, the extension of the term, all as more
particularly set forth below.
NOW THEREFORE, in consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt whereof and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Scope of Fifth Amendment. Except as expressly provided in this Fifth
Amendment, the Original Lease shall remain in full force and effect. Except as
expressly provided in this Fifth Amendment, the term "Lease" as used in the
Original Lease shall refer to the Original Lease as modified by this Fifth
Amendment. Capitalized terms used in this Fifth Amendment and not otherwise
defined herein shall have the respective meanings set forth in the Original
Lease.
2. Modifications to Original Lease. Effective as of January 1, 1997 (the
"Effective Date") the Original Lease is hereby modified as hereinafter set
forth:
(a) The monthly installment of Rent payable for the Premises from
January 1, 1998 to and including December 31, 1998 shall be Ninety Two Thousand
Four Hundred Forty Eight Dollars and No Cents ($92,448.00) per month; the
monthly installment of Rent payable for the Premises from January 1, 1999 to and
including December 31, 1999 shall be Ninety Seven Thousand Seventy Dollars and
Forty Cents ($97,070.40) per month; and One Hundred One Thousand Six Hundred
Ninety Two and Eighty Cents ($101,692.80) per month for the remaining term of
the Lease, as extended hereby.
(b) The termination date shall be December 31, 2000.
3. Acceptance by Tenant of Premises. Neither Landlord nor Landlord's
representatives have made any representations or promises with respect to the
Premises except as herein expressly set forth. Tenant acknowledges and agrees:
(a) that Tenant has been afforded ample opportunity to inspect the Premises, and
has investigated its condition to the extent Tenant desires to do so, and (b)
that Landlord
<PAGE>
has no obligation to remodel or make any repairs, alterations or improvements to
the Premises or remediate any condition therein. The taking of possession of the
Premises by Tenant shall be conclusive evidence, as against Tenant, that Tenant
has accepted the same in its then "AS IS" condition and that the Premises is in
good and satisfactory condition at the time such possession was so taken.
4. Payment of Commission. In connection with this Fifth Amendment, Tenant
acknowledges that it has not used the services of a broker or other real estate
licensee other than Grubb & Ellis and CPS (the latter is hereinafter referred to
as "Landlord's Broker"). Landlord shall be responsible for the payment of the
commission or fee, if any, owed to the foregoing two brokers pursuant to an
agreement between Landlord and Landlord's Broker. In the event of a claim for
broker's fee, finder's fee, commission or other similar compensation in
connection herewith Tenant and Landlord hereby agree to protect, defend and
indemnify each other against and hold each other harmless from any and all
damages, liabilities, costs, expenses and losses (including, without limitation,
reasonable attorneys' fees and costs) which either may sustain or incur by
reason of such claim. The provisions of this Paragraph 4 shall survive the
termination of this Fifth Amendment.
5. Compliance with Law.
(a) Tenant acknowledges that the Americans with Disabilities Act of
1990 and the Fair Housing Act of 1968 (collectively, as amended and as
supplemented by further laws from time to time, the "Acts") imposes certain
requirements upon the owners, lessees and operators of commercial facilities and
places of public accommodation, including prohibitions on discrimination against
any individual on the basis of disability (which discrimination includes certain
failures to design and construct facilities for first occupancy that are readily
accessible to and usable by individuals with disabilities and certain failures,
when making alterations affecting the usability of a facility, to make the same
in such a manner that such altered portions are readily accessible to and usable
by individuals with disabilities). Accordingly Tenant agrees to take all proper
and necessary action to cause the Premises to be maintained, used and occupied
in compliance with the Acts and, further, to otherwise assume all responsibility
to ensure the Premises' continued compliance with all provisions of the Acts
throughout the Term. Tenant shall, at its sole cost and expense, make all
alterations and improvements necessary to make the Premises comply with the
Americans With disabilities Act (ADA"). Landlord shall, at its sole cost and
expense, make all alterations and improvements necessary to make the Building,
including all Common Areas thereof, comply with the ADA.
(b) Without limiting any of its obligations set forth elsewhere in the
Lease, Tenant covenants and agrees to comply with all laws, rules, regulations
and guidelines now or hereafter made applicable to the Premises by government or
other public authorities respecting the disposal of waste, trash, garbage and
other matter (liquid or solid), generated by Tenant, its employees, agents,
contractors, invitees, licensees, guests and visitors, the disposal of which is
not otherwise the express obligation of the Landlord under the Lease, including,
but not limited to, laws, rules, regulations and guidelines respecting recycling
and other forms of reclamation (all of which are herein collectively referred to
as "Waste Management Requirements"). Tenant covenants and agrees to comply with
all reasonable rules and regulations established by Landlord to enable Landlord
from time to time to comply with Waste
-2-
<PAGE>
Management Requirements applicable to Landlord (i) as owner of the Premises and
(ii) in performing Landlord's obligations under the Lease, if any.
6. Option to Extend.
(a) Landlord hereby grants Tenant one (1) option to extend the Term of
the Lease for an additional period of three (3) years (the "Option Term"), as to
all (but not part) of the Premises as such may then exist, upon and subject to
the terms and conditions set forth in this Section 6 (the "Option To Extend").
(b) The Option Term shall commence immediately after the expiration of
the Term of the Lease, as extended hereby. Tenant's hiring of the Premises
during the Option Term shall be upon and subject to the same terms and
conditions contained in the Lease except that (a) the Rent shall be equal to the
"Option Term Base Rent," defined and determined in the manner set forth below;
(b) Tenant shall accept the Premises, the Building and the Project in an "AS IS"
condition without any obligation of Landlord to repaint, remodel, improve or
alter the Premises, Building or Project or to provide Tenant any allowance for
any of the foregoing, and (c) there shall be no further option or right to
extend the Term of the Lease, or any right to renew this Lease during the Option
Term. If Tenant timely and properly exercises the Option To Extend, references
in the Lease to the Term shall be deemed to mean the Option Term unless the
context clearly requires otherwise.
(c) Tenant's election to exercise the Option To Extend must be given to
Landlord in writing no later than six (6) months prior to the expiration of the
Term of the Lease, as extended hereby.
(d) Notwithstanding anything to the contrary contained herein, all
rights of Tenant pursuant to the Option To Extend shall automatically terminate
without notice and shall be of no further force and effect, whether or not
Tenant has timely exercised the option granted herein, if (a) at the time of
exercise of the Option To Extend or at the time of commencement of the Option
Term, there exists a default hereunder, or any act or omission on the part of
Tenant which, with the passage of time or the giving of notice, or both, would
constitute a default under hereunder, or (b) Landlord has given Tenant two (2)
or more notices of the existence of a default hereunder, during the initial Term
of the Lease, as extended hereby, whether or not such default is subsequently
cured, or (c) a late charge has become payable pursuant to the Lease two (2) or
more times during the initial Term of the Lease, as extended hereby, or (d)
Tenant does not occupy all of the Premises at the time of exercise of the Option
To Extend or at the time of commencement of the Option Term. In the event of a
termination of the Option To Extend pursuant to this Section 6, Tenant shall
reimburse Landlord for all cost and expense Landlord incurs in connection with
Tenant's exercise of the Option, including, without limitation, with respect to
any brokerage commissions.
(e) The Option Term Rent for the Premises for the Option Term shall
mean the greater of (a) the Rent payable by Tenant under this Lease for the
twelve (12) month period immediately prior to the commencement of the applicable
Option Term (the "Preceding Base Rent"), or (b) the "Market Rent", which as used
herein shall mean the amount of Rent that Landlord could obtain from a third
party desiring to lease the Premises under a lease containing terms and
conditions substantially
-3-
<PAGE>
identical to those of this Lease, including with limitation additional rent
payable by Tenant with respect to Building Costs, Project Costs, Taxes and
Additional Taxes pursuant to the Lease, for the Option Term under market leasing
conditions then existing, and taking into account the following: the length of
term; the size, location, configuration and floor levels of the Premises; the
type and quality of improvements in or amenities available to the Premises,
Building and Project; age and location of the Building and Project; services to
be provided by Landlord or by tenant; the rent, all other monetary payments and
escalations then obtainable for new leases of space comparable to the Premises
in the locality of the Project; and other factors that would be relevant to a
prospective lease by a third party of the Premises for the Option Term in
determining what such party would be willing to pay therefore; but in each
instance disregarding "Tenant Concessions", if any, then being offered to
prospective new tenants of comparable space in the Project and in the locality
of the Project. For purposes of the preceding sentence, the term "Tenant
Concessions" shall include, without limitation, so-called free rent, tenant
improvement allowances, moving allowances and lease takeovers. The determination
of Market Base Rent based upon the foregoing criteria, shall be made by
Landlord, in Landlord's sole discretion. Within thirty (30) days after Tenant's
exercise of the applicable Option To Extend, Landlord shall notify Tenant of
Landlord's determination of Option Term Base Rent for the Premises. If
Landlord's determination of the Option Term Base Rent is greater than the
Preceding Base Rent for the applicable Option Term, and if Tenant, in Tenant's
sole discretion, disagrees with the amount of Option Term Base Rent determined
by Landlord, Tenant may elect to revoke and rescind the exercise of the option
by giving written notice thereof to Landlord within ten (10) days after notice
of Landlord's determination of Option Term Base Rent.
(f) The Option To Extend is personal to Adept Technology, Inc., a
California corporation in existence as of the date hereof and shall not be
transferrable or assignable, by operation of law or otherwise, either in
connection with an assignment of the Lease, or a sublease of all or part of the
Premises, or otherwise. Any purported assignment of the Option To Extend shall
be void and a material breach of this Lease shall constitute a default under
this Lease. Time is of the essence to each and every term and condition of this
Section 6.
7. Waiver. No failure or delay by a party to insist upon the strict
performance of any term, condition or covenant of this Fifth Amendment, or to
exercise any right, power or remedy hereunder shall constitute a waiver of the
same or any other term of this Fifth Amendment or preclude such party from
enforcing or exercising the same or any such other term, conditions, covenant,
right, power or remedy at any later time.
8. California Law. This Fifth Amendment shall be construed and governed by
the laws of the State of California.
9. Authority. This Fifth Amendment shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, legal representatives,
successors and assigns. Each party hereto and the persons signing below warrant
that the person signing below on such party's behalf is authorized to do so and
to bind such party to the terms of this Fifth Amendment.
-4-
<PAGE>
10. Attorney's Fees and Costs. In the event of any action at law or in
equity between the parties hereto to enforce any of the provisions hereof, any
unsuccessful party to such litigation shall pay to the successful party all
costs and expenses, including actual attorneys' fees (including costs and
expenses incurred in connection with all appeals) incurred therein by such
successful party, and such costs, expenses and attorneys' fees may be included
in and as part of such judgment. A successful party shall be any party who is
entitled to recover his costs of suit, whether or not the suit proceeds to final
judgment.
11. Entire Agreement; No Amendment. This Fifth Amendment constitutes the
entire agreement and understanding between the parties herein named with respect
to the subject of this Fifth Amendment and shall supersede all prior written and
oral agreements concerning the subject matter contained herein. This Fifth
Amendment may not be altered, amended, modified or otherwise changed in any
respect whatsoever except by a writing duly executed by authorized
representatives of the parties hereto. Each party acknowledges that it has read
this Fifth Amendment, fully understands all of the terms and conditions of this
Fifth Amendment and hereby executed this Fifth Amendment freely, voluntarily and
with full knowledge of its significance and with and upon advice of counsel.
12. Severability. If any provision of this Fifth Amendment or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Fifth Amendment and the
application of such provision to other persons or circumstances, other than
those to which it is held invalid, shall not be affected thereby and shall be
enforced to the furthest extent permitted by law, provided that the invalidity
of such provision does not materially affect the benefits accruing to any party
hereto.
13. Counterparts. This Fifth Amendment may be executed in duplicates or
counterparts, or both, and such duplicates or counterparts together shall
constitute but one original of the Fifth Amendment. Each duplicate and
counterpart shall be equally admissible in evidence, and each original shall
fully bind each party who has executed it.
14. Agreement to Perform Necessary Acts. Each party agrees that upon demand
therefor, it shall promptly perform all further acts and execute, acknowledge
and deliver all further instructions, instruments and documents which may be
reasonably necessary or useful to carry out the provisions of this Fifth
Amendment or to evidence, perfect or otherwise effectuate the rights and
remedies relating to this Fifth Amendment.
15. Captions and Headings. The titles or headings of the various paragraphs
hereof are intended solely for convenience of reference and are not intended and
shall not be deemed to or in any way be used to modify, explain or place any
construction upon any of the provisions of this Fifth Amendment.
-5-
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Fifth Amendment
as of the date first above written.
METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
By: /s/ Edward J. Hayes
--------------------------------------
Print Name: Edward J. Hayes
Its: Assistant Vice President
ADEPT TECHNOLOGY, INC.,
a California corporation
By: /s/ James E. Kuhl
--------------------------------------
Print Name: James E. Kuhl
Its: Vice President, Operations
-6-
<PAGE>
<TABLE>
SCHEDULE II
ADEPT TECHONOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
Balance Additions
at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions(1) of Period
- ------------------------------------------ --------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Year ended June 30, 1995:
Allowance for doubtful accounts $240 $305 $ 63 $482
Year ended June 30, 1996:
Allowance for doubtful accounts 482 277 294 465
Year ended June 30, 1997:
Allowance for doubtful accounts 465 129 145 449
<FN>
- ----------
(1) Includes write offs net of recoveries.
</FN>
</TABLE>
<TABLE>
Exhibit 11.1
ADEPT TECHNOLOGY, INC.
Statement of Computation of Net Income Per Share
(in thousands, except per share data)
(unaudited)
<CAPTION>
Year Ended June 30,
--------------------------------------------
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
Net income $2,757 $5,777 $ 925
====== ====== ======
Weighted average common stock outstanding 8,062 7,009 5,661
Weighted average common stock equivalent shares 380 700 647
Shares related to SAB No. 55, 64, and 83 -- 24 97
------ ------ ------
Shares used to compute net income per share 8,442 7,733 6,405
====== ====== ======
Net income per common share $ .33 $ .75 $ .14
====== ====== ======
</TABLE>
<TABLE>
Exhibit 13.1
SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
(in thousands, except per share data) Year Ended June 30,
-----------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ------
Results of Operation:
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $ 82,767 $ 81,572 $ 59,069 $ 50,618 $ 43,065
Cost of revenues................................. 48,761 46,812 34,788 28,089 22,142
--------- --------- --------- --------- --------
Gross margin.................................. 34,006 34,760 24,281 22,529 20,923
Operating expenses:
Research, development and engineering......... 9,016 8,098 6,598 7,075 5,628
Selling, general and administrative........... 21,628 20,201 14,722 13,486 13,451
Acquired in-process research and
development (1)............................. -- -- 2,972 -- --
--------- --------- --------- --------- --------
Total operating expenses.................... 30,644 28,299 24,292 20,561 19,079
Operating income (loss)....................... 3,362 6,461 (11) 1,968 1,844
Interest income, net.......................... 704 496 440 163 191
--------- --------- --------- --------- --------
Income (loss) before provision for
income taxes................................ 4,066 6,957 429 2,131 2,035
Provision for (benefit from) income taxes..... 1,309 1,180 (496) (150) 145
--------- --------- ---------- ---------- --------
Net income.................................... $ 2,757 $ 5,777 $ 925 $ 2,281 $ 1,890
========= ========= ========= ========= ========
Net income per share (2)......................... $ .33 $ .75 $ .14 $ .37 $ .32
========= ========= ========= ========= ========
Shares used in per share calculation (2)......... 8,442 7,733 6,405 6,218 5,912
========= ========= ========= ========= ========
(in thousands) June 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ------
Balance Sheet Data:
Cash, cash equivalents and short term investments $ 18,467 $ 10,975 $ 8,812 $ 6,677 $ 8,350
Working capital.................................. 38,931 35,030 19,757 18,772 16,664
Total assets..................................... 59,493 56,352 38,371 29,304 25,892
Long term liabilities............................ -- 26 117 203 127
Total shareholders' equity....................... 47,094 42,823 25,678 21,598 19,307
<FN>
- -----------
(1) In June 1995 the Company acquired SILMA Incorporated and incurred a charge
of $3.0 million for acquired in-process research and development in
connection with such purchase. See Note 2 of Notes to Consolidated
Financial Statements.
(2) See Note 1 of Notes to Consoldiated Financial Statements for a discussion
of the computation of net income per share.
</FN>
</TABLE>
<PAGE>
Exhibit 13.1
Quarterly Results of Operations (Unaudited)
<TABLE>
The Company operates and reports financial results ending on the last
Saturday of a thirteen week period for each of its first three fiscal quarters
and at June 30 for its fiscal year end. For convenience, the Company has
indicated in this annual report its fiscal quarters end on March 31, December
31, and September 30.
<CAPTION>
Three Months Ended
----------------------------------------------------------------------------
(in thousands, except per share data) Jun.30 Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30,
1997 1997 1996 1996 1996 1996 1995 1995
------ ------- ------- ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................. $ 24,339 21,104 18,887 18,437 $ 20,358 $ 20,800 $ 20,743 $19,671
Cost of revenues......................... 14,164 12,299 11,239 11,059 11,679 11,852 11,923 11,358
------ ------ ------ ------ ------ ------ ------ ------
Gross margin........................... 10,175 8,805 7,648 7,378 8,679 8,948 8,820 8,313
Operating expenses:
Research, development and engineering.. 2,681 2,305 2,054 1,976 1,967 2,112 2,073 1,946
Selling, general and administrative.... 5,674 5,474 5,328 5,152 5,289 5,126 4,985 4,801
----- ----- ------ ------ ------ ------- ----- -----
Total operating expenses............. 8,355 7,779 7,382 7,128 7,256 7,238 7,058 6,747
Operating income......................... 1,820 1,026 266 250 1,423 1,710 1,762 1,566
Interest income, net..................... 226 181 163 134 152 210 33 101
----- ----- ------ ------ ------ ------ ----- -----
Income before provision income taxes..... 2,046 1,207 429 384 1,575 1,920 1,795 1,667
Provision for income taxes............... 654 362 155 138 255 325 312 288
------ ----- ------ ------ ------ ------ ------ ------
Net income............................... $1,392 $ 845 $ 274 $ 246 $1,320 $1,595 $1,483 $1,379
====== ===== ====== ====== ====== ====== ====== ======
Net income per share.................... $ .17 $ .10 $ .03 $ .03 $ .16 $ .19 $ .20 $ .20
====== ===== ====== ====== ====== ====== ====== ======
As a Percentage of Net Revenues:
Net revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues......................... 58.2 58.3 59.5 60.0 57.4 57.0 57.5 57.7
---- ------ ------- ------- ------- ------ ------ ------
Gross margin........................... 41.8 41.7 40.5 40.0 42.6 43.0 42.5 42.3
Operating expenses:
Research, development and engineering.. 11.0 10.9 10.9 10.7 9.6 10.2 10.0 9.9
Selling, general and administrative.... 23.3 25.9 28.2 27.9 26.0 24.6 24.0 24.4
------ ------ ------- ------- ------- ------ ------ ------
Total operating expenses............. 34.3 36.8 39.1 38.6 35.6 34.8 34.0 34.3
Operating income......................... 7.5 4.9 1.4 1.4 7.0 8.2 8.5 8.0
Interest income, net..................... 0.9 0.8 0.9 0.7 0.7 1.0 0.2 0.5
------ ------ ------- ------- ------- ------ ------ ------
Income before provision for income taxes. 8.4 5.7 2.3 2.1 7.7 9.2 8.7 8.5
Provision for income taxes............... 2.7 1.7 0.8 0.8 1.2 1.5 1.5 1.5
------ ------ ------- ------- ------- ------ ------ ------
Net income............................... 5.7% 4.0% 1.5% 1.3% 6.5% 7.7% 7.2% 7.0%
====== ====== ======= ======= ======= ====== ====== ======
</TABLE>
Market for Registrant's Common Stock and Related Shareholder Matters
<TABLE>
The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol ADTK since the Company's initial public offering on December
15, 1995. The following table reflects the range of high and low sale prices as
reported on the Nasdaq National Market for the quarters ended:
<CAPTION>
Three Months Ended
-------------------------------------------------------------------
Jun.30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31,
1997 1997 1996 1996 1996 1996 1995
------ ------- ------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
High...................... $ 10.00 $ 8.63 $ 8.25 $ 14.00 $20.25 $17.75 $11.25
Low....................... $ 6.13 $6.75 $5.88 $ 5.00 $12.00 $ 9.25 $ 9.44
</TABLE>
At June 30, 1997, there were approximately 450 shareholders of record.
To date, the Company has neither declared nor paid cash dividends on shares of
its Common Stock. The Company currently intends to retain all future earnings
for its business and does not anticipate paying cash dividends on its Common
Stock in the foreseeable future.
<PAGE>
Exhibit 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in the following Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: the potential fluctuations in the Company's
quarterly and annual results of operations; the cyclicality of capital spending
of the Company's customers; the Company's dependence on the continued growth of
the intelligent automation market; the risks associated with sole or single
sources of supply and lengthy procurement lead times; the Company's highly
competitive industry; rapid technological change within the Company's industry;
the lengthy sales cycles for the Company's products; the risks associated with
reliance on system integrators; the risks associated with international sales
and purchases; the risks associated with potential acquisitions and the need to
manage growth; the risks associated with new product development and the need to
manage product transitions, including any difficulties or delays in the
development, production, testing and marketing of the Company's new products
under development; the Company's dependence on retention and attraction of key
employees; the risks associated with product defects; the Company's dependence
on third-party relationships; the uncertainty of patent and proprietary
technology protection and third party intellectual property claims; changes in,
or failure or inability to comply with, government regulations; general economic
and business conditions; the failure of any new products to be accepted in the
marketplace; decreased investment in robotics generally, and in the Company's
intelligent automation products particularly, as a result of general or specific
economic conditions or conditions affecting any of the Company's primary
markets; decreased acceptance of the Company's current products in the
marketplace, and the other factors referenced in this Management's Discussion
and Analysis of Financial Condition and Results of Operations and the Company's
Annual Report on Form 10-K for the year ended June 30, 1997, in particular the
section titled "Significant Fluctuations in Operating Results."
OVERVIEW
The Company designs, manufactures and markets intelligent automation software
and hardware products for assembly, material handling and packaging
applications. The Company's products currently include machine controllers for
robot mechanisms and other flexible automation equipment, machine vision
systems, simulation software and a family of mechanisms including robots, linear
modules and vision-based flexible part feeders. In addition, the Company
recently introduced a new line of Cartesian scalable robots targeted for the
electronics and assembly applications markets. In recent years, the Company has
expanded its robot product lines, developed advanced software and sensing
technologies that have enabled robots to perform a wider range of functions, and
the Company has expanded its channel of system integrators. The Company has also
expanded its international sales and marketing operations. As a result of these
developments, the nature and composition of the Company's revenues have changed
over time. Specifically, software license and service revenues, although still
relatively insignificant, have increased as a percentage of total revenues, and
international sales now comprise a significant portion of the Company's
revenues.
The Company sells its products through system integrators, its direct sales
force and OEMs. System integrators and OEMs add application-specific hardware
and software to the Company's products, thereby enabling the Company to provide
solutions to a diversified industry base, including the electronics,
telecommunications, appliances, pharmaceutical, food processing and automotive
components industries. Net revenues have increased in each of the Company's last
three years; however, there can be no assurance that the Company's net revenues
will continue to grow or that the Company will be profitable in future periods.
Accordingly, the Company's historical results of operations should not be relied
upon as an indication of future performance.
<PAGE>
This discussion summarizes the significant factors affecting the Company's
consolidated operating results, financial condition, liquidity and cash flow
during the three year period ended June 30, 1997 (i.e., 1997, 1996, and 1995).
This discussion should be read in conjunction with the consolidated financial
statements and financial statement footnotes included in this annual report.
Results of Operations
Comparison of 1997 to 1996
Net revenues. The Company's net revenues increased by 1.5% to $82.8 million in
1997 from $81.6 million in 1996. The first half of 1997 saw an overall decline
in net revenues from the comparable period in 1996 as product sales fell,
particularly sales of motion controllers in the Company's international markets
and to a lesser extent, to decreased service and upgrade revenues, partially
offset by an increase in robot sales. A strong domestic market and gradual
recovery in the international markets during the second half of 1997 resulted in
increased revenues for the comparable period of 1996, bringing total net
revenues for 1997 slightly above the 1996 level. The recovery in total revenues
during the second half of 1997 reflected growth in robot sales and a return of
motion controller sales comparable to the same levels of the second half period
of 1996, as well as increases in service and upgrade revenues as compared to
both the first half of 1997 and the second half of 1996. International sales,
including sales to Canada, were $29.6 million or 35.8% of net revenues in 1997,
as compared with $32.2 million or 39.4% of net revenues in 1996.
Gross margin. Gross margin was 41.1% in 1997 compared to 42.6% in 1996. The
decrease in gross margin percentage was primarily attributable to higher sales
of lower margin mechanism systems and to lower sales of higher margin motion
controller products. In addition, sales of lower margin mechanical subsystems
sourced from third parties increased during the year. These declines in gross
margin were partially offset by increased gross margin on service and upgrade
revenues, and to a lesser extent, to increased gross margin from software
products, including simulation software products from the Company's Silma
business. The Company expects that it will continue to experience fluctuations
in gross margin percentage due to changes in its sales and product mix.
Research, Development and Engineering expenses. Research, development and
engineering expenses increased by 11.3% to $9.0 million in 1997 from $8.1
million in 1996. As a percentage of net revenues, research, development and
engineering expenses increased to 10.9% in 1997 from 9.9% in 1996, primarily
because of increases in compensation related expenses, including consulting
expenses, decreased third party development funding and to a lesser extent, to
increased project material spending. Research, development and engineering
expenses in 1997 were partially offset by $767,000 of third party development
funding as compared with $1.1 million of third party development funding in
1996. The Company expects that it will continue to receive third party
development funding from the federal and California state governments as well as
other third parties during 1998 and that such funding will be comparable to
funding received in 1997. However, there can be no assurance that any funds
budgeted by either government or other third parties for the Company's
development projects will not be curtailed or eliminated at any time.
Selling, General and Administrative expenses. Selling, general and
administrative expenses increased 7.1% to $21.6 million or 26.1% of net revenues
in 1997 from $20.2 million or 24.8% of net revenues in 1996. This increased
spending was primarily attributable to investments in new product launches and
promotions, higher depreciation expenses, increased headcount and related
expenses and to a lesser extent, to employee merit compensation adjustments and
additional administrative expenses associated with being a public company. The
Company expects that selling, general and administrative expenses will continue
to increase in absolute dollars in future periods, although as a percentage of
net revenues, selling, general and administrative expenses may fluctuate in
future periods.
Interest Income, Net. Interest income, net in 1997 was $704,000, compared to
$496,000 in 1996. The increase was due to higher levels of available invested
funds, partially offset by lower investment yields in 1997.
<PAGE>
Provision for Income Taxes. The Company's effective tax rate for 1997 was 32%,
compared to 17% for 1996. The Company's tax rate for 1997 differs from the
statutory income tax rate primarily due to the benefit of federal and state tax
credits. The Company's 17% tax rate for 1996 differed from the combined federal
and state statutory income tax rate primarily due to the utilization of tax
credit carryforwards and to a reduction in the valuation allowance for deferred
tax assets.
Derivative Financial Instruments. The Company makes yen-denominated purchases of
certain components and mechanical subsystems from Japanese suppliers. At certain
times the Company has entered into forward foreign exchange contracts, primarily
to hedge against the short term impact of foreign currency fluctuations on
purchases denominated in yen. The maturities of the forward foreign exchange
contracts are short term in nature, generally less than 90 days. The Company
also sells its products to certain Japanese customers in yen. Depending on the
ratio of yen-denominated purchases to yen-denominated sales, the Company may
engage in additional hedging transactions in the future. Notwithstanding these
precautions, however, the Company remains subject to the transaction exposures
that arise from foreign exchange movements between the dates foreign currency
export sales or purchase transactions are recorded and the dates cash is
received or payments are made in foreign currencies.
Comparison of 1996 to 1995
Net revenues. The Company's net revenues increased by 38.1% to $81.6 million in
1996 from $59.1 million in 1995. The growth in net revenues was primarily
attributable to higher shipments of existing products, increased service and
upgrade revenues and, to a lesser extent, to increased net revenues from
simulation software. International sales, including sales to Canada, were $32.2
million or 39.4% of net revenues in 1996 as compared with $24.0 million or 40.6%
of net revenues in 1995.
Although net revenues increased in 1996, the Company did experience moderation
in its overall growth rate in the second half of 1996 as compared to the
Company's growth rate in prior quarters. See "Significant Fluctuations in
Operating Results." In addition, although the Company's Silma business
contributed to the Company's overall revenue growth in 1996, in the fourth
quarter of 1996 the Silma business experienced lower revenues due to unexpected
competitive pressures and organizational issues.
Gross margin. Gross margin was 42.6% in 1996 and 41.1% in 1995. The increase in
gross margin was primarily attributable to higher gross margins on simulation
software products from Silma, which the Company acquired in June 1995.
Research, Development and Engineering expenses. Research, development and
engineering expenses increased by 22.7% to $8.1 million in 1996 from $6.6
million in 1995. The increase in research, development and engineering expenses
is primarily attributable to the addition of the research and development
expenses of the Company's Silma business. The increase in research, development
and engineering expenses for 1996 was partially offset by $1.1 million of third
party development funding as compared with only $250,000 of third party
development funding in 1995. As a percentage of net revenues, research,
development and engineering expenses decreased to 9.9% in 1996 from 11.2% in
1995, primarily because the increase in research, development and engineering
expenses was more than offset by the increase in net revenues.
Selling, General and Administrative expenses. Selling, general and
administrative expenses increased 37.2% to $20.2 million or 24.8% of net
revenues in 1996 from $14.7 million or 24.9% of net revenues in 1995. This
increased spending was primarily attributable to the addition of the Company's
Silma business, and to a lesser extent, to increased headcount and sales
commissions associated with the Company's higher revenue levels, additional
administrative expenses associated with being a public company and a higher
employee incentive bonus accrual. The increase in the incentive bonus accrual
was primarily attributable to higher operating profitability in 1996 as compared
with 1995.
Interest Income, Net. Interest income, net in 1996 was $496,000, compared to
$440,000 in 1995. The increase was due to additional interest income earned by
the investment of cash proceeds from the sale of common stock in the Company's
initial public offering in December 1995, partially offset by lower investment
yields in 1996.
<PAGE>
Provision for (Benefit from) Income Taxes. The Company's effective tax rate in
1996 was 17%. The Company's tax rate differed from the statutory income tax rate
primarily due to the utilization of tax credit carryforwards and to a reduction
in the valuation allowance for deferred tax assets, partially offset by state
income taxes and taxes on the Company's foreign operations. The Company recorded
a tax benefit of ($496,000) in 1995 due to the utilization of net operating loss
carryforwards and a reduction in the valuation allowance for deferred tax
assets, offset by the tax impact of the nondeductible charge for acquired
in-process research and development made in connection with the acquisition of
Silma in June 1995.
Derivative Financial Instruments. The Company makes yen-denominated purchases of
certain components and mechanical subsystems from Japanese suppliers. In 1995,
the Japanese yen strengthened substantially against the dollar, resulting in
material unfavorable foreign exchange transactions included in cost of revenues.
Significant Fluctuations in Operating Results
The Company's operating results have historically been, and will continue to be,
subject to significant quarterly and annual fluctuations due to a number of
factors, including fluctuations in capital spending domestically and
internationally or in one or more industries to which the Company sells its
products, new product introductions by the Company or its competitors, changes
in product mix and pricing by the Company, its suppliers or its competitors,
availability of components and raw materials, failure to manufacture a
sufficient volume of products in a timely and cost-effective manner, failure to
introduce new products on a timely basis, failure to anticipate changing
customer product requirements, lack of market acceptance or shifts in the demand
for the Company's products, changes in the mix of sales by distribution channel,
changes in the spending patterns of the Company's customers, and extraordinary
events such as litigation or acquisitions. The Company's gross margins may vary
greatly depending on the mix of sales of lower margin hardware products,
particularly mechanical subsystems sourced from third parties, and higher margin
software products. The Company's operating results will also be affected by
general economic and other conditions affecting the timing of customer orders
and capital spending. The Company generally recognizes product revenue upon
shipment or, for certain international sales, upon receipt by the customer. The
Company's net revenues and results of operations for a period will therefore be
affected by the timing of orders received and orders shipped during such period.
A delay in shipments near the end of a period, due for example to delays in
product development or delays in obtaining materials, could materially adversely
affect the Company's business, financial condition and results of operations for
such period. Moreover, continued investments in research and development,
capital equipment and ongoing customer service and support capabilities will
result in significant fixed costs which the Company will not be able to reduce
rapidly and, therefore, if the Company's sales for a particular period are below
expected levels, the Company's business, financial condition and results of
operations for such period could be materially adversely affected. In addition,
while in some years revenue from international sales has helped buffer the
Company against slowdowns in U.S. capital spending, in other years the higher
costs associated with international sales, combined with downturns in
international markets, have adversely affected the Company's results of
operations. There can be no assurance that the Company will be able to increase
or sustain profitability on a quarterly or annual basis in the future.
The Company has experienced and is expected to continue to experience
seasonality in product bookings. The Company has typically had higher bookings
for its products during the June quarter of each year and lower bookings during
the September quarter of each year, due primarily to the slowdown in sales to
European markets. The Company has generally been able to maintain revenue levels
during the September quarter by utilizing backlog from the June quarter. In the
event bookings for the Company's products in the June quarter are lower than
anticipated and the Company's backlog at the end of the June quarter is
insufficient to compensate for lower bookings in the September quarter, the
Company's results of operations for the September quarter and future quarters
could be materially adversely affected. In fact, in the June quarter of 1996,
sales were lower than anticipated due to competitive pressures and
organizational issues with respect to the Company's Silma business. In addition,
in the September quarter of fiscal 1997, sales to European and other
international markets decreased substantially, as several large orders were
delayed by customers. The decrease in product bookings resulted in decreased net
revenues for the September quarter of fiscal 1997. Entering into the new year,
the Company's backlog is up significantly from where it began the prior year.
However, in the event product bookings and net revenues for any quarter are
insufficient to compensate for the lower product bookings in a prior quarter,
the Company's results of operations for that quarter and future quarters could
be materially adversely affected.
<PAGE>
In addition, a significant percentage of the Company's product shipments occur
in the last month of each quarter. Historically this has been due to a lack of
component availability from sole or single source suppliers or, with respect to
components with long procurement lead times, due to inaccurate forecasting of
the level of demand for the Company's products or of the product mix for a
particular quarter. The Company has therefore from time to time been required to
utilize components and other materials for current shipments which were
scheduled to be incorporated into products to be shipped in subsequent periods.
If the Company were unable to obtain additional components or mechanical
subsystems to meet increased demand for its products, or to meet demand for a
product mix which differed from the forecasted product mix, or if for any reason
the Company failed to ship sufficient product prior to the end of the quarter,
the Company's business, financial condition and results of operations could be
materially adversely affected.
Impact of Inflation
The effect of inflation on the Company's business and financial position has not
been significant to date.
Liquidity and Capital Resources
The Company completed its initial public offering of common stock in December
1995, raising approximately $10.0 million net of offering expenses. As of June
30, 1997, the Company had working capital of approximately $38.9 million,
including $11.1 million in cash and cash equivalents and $7.4 million in short
term investments. The Company also had long term investments in obligations of
U.S. government agencies of $1.0 million.
The Company's cash requirements during the year ended June 30, 1997 were met
primarily through cash provided by operations and to a lesser extent, to cash
provided by financing activities. Cash, cash equivalents and investments
increased $8.5 million from June 30, 1996 primarily as a result of $8.7 million
of cash generated from operating activities, $1.4 million in financing
activities, offset by $1.6 million of capital expenditures.
Net cash provided by operating activities was primarily attributable to net
income adjusted by depreciation and amortization, and the decrease in accounts
receivable arising from significant improvements in collection efforts as
evidenced by a reduction in day sales outstanding to 62 days in 1997 from 85
days in 1996. Additionally, inventory reductions contributed to the increase in
cash. Financing activities consisted mainly of proceeds from employee stock
incentive and purchase plans.
The Company believes that the existing cash and cash equivalent balances as well
as short term investments and anticipated cash flow from operations will be
sufficient to support the Company's working capital requirements for at least
the next twelve months.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share" and
Statement of Financial Accounting Standards No. 129 (SFAS 129), "Disclosure of
Information about Capital Structure," both of which are required to be adopted
on December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirement for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact to the Company
will be an increase in net income per share of $.01 and $.07 for 1997 and 1996,
respectively. The impact of SFAS 128 on the calculation of fully diluted
earnings per share for these periods is not expected to be material.
<PAGE>
<TABLE>
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(in thousands)
June 30, June 30,
1997 1996
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,101 $ 8,075
Short term investments 7,366 2,900
Accounts receivable, less allowance for doubtful accounts of
$449 in 1997 and $465 in 1996 17,250 20,495
Inventories 13,096 14,808
Deferred tax assets and prepaid expenses 2,517 2,255
-------- --------
Total current assets 51,330 48,533
Property and equipment, net 5,228 5,731
Long term investments 1,000 --
Intangible assets related to acquisition of Silma Incorporated, net of
accumulated amortization of $642 in 1997 and $306 in 1996 774 1,167
Other assets 1,161 921
-------- --------
Total assets $ 59,493 $ 56,352
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,927 $ 6,894
Accrued payroll and related expenses 2,311 2,635
Accrued warranty 1,846 1,387
Accrued customer rebates 143 99
Deferred revenue 1,138 561
Other accrued liabilities 3,007 1,839
Current portion of obligations under capital leases 27 88
-------- --------
Total current liabilities 12,399 13,503
Obligations under capital leases -- 26
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
5,000 shares authorized, none issued and outstanding -- --
Common stock, no par value:
25,000 shares authorized; 8,240 issued
and outstanding in 1997, and 7,869 in 1996 46,897 45,383
Retained earnings (deficit) 197 (2,560)
-------- --------
Total shareholders' equity 47,094 42,823
-------- --------
Total liabilities and shareholders' equity $ 59,493 $ 56,352
======== ========
<FN>
See accompanying note.
</FN>
</TABLE>
<PAGE>
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Year Ended June 30,
--------------------------------
1997 1996 1995
-------- -------- --------
Net revenues $ 82,767 $ 81,572 $ 59,069
Cost of revenues 48,761 46,812 34,788
-------- -------- --------
Gross margin 34,006 34,760 24,281
Operating expenses:
Research, development and engineering 9,016 8,098 6,598
Selling, general and administrative 21,628 20,201 14,722
Acquired in-process research
and development -- -- 2,972
-------- -------- --------
Total operating expenses 30,644 28,299 24,292
-------- -------- --------
Operating income (loss) 3,362 6,461 (11)
Interest income 717 540 476
Interest expense 13 44 36
-------- -------- --------
Income before provision for income taxes 4,066 6,957 429
Provision for (benefit from) income taxes 1,309 1,180 (496)
-------- -------- --------
Net income $ 2,757 $ 5,777 $ 925
======== ======== ========
Net income per share $ .33 $ .75 $ .14
======== ======== ========
Shares used in computing net income per share 8,442 7,733 6,405
======== ======== ========
<PAGE>
Exhibit 13.1
<TABLE>
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(in thousands) Year Ended June 30,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Operating activities
Net income $ 2,757 $ 5,777 $ 925
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,981 2,364 1,533
(Gain) loss on disposal of property and equipment 316 (45) 87
Acquired in-process research and development -- -- 2,972
Tax benefit from stock plans 73 367 --
Changes in operating assets and liabilities:
Accounts receivable 3,245 (6,903) (1,206)
Inventories 1,044 (6,853) (1,491)
Deferred tax assets and prepaid expenses (262) (1,113) (406)
Other assets (411) (317) (620)
Accounts payable (2,967) 109 3,887
Accrued payroll and related expenses (324) 621 (2)
Accrued warranty 459 361 315
Accrued customer rebates 44 (545) 176
Deferred revenue 577 153 (189)
Other accrued liabilities 1,174 388 151
-------- -------- --------
Total adjustments 5,949 (11,413) 5,207
-------- -------- --------
Net cash provided by (used in) operating activities 8,706 (5,636) 6,132
-------- -------- --------
Investing activities
Purchase of property and equipment, net (1,631) (2,968) (2,040)
Proceeds from the sale of property and equipment 63 58 24
Purchases of long term available for sale investments (1,000) -- --
Purchases of short term available for sale investments (20,123) (13,500) (2,900)
Sales of short term available for sale investments 15,657 13,500 --
Cash paid for acquisition, net of cash received -- -- (1,818)
-------- -------- --------
Net cash used in investing activities (7,034) (2,910) (6,734)
-------- -------- --------
Financing activities
Principal payment for capital lease obligations (87) (292) (186)
Proceeds from common stock issued under initial public offering -- 10,028 --
Proceeds from employee stock incentive program, employee
stock purchase plan, net of repurchases, cancellations,
and payments of notes receivable from shareholders 1,441 973 23
-------- -------- --------
Net cash provided by (used in) financing activities 1,354 10,709 (163)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 3,026 2,163 (765)
Cash and cash equivalents, beginning of period 8,075 5,912 6,677
-------- -------- --------
Cash and cash equivalents, end of period $ 11,101 $ 8,075 $ 5,912
======== ======== ========
Supplemental disclosure of noncash activities:
Conversion of preferred stock to common stock $ -- $ 30,185 $ --
Inventory capitalized into property, equipment and related tax $ 718 $ 873 $ --
Cash paid during the period for:
Interest $ 13 $ 44 $ 36
Taxes $ 638 $ 1,781 $ 27
<FN>
There were no new capital leases in 1997, 1996 or 1995. Capital lease
obligations of approximately $202 were assumed as part of the Company's
acquisition of SILMA Incorporated (see Note 2).
See accompanying notes.
</FN>
</TABLE>
<PAGE>
Exhibit 13.1
<TABLE>
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
(in thousands)
Convertible Retained
Preferred Stock Common Stock Earnings
----------------- -----------------
Shares Amount Shares Amount (Deficit)
------ ------- ----- ------ -------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994 4,043 $ 30,185 1,580 $ 822 ($ 9,262)
Common stock issued under
employee stock incentive program -- -- 18 23 --
Common stock issued in connection
with acquisition -- -- 522 3,132 --
Net income -- -- -- -- 925
------ ------- ----- ------ -------
Balance at June 30, 1995 4,043 30,185 2,120 3,977 (8,337)
Common stock issued under initial public
offering net of issuance costs -- -- 1,250 10,028 --
Conversion of preferred stock to common stock (4,043) (30,185) 4,067 30,185 --
Common stock issued under employee stock
incentive program, employee
stock purchase plan, net of repurchase,
cancellations, and payments of notes
receivable from shareholders -- -- 432 826 --
Tax benefit from stock plans -- -- -- 367 --
Net income -- -- -- -- 5,777
------ ------- ----- ------ -------
Balance at June 30, 1996 -- -- 7,869 45,383 (2,560)
Common stock issued under employee stock
incentive program and employee
stock purchase plan -- -- 371 1,441 --
Tax benefit from stock plans -- -- -- 73 --
Net income -- -- -- -- 2,757
------ ------- ----- ------ -------
Balance at June 30, 1997 -- $ -- 8,240 $ 46,897 $ 197
====== ======= ===== ====== =========
Notes
Receivable Total
From Shareholders'
Shareholders Equity
------- -------
Balance at June 30, 1994 ($ 147) $ 21,598
Common stock issued under
employee stock incentive program -- 23
Common stock issued in connection
with acquisition -- 3,132
Net income -- 925
------- -------
Balance at June 30, 1995 (147) 25,678
Common stock issued under initial public
offering net of issuance costs -- 10,028
Conversion of preferred stock to common stock -- --
Common stock issued under employee stock
incentive program, employee
stock purchase plan, net of repurchase,
cancellations, and payments of notes
receivable from shareholders 147 973
Tax benefit from stock plans -- 367
Net income -- 5,777
------- -------
-- 42,823
Balance at June 30, 1996
Common stock issued under employee stock
incentive program and employee
stock purchase plan -- 1,441
Tax benefit from stock plans -- 73
Net income -- 2,757
------- -------
Balance at June 30, 1997 $ -- $ 47,094
======= =======
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Adept Technology, Inc. ("Adept" or the "Company") was incorporated under the
laws of the state of California on June 14, 1983. The Company designs,
manufactures and markets intelligent automation software and hardware products
for automating assembly, material handling and packaging applications.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned international subsidiaries, and SILMA Incorporated
("Silma"), acquired by the Company on June 28, 1995 (see Note 2).
All material intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
The Company applies Financial Accounting Standards Board Statement No. 52
(SFAS 52), "Foreign Currency Translation," with respect to its international
operations, which are sales and service entities. All monetary assets and
liabilities are remeasured at the current exchange rate at the end of the
period, nonmonetary assets and liabilities are remeasured at historical exchange
rates, and revenues and expenses are remeasured at average exchange rates in
effect during the period. Gains or (losses) which result from the process of
remeasuring foreign currency financial statements in U.S. dollars were
($141,000), ($105,000) and $38,000 in 1997, 1996 and 1995, respectively.
Transaction gains and (losses) were $8,000, $70,000, and ($59,000) in 1997, 1996
and 1995, respectively.
Cash, Cash Equivalents and Investments
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Short-term
investments in marketable securities consist principally of debt instruments
with maturities between three and twelve months. Long-term investments in
marketable securities consist of debt instruments with maturities exceeding
twelve months. Investments are classified as held-to-maturity, trading, or
available-for-sale at the time of purchase.
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1997 and 1996, all of the Company's investments in marketable
securities were classified as available-for-sale and were carried at fair market
value which approximated cost. Material unrealized gains and losses, if any,
would have been recorded in shareholders' equity. Fair market value is based on
quoted market prices on the last day of the fiscal year. The cost of the
securities is based upon the specific identification method.
(in thousands) June 30,
----------------------
1997 1996
------- ------
Cash and cash equivalents
Cash ......................................... $ 1,913 $ 1,486
Money market funds ........................... 602 1,143
Commercial paper ............................. 8,586 5,446
------- -------
Cash and cash equivalents ........................ $11,101 $ 8,075
======= =======
Short-term investments
Commercial paper ............................. $ 3,466 $ --
Government agency notes ...................... 1,000 1,000
Market auction preferred stock ............... 2,900 1,900
------- -------
Short-term investments ........................... $ 7,366 $ 2,900
======= =======
Long-term investments
Government agency notes................ $ 1,000 $ --
======= =======
Realized gains or losses, interest, and dividends are included in interest
income. In 1997, 1996 and 1995, realized and unrealized gains or losses from
available-for-sale securities were not material.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in first-out method. The components of inventories are as
follows:
(in thousands) June 30,
------------------------
1997 1996
--------- --------
Raw materials........................... $ 6,323 $ 9,488
Work-in-process......................... 3,509 3,069
Finished goods.......................... 3,264 2,251
--------- ---------
$ 13,096 $ 14,808
========= =========
Property and Equipment
Property and equipment are recorded at cost. The Company has adopted
Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS 121 requires impairment losses to be recorded on long-lived assets
used in operations, such as property and equipment, when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the carrying amount of the assets. The adoption
had no material effect on the Company's financial statements.
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of property and equipment are summarized as follows:
(in thousands) June 30,
---------------------------
1997 1996
--------- ---------
Cost:
Machinery and equipment.................. $ 11,008 $ 9,946
Computer equipment....................... 5,211 4,406
Office furniture and equipment........... 2,193 2,177
--------- ---------
18,412 16,529
Accumulated depreciation and amortization ... 13,184 10,798
Net property and equipment .................. $ 5,228 $ 5,731
========= ==========
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets, which range from three to five
years. Assets under capital leases are depreciated over the shorter of the asset
life or the remaining lease term.
Revenue Recognition
The Company generally recognizes revenue on products at the time of
shipment. For certain international sales where title and risk of loss are
transferred at the customer's site, revenue is recognized upon receipt of
product by the customer. A provision for the estimated cost to repair or replace
products under warranty at the time of sale are recorded in the same period as
the related revenues.
The Company recognizes software revenue, primarily related to its simulation
software products, in accordance with the American Institute of Certified Public
Accountants' Statement of Position 91-1 on Software Revenue Recognition. License
revenue is recognized on shipment of the product provided that no significant
vendor or post-contract support obligations remain and that collection of the
resulting receivable is deemed probable by management. Insignificant vendor and
post-contract support obligations are accrued upon shipment. Service revenue
includes training, consulting and customer support. Revenues from training and
consulting are recognized at the time the service is performed.
Deferred revenue primarily relates to software support contracts sold under
separate arrangements with customers. The term of the software support contract
is generally one year, and the Company recognizes the associated revenue on a
pro rata basis over the life of the contract.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash equivalents, money market auction rate
preferred stocks and trade receivables. The Company places its cash equivalents
and short term investments with high credit-quality financial institutions. The
Company invests its excess cash in commercial paper, readily marketable debt
instruments and collateralized funds of U.S., state and municipal government
entities. The Company has established guidelines relative to credit ratings,
diversification and maturities that seek to maintain safety and liquidity. The
Company manufactures and sells its products to system integrators, end users and
OEMs in diversified industries. The Company performs ongoing credit evaluations
of its customers and does not require collateral. However, the Company may
require the customers to make payments in advance of shipment or to provide a
letter of credit. The Company provides reserves for potential credit losses, and
such losses have been within management's expectations.
Research, Development and Engineering Costs
Research, development and engineering costs, other than purchased computer
software, are charged to expense when incurred. The Company has received third
party funding of $767,000, $1,081,000 and $250,000 in years 1997, 1996 and 1995,
respectively. The Company has offset research, development and engineering
expenses by the third party funding, as the third party funding is based upon
research and development expenditures and the Company retains the rights to any
technology that is developed.
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Software Development Costs
The Company capitalizes software development costs incurred subsequent to
the time the product reaches technical feasibility. All capitalized internally
developed software costs and purchased software costs are amortized to the cost
of revenues on a straight-line basis based on the estimated useful lives of the
products or the ratio of current revenue to the total of current and anticipated
future revenue, whichever is greater. Capitalized internally developed software
and purchased software are stated at the lower of amortized cost or net
realizable value. Capitalized and purchased software are included in intangible
assets.
For 1997, 1996 and 1995, software amortization was $180,000, $180,000 and
$0, respectively. Unamortized software development costs at June 30, 1997 and
1996 were approximately $ 538,000 and $718,000, respectively
Intangible Assets Related to Acquisition of Silma
Intangible assets related to the acquisition of Silma in 1995 included
goodwill of $486,000, purchased software of $898,000 and a non-compete agreement
of $89,000. Goodwill is amortized on a straight-line basis over an estimated
useful life of five years. The non-compete agreement was fully amortized at June
30, 1997.
Advertising costs
Advertising costs are recorded as an expense as incurred. Advertising costs
were $217,000, $229,000 and $284,000 in 1997, 1996 and 1995, respectively. The
Company does not incur any direct response advertising costs.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Under
SFAS 109, the liability method is used to account for income taxes. Deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Stock-Based Compensation
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation", which provides an alternative to APB Opinion No. 25 (Opinion 25),
"Accounting for Stock Issued to Employees", in accounting for stock issued to
employees. The Company has elected to account for stock-based compensation to
employees in accordance with Opinion 25, providing only proforma disclosure
required by SFAS 123.
Net Income Per Share
Net income per share is computed using the weighted average number of shares
of common stock and dilutive common equivalent shares from convertible preferred
stock (using the if-converted method) and from stock options and warrants (using
the treasury stock method). Pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common stock and common equivalent shares issued by
the Company at prices below the assumed public offering price during the
twelve-month period prior to the initial public offering have been included in
the calculation through September 30, 1995 as if they were outstanding for all
periods presented regardless of whether they are dilutive (using the treasury
stock method at an assumed public offering price).
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share", which
is required to be adopted on December 31, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirement for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact to the Company will be an incremental increase in net
income per share of $.01 and $.07 for 1997 and 1996, respectively. The impact of
SFAS 128 on the calculation of fully diluted earnings per share for these
periods is not expected to be material.
Reclassification
Certain amounts presented in the financial statements of prior years have
been reclassified to conform to the current presentation for 1997.
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition
In June 1995, the Company acquired SILMA Incorporated ("Silma"), a developer
of automation simulation software, for a total acquisition price of $4,976,000.
The acquisition price included a cash payment of $1,380,000, and issuance of
521,992 shares of the Company's common stock at a fair market value of $6 per
share on the closing date and related acquisition costs of $464,000.
The transaction was accounted for using the purchase method and an independent
appraisal was performed for all assets acquired. As a result, $2,972,000 of the
purchase price was written off as a one-time charge related to the acquired
in-process research and development, and $898,000 was capitalized as completed
software. The completed software along with the excess cost over the fair value
of net assets acquired for the acquisition is being amortized on a straight-line
basis over estimated useful lives ranging from three to five years. The acquired
operation is included in the consolidated statements of operation from the date
of acquisition.
3. Derivative Financial Instruments
The Company from time to time may enter into forward foreign exchange
contracts primarily to hedge against the short term impact of foreign currency
fluctuations of purchase commitments denominated in yen. The maturities of the
forward exchange contracts are short term in nature, generally 90 days. Because
the impact of movements in currency exchange rates on forward foreign exchange
contracts offsets the related impact on the underlying items being hedged, these
financial instruments do not subject the Company to speculative risk that would
otherwise result from changes in currency exchange rates. Realized and
unrealized gains and losses on instruments that hedge firm commitments are
deferred and included in the measurement of the subsequent transaction; however,
losses are deferred only to the extent of expected gains on the future
commitment.
4. Commitments and Contingencies
Commitments
The Company leases certain equipment under capital leases. Capitalized costs
of approximately $152,000 and $534,000 are included in property and equipment at
June 30, 1997 and 1996, respectively. Accumulated depreciation of the leased
equipment amounted to approximately $67,000 and $372,000 for the respective
years.
<TABLE>
The Company's lease on its major facility will expire in December 2000.
Future minimum payments for capital and operating leases as of June 30, 1997 are
as follows:
<CAPTION>
June 30, 1997
---------------------------
(in thousands) Capital Operating
Leases Leases
--------- ----------
<S> <C> <C>
Fiscal year
1998.................................................................... $ 28 $ 1,809
1999.................................................................... -- 1,786
2000.................................................................... -- 1,654
2001.................................................................... -- 840
2002.................................................................... -- 95
Later years............................................................. -- 256
--------- ---------
Total minimum lease payments................................................. 28 $ 6,440
=========
Less amount representing interest....................................... 1
---------
Present value of net minimum payments................................................. $ 27
=========
</TABLE>
Total rent expense for all facility and equipment operating leases was
approximately $1,665,000, $1,406,000 and $1,195,000 in 1997, 1996 and 1995,
respectively.
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contingencies
The Company has from time to time received communications from third parties
asserting that the Company is infringing certain patents and other intellectual
property rights of others, or seeking indemnification against such alleged
infringement. While it is not feasible to predict or determine the outcome of
the actions brought against it, the Company believes the ultimate resolution of
these matters will not have a material adverse effect on its financial position,
results of operations or cash flows.
5. Shareholders' Equity
Public Offering
In December 1995, the Company sold a total of 1,250,000 shares of common
stock at $9.50 per share through its initial public offering. The net proceeds
(after underwriters' commission and fees and other costs associated with the
offering) totaled approximately $10,028,000. In connection with the offering,
all convertible preferred stock totaling approximately 4,043,000 shares with an
aggregate paid-in value of approximately $30,185,000 were converted into
approximately 4,067,000 shares of common stock of the Company.
Preferred Stock
The Board of Directors has the authority to issue, without further action by
the Shareholders, up to 5,000,000 shares of preferred stock in one or more
series and to fix the price, rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting a series or the designation of such series,
without any further vote or action by the Company's shareholders. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the shareholders and may adversely affect the market price of,
and the voting and other rights of, the holders of Common Stock.
Stock Option Plans
The Company's 1983 Employee Stock Incentive Program (the "1983 Plan") was
adopted by the Board of Directors in August 1983. The 1983 Plan provided for the
grant of incentive stock options to employees (including officers and employee
directors) and nonstatutory stock options to employees (including officers and
employee directors) and consultants of the Company. In general, options and
common stock purchased pursuant to stock purchase rights granted under the 1983
Plan vest and become exercisable starting one year after the date of grant, with
25% of the shares subject to the option exercisable at that time and an
additional 1/48th of the shares subject to the option becoming exercisable each
month thereafter. Upon the voluntary or involuntary termination of employment
(including as a result of death or disability) by a holder of unvested shares of
the Company's common stock purchased pursuant to stock purchase rights granted
under the 1983 Plan, the Company may exercise an option to repurchase such
shares at their original issue price. The Board of Directors determines the
exercise price which must be at least equal to the fair market value of shares
on the date of grant. The 1983 Plan expired according to its terms in August
1993. Currently outstanding options under the 1983 Plan and common stock
purchased pursuant to stock purchase rights granted under the 1983 Plan continue
to be governed by the terms of the 1983 Plan and by the terms of the respective
option and stock purchase and stock restriction agreements between the Company
and the holders thereof.
The Company's 1993 Stock Plan (the "1993 Plan") was adopted by the Board of
Directors in April 1993 and approved by the shareholders of the Company in June
1993. The 1993 Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options to
employees (including officers and employee directors) and consultants of the
Company. The terms of the 1993 Plan are similar to the 1983 Plan, and the terms
of the options granted under the 1993 Plan generally may not exceed ten years.
The Board of Directors determines the exercise price which must be at least
equal to the fair market value of shares on the date of grant.
The Company's 1995 Director Option Plan (the "Director Plan") was adopted by
the Board of Directors and approved by the shareholders of the Company in
October 1995. The option grants under the Director Plan are automatic and
nondiscretionary, and the exercise price of the options is at the fair market
value of the common stock on the date of grant. A
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
total of 150,000 shares of common stock has been reserved for issuance under the
Director Plan. At June 30, 1997, 51,000 shares were granted and no shares were
exercised.
The options may be exercised at the time or times determined by the Board of
Directors.
<TABLE>
The following table summarizes activities of the stock option plans:
<CAPTION>
Options
------------------------------------------------------------------
(in thousands, except per share data) Available No. of Shares Aggregate Weighted Average
for Grant Outstanding Price Exercise Price
------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C>
Balance at June 30, 1994......................... 126 803 $ 837 $ 1.04
Additional shares authorized................ 375 -- -- --
Granted..................................... (280) 280 1,645 5.87
Canceled.................................... 23 (23) (66) 2.78
Shares Expired.............................. (6) -- -- --
Exercised................................... -- (18) (23) 1.35
--------- --------- --------
Balance at June 30, 1995......................... 238 1,042 2,393 2.30
Additional shares authorized................ 800 -- -- --
Granted..................................... (203) 203 2,130 10.49
Canceled.................................... 39 (39) (175) 4.52
Shares Expired.............................. (1) -- -- --
Exercised................................... -- (382) (524) 1.37
--------- --------- ---------
Balance at June 30, 1996......................... 873 824 3,824 4.64
Granted..................................... (465) 465 3,091 6.65
Canceled.................................... 35 (35) (269) 7.70
Exercised................................... -- (158) (268) 1.70
--------- --------- ---------
Balance at June 30, 1997......................... 443 1,096 $ 6,378 $ 5.82
========= ========= =========
</TABLE>
<TABLE>
The following table summarizes information concerning outstanding and
exercisable options at June 30, 1997, (at June 30, 1996, 454,000 stock options
were exercisable):
<CAPTION>
(shares in thousands) Options Outstanding Options Exercisable
----------------------------- -------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Numbers Contractual Exercise Numbers Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ---------- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$ .80 - $ 3.00 269 1.02 $ 1.17 263 $ 1.16
$ 3.01 - $ 6.00 196 2.75 $ 5.86 133 $ 5.85
$ 6.01 - $ 9.00 540 8.32 $ 6.70 118 $ 6.74
$ 9.01 - $ 15.00 48 8.55 $ 11.22 17 $ 11.17
$ 15.01 - $ 18.25 43 8.84 $ 17.80 13 $ 17.84
------ ---
$ .80 - $ 18.25 1,096 5.56 $ 5.82 544 $ 4.22
====== =====
</TABLE>
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has an option to repurchase all or a portion of the shares,
depending on the length of employment, at the original selling price in the
event the employee terminates employment. At June 30, 1997 and 1996,
respectively, 363 and 439 common shares issued were subject to repurchase under
these agreements.
In August 1997, the Company's Board of Directors approved a 1,000,000 share
increase in the number of common shares available for grant under the Company's
1993 Plan. This increase is currently subject to shareholder approval.
Employee Stock Purchase Plan
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors and approved by the shareholders in October
1995. The Purchase Plan has overlapping twelve-month offering periods that begin
every six months, starting on the first trading day on or after May 1, and
November 1 of each year. Each twelve-month offering period is divided into two
six-month purchase periods. The Purchase Plan allows eligible employees, through
payroll deductions, to purchase shares of the Company's common stock at 85% of
fair market value on either the first day of the offering period or the last day
of the purchase period, whichever is lower.
At June 30, 1997, 300,000 shares of the Company's common stock has been
reserved for issuance under the Purchase Plan, of which 283,000 shares have been
issued. In August 1997, the Company's Board of Directors approved a 500,000
share increase in the number of common shares to be reserved for issuance under
the Purchase Plan. This increase is currently subject to shareholder approval.
<TABLE>
Stock Based Compensation
At June 30, 1997, the Company has four stock-based compensation plans as
described above. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans and its stock purchase
plan. If compensation cost for the Company's stock-based compensation plans had
been determined consistent with Statement of Financial Accounting Standards No.
123 (SFAS 123), the Company's net income and net income per share would have
been reduced to the pro forma amounts indicated below:
(in thousands, except per share data)
<CAPTION>
June 30,
---------------------------
1997 1996
--------- ---------
<S> <C> <C>
Net income As reported.......................................... $ 2,757 $ 5,777
Pro forma ........................................... $ 1,464 $ 5,266
Net income per share As reported.......................................... $ .33 $ .75
Pro forma............................................ $ .17 $ .68
</TABLE>
Because the method of accounting prescribed by SFAS 123 has not been applied to
options granted prior to July 1, 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions for grants during the year ended June 30, 1997 and 1996: risk-free
interest rates of 6.63% and 5.95% for 1997 and 1996, respectively; a dividend
yield of 0% for both years; a weighted-average expected life of 3.0 and 2.9
years for 1997 and 1996; and a volatility factor of the expected market price of
the Company's common stock of .69 for both years. The weighted average grant
date fair value of options granted during 1997 and 1996 was $3.26 and $5.19,
respectively.
Compensation cost is estimated for the fair value of the employees' purchase
rights using the Black-Sholes model with the following assumptions for these
rights granted in 1997 and 1996: a dividend yield of 0% for both years; and
expected life of 6 months and 4.5 months for 1997 and 1996; and expected
volatility of .69 for both years; and a risk-free interest rate of 5.27% and
5.05% for 1997 and 1996. The weighted average fair market value of the purchase
rights granted in 1997 and 1996 was $3.45 and $3.07, respectively.
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
6. Employee Savings and Investment Plan
In May 1988, the Company adopted a 401(k) savings and investment plan in
which employees are eligible to participate. In 1997, the Company matched the
employee's contribution at a rate of $.50 per dollar, to a maximum of $19.23 per
person, per week. Through June 30, 1996, the Company's matched the employee's
contribution at a rate of $.25 per dollar, to a maximum of $12 per person, per
week. The Company's matching contributions were $235,000, $133,000 and $90,000
in 1997, 1996 and 1995, respectively.
7. Income Taxes
<TABLE>
The provision for (benefit from) income taxes consists of the following:
<CAPTION>
(in thousands) Year Ended June 30,
-----------------------------------------
1997 1996 1995
--------- --------- ------
Current:
<S> <C> <C> <C>
Federal................................................. $ 1,029 $ 1,545 $ 150
State................................................... 187 585 241
Foreign................................................. 187 250 113
--------- --------- ---------
Total current............................................... 1,403 2,380 504
Deferred:
Federal................................................. (78) (1,160) (822)
State................................................... (16) (40) (178)
---------- -------- ---------
Total deferred.............................................. (94) (1,200) (1,000)
---------- --------- ---------
Provision for (benefit from) income taxes................... $ 1,309 $ 1,180 $ (496)
========= ========= ==========
</TABLE>
<TABLE>
The difference between the provision for (benefit from) income taxes and the
amount computed by applying the federal statutory income tax rate to income
before provision for income taxes is explained below:
<CAPTION>
(in thousands) Year Ended June 30,
-----------------------------------------
1997 1996 1995
--------- --------- ------
<S> <C> <C> <C>
Tax at federal statutory rate............................... $ 1,382 $ 2,366 $ 146
Tax benefits of net operating loss carryforward utilization. -- (1,149) (1,158)
Nondeductible charge for purchased research and development. -- -- 1,010
Adjustment of valuation allowance........................... -- (805) (1,000)
State taxes, net of federal benefit......................... 113 360 241
Impact of temporary differences............................. -- -- 276
Foreign taxes............................................... 132 173 --
Tax credits................................................. (373) -- --
Other....................................................... 55 235 (11)
--------- --------- ----------
Provision for (benefit from) income taxes................... $ 1,309 $ 1,180 $ (496)
========= ========= ==========
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<PAGE>
EXHIBIT 13.1
<TABLE>
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
(in thousands) June 30,
------------------------
1997 1996
--------- ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................................... $ 650 $ 800
Tax credit carryforwards................................................... 550 500
Inventory valuation accounts............................................... 910 950
Warranty reserves.......................................................... 700 550
Other accruals and reserves not currently deductible for tax purposes...... 750 780
Other...................................................................... 206 110
--------- ---------
Total deferred tax assets...................................................... 3,766 3,690
Valuation allowance............................................................ (784) (890)
---------- ---------
Net deferred tax assets........................................................ 2,982 2,800
---------- ---------
Deferred tax liabilities:
Foreign earnings ......................................................... (144) --
Intangible assets.......................................................... (244) (300)
---------- ---------
Net deferred tax liabilities................................................... (388) (300)
---------- ---------
Total net deferred tax assets.................................................... $ 2,594 $ 2,500
========= =========
</TABLE>
The change in the valuation allowance was a net decrease of approximately
$2,010,000 for 1996.
At June 30, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $1.9 million, which if unused, will
expire beginning in 2001. The Company also had credit carryforwards of
approximately $550,000, which if unused, will expire beginning in 1998.
Utilization of the net operating loss carryforwards and the deduction equivalent
of approximately $375,000 of the tax credit carryforwards is limited to
approximately $300,000 per year.
For financial reporting purposes, a valuation allowance of $784,000 has been
established to offset the deferred tax assets related to certain tax credits and
net operating loss carryforwards. When realized, the tax benefits related to the
valuation allowance will be applied to reduce goodwill and other intangible
assets related to the acquisition of Silma.
Pretax income (losses) from foreign operations were approximately
($271,000), $548,000 and ($257,000) in 1997, 1996 and 1995, respectively.
<PAGE>
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Industry and Geographic Information
<TABLE>
The Company and its subsidiaries operate in one industry segment: the
design, manufacturing and marketing of intelligent automation software and
hardware products for automating assembly, material handling and packaging
applications. International sales, which include export sales and foreign
operation net revenues, account for a significant portion of the Company's net
revenues and are summarized as a percentage of net revenues by geographic areas
as follows:
<CAPTION>
(in thousands) Year Ended June 30,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
United States............................................... 64.2 % 60.6% 59.4%
International:
Europe.................................................. 30.1 31.7 29.1
Other international..................................... 5.7 7.7 11.5
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
Foreign operations' net revenues have constituted less than 10% of
consolidated net revenue to date. Identifiable assets in Europe and Asia
contributed approximately 9% and 2%, respectively to the consolidated total
assets at both June 30, 1997 and 1996.
The Company had export sales of approximately 26%, 29% and 32% of the net
revenues in 1997, 1996 and 1995, respectively. Approximately 86%, 79% and 66% of
the export sales were to Europe in 1997, 1996 and 1995, respectively. The
balance of export sales was primarily to Asia and Canada in each of the three
fiscal years.
<PAGE>
Exhibit 13.1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Shareholders and Board of Directors
Adept Technology, Inc.
We have audited the accompanying consolidated balance sheets of Adept
Technology, Inc. as of June 30, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended June 30, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Adept Technology, Inc. at June 30, 1997 and 1996, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 1997, in conformity with generally accepted accounting
principles..
Ernst & Young L.L.P.
San Jose, California
July 29, 1997
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Adept Technology, Inc. of our report dated July 29, 1997, included in the
1997 Annual Report to Shareholders of Adept Technology, Inc.
Our audits also included the financial statement schedule of Adept Technology,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-3656) pertaining to the 1983 Employee Stock Incentive Plan,
1993 Stock Plan, 1995 Employee Stock Purchase Plan and 1995 Director Option Plan
of Adept Technology, Inc. of our report dated July 29, 1997, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule in this Annual Report (Form 10-K) of Adept Technology, Inc.
ERNST & YOUNG LLP
San Jose, California
September 26, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27.1
ADEPT TECHNOLOGY, INC.
Financial Data Schedule
(in thousands, except per share data)
(unaudited)
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND THE CONSOLIDATED STATEMENT OF
INCOME FOR THE YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 11,101
<SECURITIES> 7,366
<RECEIVABLES> 17,699
<ALLOWANCES> 449
<INVENTORY> 13,096
<CURRENT-ASSETS> 51,330
<PP&E> 18,412
<DEPRECIATION> 13,184
<TOTAL-ASSETS> 59,493
<CURRENT-LIABILITIES> 12,399
<BONDS> 0
0
0
<COMMON> 46,897
<OTHER-SE> 197
<TOTAL-LIABILITY-AND-EQUITY> 59,493
<SALES> 82,767
<TOTAL-REVENUES> 82,767
<CGS> 48,761
<TOTAL-COSTS> 79,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> 4,066
<INCOME-TAX> 1,309
<INCOME-CONTINUING> 2,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,757
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
