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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the fiscal year ended March 31, 1998 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from to .
Commission File Number 000-15071
ADAPTEC, INC.
(exact name of Registrant as specified in its charter)
DELAWARE 94-2748530
(State of incorporation) (I.R.S. Employer Identification No.)
691 S. Milpitas Blvd.
Milpitas, California 95035
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 945-8600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Preferred Share Purchase Rights
(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. Yes [X] No [ ]
Based on the closing sale price of the Common Stock on the Nasdaq
National Market System on June 1, 1998, the aggregate market value of the voting
stock held by non-affiliates of the Registrant was $1,650,641,230. Shares of
Common Stock held by each officer and director and by each person known by the
Company to own 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.
The number of shares outstanding of Registrant's Common Stock, $0.001
par value, was 114,319,660 at June 1, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV incorporate information by reference from the Annual
Report to Stockholders for the fiscal year ended March 31, 1998.
Part III incorporates information by reference from the definitive proxy
statement for the Annual Meeting of Stockholders to be held on August 20, 1998.
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INTRODUCTORY STATEMENT
References made in this Annual Report on Form 10-K to "Adaptec," the "Company,"
or the "Registrant" refer to Adaptec, Inc. and its wholly owned subsidiaries.
Adaptec, the Adaptec logo, EZ-SCSI, and SCSIselect are trademarks of Adaptec,
Inc., which may be registered in some jurisdictions. All other trademarks used
are owned by their respective owners.
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PART I
ITEM 1. BUSINESS
GENERAL
Adaptec is a leading supplier of bandwidth management solutions that
significantly enhance total system performance by increasing the data transfer
rates between personal computers ("PCs"), servers, peripherals, and networks.
The Company's products include host adapters, which are primarily based on the
small computer system interface ("SCSI") standard, network products, CD
recordable software solutions, peripheral technology solutions, consisting
primarily of application specific integrated circuit ("ASIC") controllers for
hard disk and CD-ROM drives, and storage system solutions that incorporate RAID
and Fibre Channel technologies.
Adaptec provides its customers with complete solutions, consisting of hardware,
software, and firmware, which are incorporated into the products of
substantially all of the major Intel-based PC and server manufacturers
worldwide. Many of these solutions are based on the SCSI standard which has
become an important industry standard I/O bus specification for high-performance
systems. SCSI allows the "intelligent" transfer of data between computers,
peripherals, and networks by enabling multitasking and by offloading the system
CPU from I/O management.
The increase in the usage of data has created the need for solutions involving
increasing amounts of data storage as well as new high-capacity peripheral
devices. Virtually every microcomputer is shipped with mass storage peripherals
such as hard disk drives and CD-ROMs. Each peripheral requires an ASIC
controller to manage the operations of that peripheral and to interface with the
system bus. Recently, new peripherals, such as CD-ROMs and removable storage
devices, have been increasingly used alongside hard disks to provide additional
storage capacity. In addition, the increasing need for mass storage is also
driving the need for controller solutions that can support multi-gigabyte drives
in both desktop and server systems.
Adaptec also supports emerging high-performance solutions, such as Fibre Channel
and microprocessor based RAID. Fibre Channel is a bus technology targeted for
applications with very high-capacity I/O demands over long distances, which
offers unique capabilities in the clustering and very high end multi-processor
server environments. Fibre Channel has fostered the idea of a "storage area
network" where a Fibre Channel network exists independently of a local area
network (LAN). The storage area network moves data between storage devices and
servers while the LAN moves data between clients and servers. RAID is an acronym
for Redundant Array of Inexpensive (or Independent) Disks. A microprocessor RAID
array is a collection of drives which collectively act as a single storage
system, which can tolerate the failure of a drive without losing data and which
can operate independently of each other. RAID offloads overhead from the main
CPU allowing for enhanced system performance.
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PRODUCTS
The Company's products are designed and manufactured using a core set of
technologies and resources. The Company's semiconductor technology design
centers develop products for all markets the Company serves. The Company
continues to utilize a process called concurrent engineering, in which
manufacturing, marketing, and engineering work together early in the development
cycle to meet the demands of emerging technologies as well as decrease the "time
to volume" of product shipments. The Company maintains an Internet Web site to
provide its customers with detailed company and product information.
Host Interface Solutions
The Company's host interface solutions, which include SCSI host adapters and
related firmware and software, meet the demanding I/O and connectivity
requirements of enterprise servers, high-performance desktop and portable
computers, and technical workstations across all important microprocessor-based
platforms.
The Company's host interface products, which incorporate the Company's
proprietary single chip architectures and related software products including CD
recordable solutions, provide customers comprehensive I/O solutions in the
markets it serves. Ultra2SCSI products include PCI Ultra2 solutions for
workstation applications such as CAD/CAM, financial analysis and desktop
publishing. Internal RAID solutions include RAID option cards for motherboards
equipped with a RAIDport II slot and PCI-to-Ultra SCSI Array Adapters. The
Company provides bus mastering, SCSI host adapters that manage all I/O
processing activity, thereby freeing the CPU to perform other operations. The
Company offers these host adapters across all ranges of bus architectures
including PCI, Fibre Channel, ISA, EISA, and PCMCIA as well as for previous
generations of the SCSI standard. The Company also provides non-bus mastering
host adapters that provide standardized SCSI connectivity between the CPU and
its peripherals. To expand further the market for its products, the Company
continues to develop and market I/O solutions meeting specific original
equipment manufacturer ("OEM") requirements and turnkey kits for the distributor
channels. These kits include a SCSI host adapter and related software that
enable end-users to more readily connect SCSI peripherals to their
microcomputer.
The Company has undertaken numerous initiatives to increase the accessibility,
ease of use, and versatility of the SCSI standard. Advanced SCSI programming
interface ("ASPI"), an industry standard developed by the Company, enables users
to integrate high-performance SCSI peripherals with microcomputers using popular
operating systems, such as Windows 95, Windows NT, NetWare, OS/2, and UNIX. In
addition, the Company is engaged in strategic relationships with leading
operating system vendors, such as IBM, Microsoft, and Novell, resulting in joint
development projects to embed the Company's software within their operating
systems. The Company has several software utilities such as Adaptec EZ-SCSI and
SCSIselect products, which simplify connecting a SCSI host adapter and
peripherals to a microcomputer system. The Company also provides networking
products such as Fast Ethernet adapters and Duralink software.
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Semiconductor Solutions
The Company develops proprietary integrated circuits ("ICs") for use in
microcomputer systems, mass storage devices, various other peripherals, and for
use in its own board-based SCSI host adapters and NICs. Adaptec's proprietary
ICs provide innovative solutions for managing complex I/O functions in
high-performance microcomputer and storage applications. Working closely with
customers, the Company provides complete solutions that include sophisticated
ICs, firmware, and software that optimize overall subsystem design.
The Company's semiconductor solutions include SCSI and enhanced integrated
device electronic ("EIDE") programmable storage controllers and single-chip SCSI
host adapters. All of the Company's IC products are developed using advanced
design technologies to meet market requirements for higher levels of physical
integration, increased functionality, and performance. The Company's
programmable SCSI and EIDE storage controllers are typically configured to
address specific customer requirements in the mass storage market and are used
primarily in high-capacity hard disk drives. The Company's SCSI host adapter ICs
incorporate similar technology and are used by system manufacturers to embed
SCSI on the system motherboard.
Storage System Solutions
The Company's storage system solutions include RAID for external storage,
primarily in the NT server market, and Fibre Channel solutions. RAID for
external storage includes external RAID controller boards and external RAID
"canisters". External RAID controller boards are sold to OEMs for integration
into their external storage subsystems. Canisters are sold primarily to VARs and
resellers through the distribution channel for integration into RAID storage
subsystems.
The Company's Fibre Channel products include PCI-to-Fibre Channel host adapters
which bring Fibre Channel peripheral attachment and clustering interconnection
to 32-bit/64-bit PCI workstations and servers. These PCI-to-Fibre Channel host
adapters are compatible with a wide range of hardware platforms, operating
systems and peripherals and are sold directly to OEMs and through distribution
with kitted solutions.
RESEARCH AND DEVELOPMENT
The Company believes research and development is fundamental to its success,
especially in integrated circuit design, software development, and I/O solutions
that encompass emerging technologies. The development of proprietary integrated
circuits that support multiple architectures and peripheral devices requires a
combination of engineering disciplines. In addition, extensive knowledge of
computer and subsystem architectures, expertise in the design of high-speed
digital ICs circuits, and knowledge of operating system software is essential.
The Company's research and development efforts continue to focus on the
development of complete solutions that include proprietary ASICs, firmware, and
software that support multiple architectures and peripheral devices. These I/O
solutions facilitate high-speed data transfer rates, which are essential to the
enhanced performance of client/server networking environments, applications
requiring high-performance I/O, and the adoption of various peripheral devices.
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The Company intends to continue to leverage its technical expertise and product
innovation capabilities to address I/O solutions across a broad range of users
and platforms. The Company has invested significant resources to develop its
core products as well as newer hardware and software solutions including CD-R,
Fibre Channel, File Array, RAID and external storage. The Company is currently
evaluating the stage of development and market potential of various of these
technologies and, as a result of its recent financial performance, may decide to
curtail or terminate its development efforts in certain areas.
Approximately 28% of the Company's employees are engaged in research and
development, of whom approximately 50% are engaged in software development. In
fiscal 1998, 1997, and 1996, the Company spent approximately $173 million (17%
of net revenues), $129 million (14% of net revenues) and $88 million (13% of net
revenues), respectively, for research and development.
MARKETING AND CUSTOMERS
The Company believes it has successfully positioned itself as a leading supplier
of a full range of I/O solutions providing bandwidth management. The Company
sells its products through a direct sales force to substantially all major
server and PC manufacturers, as well as most of the major electronic
distributors worldwide. The Company works closely with its OEM customers on the
design of current and next generation products to meet the specific requirements
of system integrators and end-users. The Company provides its OEM customers with
extensive applications and system design support. The Company also sells
board-based products to end-users through major computer product distributors
and provides technical support to its customers worldwide.
The Company's OEM customers include Acer, Compaq Computer, DEC, Dell Computer
Corporation, Fujitsu, Gateway 2000, Hewlett-Packard Company, IBM Corporation,
Intel Corporation, Samsung, Siemens Nixdorf, Silicon Graphics, Toshiba America,
and Western Digital. The Company's major distributors include Actebis, CHS
Electronics, Computer 2000, Gates/Arrow, Globelle, Ingram Micro, Metrologie,
Merisel, Nissho, and Tech Data. In fiscal 1998 and 1997, no customer accounted
for more than 10% of the Company's net revenues. In fiscal 1996, sales to one
distributor represented 10% of the Company's net revenues.
The Company emphasizes solution-oriented customer support as a key element of
its marketing strategy and maintains technical applications groups in the field
as well as at the Company's headquarters. Support provided by these groups
includes assisting current and prospective customers in the use of the Company's
products, writing application notes, and conducting seminars for system
designers. The systems-level expertise and software experience of the Company's
engineering staff are also available to customers with particularly difficult
I/O design problems. A high level of customer support is also maintained through
technical support hotlines, electronic bulletin boards, and dial-in-fax
capability.
International net revenues accounted for approximately 60%, 61%, and 56% of net
revenues in fiscal 1998, 1997, and 1996, respectively. Sales of the Company's
products internationally are subject to certain risks common to all export
activities, such as governmental regulation and the risk of imposition of
tariffs or other trade barriers. Sales to customers are denominated in U.S.
dollars.
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COMPETITION
In the host adapter market, the Company competes with a number of host adapter
manufacturers. The Company's competitive strategy is to continue to leverage its
technical leadership and concentrate on the most technology-intensive solutions.
To address the competitive nature of the business the Company designs advanced
features into its products, with particular emphasis on data transfer rates,
software-defined features, and compatibility with major operating systems and
most peripherals. The Company believes the principal competitive factors in this
market are performance, a comprehensive array of solutions ranging from
connectivity products for the personal computing market to high-performance
products for the enterprise-wide computing and networked environments, product
features, brand awareness, financial resources, and technical and administrative
support. The Company believes that it presently competes favorably with respect
to each of these factors.
As the Company enters the market for storage systems solutions, it expects to
experience significant competition from both existing competitors and additional
companies that may enter this market. Some of these companies have greater
technical, marketing, manufacturing, and financial resources than the Company.
The Company's principal competitors for semiconductor solutions in the mass
storage market are captive suppliers, Texas Instruments and Cirrus Logic, Inc.
The Company believes that its competitive strengths in the mass storage market
include its systems level expertise, integrated circuit design capability, and
substantial experience in I/O applications. The Company believes the principal
competitive factors in achieving design wins are performance, product features,
price, quality, and technical and administrative support. The Company believes
that it presently competes favorably with respect to each of these factors.
The markets for the Company's products are highly competitive and are
characterized by rapid technological advances, frequent new product
introductions, evolving industry standards, and competitive price pressures. The
Company's competitors continue to introduce products with improved performance
characteristics, and its customers continue to develop new applications. As the
Company has continued to broaden its bandwidth management product offerings into
the desktop and server environments, it has experienced, and expects to
experience in the future, significantly increased competition both from existing
competitors and from additional companies that may enter its markets. Some of
these companies have greater technical, marketing, manufacturing, and financial
resources than the Company. The Company will have to continue to develop and
market appropriate products to remain competitive. The Company believes one of
the factors in its competitive success is its continued commitment of resources
to research and development.
BACKLOG
At March 31, 1998, the Company's backlog was approximately $61 million compared
with $154 million at March 31, 1997. The Company believes that the trend to
lower priced PCs for mainstream corporate desktop applications, the turbulent
disk drive market and the recent instability in the Asian markets are, among
other things, factors which may have contributed to the decrease in the backlog.
However, backlog levels may also vary with product availability, delivery lead
times and customer order delays, changes or cancellations. Accordingly, the
Company's backlog as of any particular date may not necessarily be a reliable
indicator of future operating results.
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MANUFACTURING
The Company's Singapore manufacturing facility produces and tests high volume
host adapter products. The Singapore facility has earned ISO 9001 certification,
a stringent quality standard that has become a requirement for doing business
globally. Since establishing this facility in Singapore in 1988, the Company has
experienced lower costs, shorter manufacturing cycle times, and improved service
to customers. The Company's products make extensive use of standard logic,
printed circuit boards, and random access memory from several outside suppliers
in addition to the Company's custom designed integrated circuits. Additionally,
during fiscal 1998, to ensure availability of low cost manufacturing capacity
for certain product lines, the Company's Singapore plant continued to develop
relationships with major local subcontracting manufacturers by consigning
certain production equipment to the subcontractors.
All semiconductor wafers used in manufacturing the Company's products are
processed to its specifications by outside suppliers and internally tested by
the Company. The Company has secured capacity through agreements with Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") that ensure availability of a
portion of the Company's wafer capacity for both current and future technologies
for which the Company has made advance payments. The Company also purchases
wafers from SGS-Thompson Microelectronics and Seiko Epson.
PATENTS AND LICENSES
The Company believes that patents are of less significance in its industry than
such factors as innovative skills, technological expertise, and marketing
abilities. However, the Company encourages its engineers to document patentable
inventions and has applied for and continues to apply for patents both in the
United States and in foreign countries when it deems it to be advantageous to do
so. There can be no assurance that patents will be issued or that any patent
issued will provide significant protection or could be successfully defended.
As is the case with many companies in the electronics industry, it may be
desirable in the future for the Company to obtain technology licenses from other
companies. The Company has occasionally received notices of claimed infringement
of intellectual property rights and may receive additional such claims in the
future. The Company evaluates all such claims and, if necessary, will seek to
obtain appropriate licenses. There can be no assurance that any such licenses,
if required, will be available on acceptable terms.
EMPLOYEES
At March 31, 1998, the Company had 3,276 employees. The Company's continued
success will depend in large measure on its ability to attract and retain highly
skilled employees who are in great demand.
EXECUTIVE OFFICERS
The following sets forth certain information with regard to executive officers
of Adaptec as of June 23, 1998 except that ages are as of March 31, 1998:
F. Grant Saviers (age 53) has served as Chairman and Chief Executive Officer of
Adaptec since May 1998. Mr. Saviers served as Chairman, Chief Executive Officer
and President between August 1997 and May 1998 and as President and Chief
Executive Officer between July 1995 and August 1997. Mr. Saviers joined Adaptec
as Chief Operating Officer in August 1992. Prior to joining Adaptec, Mr. Saviers
was
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employed with Digital Equipment Corporation, last serving as Vice President of
its personal computer systems and peripherals operation.
Robert N. Graham (age 58) has served as President, Storage Systems since May
1998. From 1997 to 1998, Mr. Graham was Chairman, Chief Executive Officer and
President of Ridge Technologies, Inc. From 1994 to 1997, he was a director and
Chief Operating Officer of Manufacturers' Services, Inc. From 1991 to 1994, he
was the General Manager of the Sun Microelectronics Division of Sun
Microsystems.
Robert N. Stephens (age 52) has served as President, Host Interface Solutions
since May 1998. Mr. Stephens joined Adaptec as Chief Operating Officer in
November 1995. From 1993 to 1995, he founded and served as Chairman for Power
I/O Corporation. From 1990 to 1993, Mr. Stephens held the position of President
and CEO of Emulex Corporation.
Andrew J. Brown (age 38) has served as Vice President since November 1996, and
as Corporate Controller and Principal Accounting Officer since May 1994. From
July 1988 to April 1994 he served in various financial roles with the Company.
Richard J. Clayton (age 57) has served as Vice President and General Manager
since May 1996. From October 1995 until February 1996 he served as Vice
President of AVID Technology Corp. and from January 1984 until February 1996 he
served as Vice President of Thinking Machines Corp.
Michael G. Fisher (age 39) has served as Vice President and General Manager
since November 1994. Between May 1994 and October 1994 he held the position of
General Manager, Mass Storage Electronics Product Group. Before then, Mr. Fisher
held the position of Director of Hard Disk Drive Products at Exar Corporation
from November 1990 until April 1994.
Paul G. Hansen (age 50), a certified public accountant, has served as Vice
President of Finance and Chief Financial Officer since January 1988. From March
1984 to December 1987 he served in various financial roles with the Company.
E. J. Tim Harris (age 50) has served as Vice President of Administration since
December 1996. From January 1984 to November 1996, he served in various
positions at Novell, Inc. most recently as Senior Vice President, Human
Resources.
Sam Kazarian (age 55) has served as Vice President of Operations since May 1990.
James M. McCluney (age 46) has served as Vice President since May 1998. From
October 1997 to May 1998 he was Senior Vice President, Wordwide Operations, at
Apple Computer. From 1980 to October 1997, he served in various positions at
Digital Equipment Corporation, most recently as Vice President of Worldwide
Logistics.
Michael A. Ofstedahl (age 38) has served as Vice President, Worldwide Sales,
since February 1998. From January 1996 to February 1998, Mr. Ofstedahl was
Vice President of Sales for Chromatic Research, Inc. and from April, 1993 to
January, 1996, he was Vice President, Strategic Accounts, at Adaptec. Prior to
that, he served as Senior Vice-President, Sales and Marketing, for Vitarel
Microelectronics, Inc.
Christopher G. O'Meara (age 40) has served as Vice President since July 1992 and
as Treasurer since April 1989.
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Henry P. Massey (age 58) has served as Secretary since November 1989. For more
than the last five years, Mr. Massey has been a practicing lawyer and a member
of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, a law firm and
general outside counsel to the Company.
TERMINATION OF SYMBIOS ACQUISITION
In February 1998, the Company entered into an agreement to purchase all of the
outstanding stock of Symbios, Inc. ("Symbios"), a wholly owned subsidiary of
Hyundai Electronics America ("Hyundai") for approximately $768 million. Symbios
is a supplier of SCSI devices, OEM storage systems and ASIC solutions. On June
25, 1998, Adaptec and Hyundai announced that they had mutually agreed to
terminate the transaction. Adaptec expects to take a charge of approximately $20
million in the first quarter of fiscal 1999 in connection with the transaction.
FOREIGN AND DOMESTIC OPERATIONS
Incorporated by reference from information under the caption " Note 10. Segment
Information" in the Notes to Consolidated Financial Statements on pages B21 and
B22 of the Annual Report to Stockholders for the fiscal year ended March 31,
1998.
CERTAIN FACTORS BEARING ON FUTURE RESULTS
This report contains forward-looking statements that involve risks and
uncertainties. For example, Management's Discussion and Analysis of Results of
Operations and Financial Condition which is incorporated by reference from the
Company's Annual Report includes statements relating to expected sales growth,
anticipated operating expenditures and anticipated capital expenditures. The
statements contained in this document that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in the following risk factors and
elsewhere in this document. In evaluating the Company's business, prospective
investors should consider carefully the following factors in addition to the
other information set forth in this document.
Future Operating Results Subject to Fluctuation. In the second half of fiscal
1998, the Company's operating results were adversely affected by shifts in
corporate and retail buying patterns, increased competition, economic
instability in Asia and turbulence in the computer disk drive industry. In the
future, the Company's operating results may fluctuate as a result of these
factors and as a result of a wide variety of other factors, including, but not
limited to, cancellations or postponements of orders, shifts in the mix of the
Company's products and sales channels, changes in pricing policies by the
Company's suppliers, interruption in the supply of custom integrated circuits,
the market acceptance of new and enhanced versions of the Company's products,
product obsolescence and general worldwide economic and computer industry
fluctuations. In addition, fluctuations may be caused by future accounting
pronouncements, changes in accounting policies, and the timing of acquisitions
of other business products and technologies and any associated charges to
earnings. The volume and timing of orders received during a quarter are
difficult to forecast. The Company's customers from time to time encounter
uncertain and changing demand for their products. Customers generally order
based on their forecasts. If demand falls below such forecasts
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or if customers do not control inventories effectively, they may cancel or
reschedule shipments previously ordered from the Company. The Company has
historically operated with a relatively small backlog, especially relating to
orders of its host interface solutions and has set its operating budget based in
part on expectations of future revenues. Because much of the Company's operating
budget is relatively fixed in the short term, if revenues do not meet the
Company's expectations, as happened in the fourth quarter of fiscal 1998, then
the Company's operating income and net income may be disproportionately
affected. Operating results in any particular quarter which do not meet the
expectations of securities analysts are likely to cause volatility in the price
of the Company's Common Stock.
Certain Risks Associated with the High-Performance Microcomputer Market. The
Company's host interface solutions are used primarily in high performance
computer systems designed to support bandwidth-intensive applications and
operating systems. Historically, the Company's growth has been supported by
increasing demand for systems that support client/server and Internet/intranet
applications, computer-aided engineering, desktop publishing, multimedia, and
video. During the second half of fiscal 1998, the demand for such systems slowed
as more businesses chose to use relatively inexpensive PC's for desktop
applications and information technology managers shifted resources toward
resolving Year 2000 problems and investing in network infrastructure. Should
demand for such systems continue to slow, the Company's business or operating
results could be materially adversely affected by a resulting decline in demand
for the Company's products.
Certain Risks Associated with the Computer Peripherals Market. As a supplier of
controller circuits to manufacturers of computer peripherals such as disk drives
and other storage devices, a portion of the Company's business is dependent on
the overall market for computer peripherals. This market, which itself is
dependent on the market for personal computers, has historically been
characterized by periods of rapid growth followed by periods of oversupply and
contraction. As a result, suppliers to the computer peripherals industry from
time to time experience large and sudden fluctuations in demand for their
products as their customers adjust to changing conditions in their markets. If
these fluctuations are not accurately anticipated, as happened in the second
half of fiscal 1998, such suppliers, including the Company, could produce
excessive or insufficient inventories of various components which could
materially and adversely affect the Company's business and operating results.
The computer peripherals industry is also characterized by intense
price-competition, which in turn creates pricing pressures on the suppliers to
that industry. If the Company is unable to correspondingly decrease its
manufacturing or component costs, such pricing pressures could have a material
adverse effect on the Company's business or operating results.
Reliance on Industry Standards, Technological Change, Dependence on New
Products. The computer industry is characterized by various standards and
protocols that evolve with time. The Company's current products are designed to
conform to certain industry standards and protocols such as SCSI, UltraSCSI,
Ultra2 SCSI, PCI, RAID, Fibre Channel, ATM, and Fast Ethernet. In particular, a
majority of the Company's revenues are currently derived from products based on
the SCSI standard. If consumer acceptance of these standards was to decline, or
if they were replaced with new standards, and if the Company did not anticipate
these changes and develop new products, the Company's business or operating
results could be materially adversely affected. For example, the Company
believes that changes in consumers' perceptions of the relative merits of SCSI
based products and products incorporating a competing standard, Ultra-DMA, have
recently started to adversely affect the sales of the Company's products and may
adversely affect the Company's future sales.
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The markets for the Company's products are characterized by rapidly changing
technology, frequent new product introductions, and declining average selling
prices over product life cycles. The Company's future success is therefore
highly dependent upon the timely completion and introduction of new products at
competitive price/performance levels. The success of new product introductions
is dependent on several factors, including proper new product definition,
product costs, timely completion and introduction of new product designs,
quality of new products, differentiation of new products from those of the
Company's competitors, and market acceptance of the Company's and its customers'
products. As a result, the Company believes that continued significant
expenditures for research and development will be required in the future. There
can be no assurance that the Company will successfully identify new product
opportunities and develop and bring new products to market in a timely manner,
that products or technologies developed by others will not render the Company's
products or technologies obsolete or noncompetitive, or that the Company's
products will be selected for design into the products of its targeted
customers. The failure of any of the Company's new product development efforts
could have a material adverse effect on the Company's business or operating
results. In addition, the Company's revenues and operating results could be
adversely impacted if its customers shifted their demand to a significant extent
away from board-based I/O solutions to application-specific ICs.
Dependence on Wafer Suppliers and Other Subcontractors. All of the finished
silicon wafers used for the Company's products are currently manufactured to the
Company's specifications by independent foundries. The Company currently
purchases a substantial majority of its wafers through a supply agreement with
TSMC. The Company also purchases wafers from SGS-Thomson Microelectronics and
Seiko Epson. The manufacture of semiconductor devices is sensitive to a wide
variety of factors, including the availability of raw materials, the level of
contaminants in the manufacturing environment, impurities in the materials used,
and the performance of personnel and equipment. While the quality, yield, and
timeliness of wafer deliveries to date have been acceptable, there can be no
assurance that manufacturing yield problems will not occur in the future. In
addition, although the Company has various supply agreements with its suppliers,
a shortage of raw materials or production capacity could lead any of the
Company's wafer suppliers to allocate available capacity to customers other than
the Company, or to internal uses. Any prolonged inability to obtain wafers with
competitive performance and cost attributes, adequate yields, or timely
deliveries from its foundries would delay production and product shipments and
could have a material adverse effect on the Company's business or operating
results. The Company expects that it will in the future seek to convert its
fabrication process arrangements to smaller geometries and to more advanced
process technologies. Such conversions entail inherent technological risks that
can affect yields and delivery times. If for any reason the Company's current
suppliers were unable or unwilling to satisfy the Company's wafer needs, the
Company would be required to identify and qualify additional foundries. There
can be no assurance that any additional wafer foundries would become available,
that such foundries would be successfully qualified, or that such foundries
would be able to satisfy the Company's requirements on a timely basis.
The Company's future growth will depend in large part on increasing its wafer
capacity allocation from current foundries, adding additional foundries, and
gaining access to advanced process technologies. There can be no assurance that
the Company will be able to satisfy its future wafer needs from current or
alternative sources. Any increase in general demand for wafers within the
industry or any reduction of existing wafer supply from any of the Company's
foundry sources, could materially adversely affect the Company's business,
financial condition, or operating results.
In order to secure wafer capacity, the Company from time to time has entered
into "take or pay" contracts that committed the Company to purchase specified
wafer quantities over extended periods, and has made
11
13
prepayments to foundries. In the future, the Company may enter into similar
transactions or other transactions, including, without limitation,
non-refundable deposits with or loans to foundries, or equity investments in,
joint ventures with or other partnership relationships with foundries. Any such
transaction could require the Company to seek additional equity or debt
financing to fund such activities. There can be no assurance that the Company
will be able to obtain any required financing on terms acceptable to the
Company.
Additionally, the Company relies on subcontractors for the assembly and
packaging of the ICs included in its products. The Company has no long-term
agreements with its assembly and packaging subcontractors. In addition, the
Company is increasingly using board subcontractors to better balance production
runs and capacity. There can be no assurance that such subcontractors will
continue to be able and willing to meet the Company's requirements for such
components or services. Any significant disruption in supplies from, or
degradation in the quality of components or services supplied by, such
subcontractors could delay shipments and result in the loss of customers or
revenues or otherwise have a material adverse effect on the Company's business
or operating results.
Certain Risks Associated With Acquisitions. Since the beginning of fiscal 1996,
the Company has completed the acquisition of 13 complementary companies and
businesses. As part of its overall strategy, the Company plans to continue to
acquire or invest in complementary companies, products, or technologies and to
enter into joint ventures and strategic alliances with other companies. Risks
commonly encountered in such transactions include the difficulty of assimilating
the operations and personnel of the combined companies, the potential disruption
of the Company's ongoing business, the inability to retain key technical and
managerial personnel, the inability of management to maximize the financial and
strategic position of the Company through the successful integration of acquired
businesses, additional expenses associated with amortization of acquired
intangible assets, dilution of existing equity holders, the maintenance of
uniform standards, controls, procedures, and policies, and the impairment of
relationships with employees and customers as a result of any integration of new
personnel. There can be no assurance that the Company will be successful in
overcoming these risks or any other problems encountered in connection with such
business combinations, investments, or joint ventures, or that such transactions
will not materially adversely affect the Company's business, financial
condition, or operating results.
Certain Risks Associated with Implementation and Utilization of New Information
Systems. The Company has recently implemented new information systems in its
operations in the United States, Singapore and Europe and will implement new
information systems in its operations in Japan. There can be no assurance that
the Company will successfully implement and utilize these new systems
efficiently and in a timely manner. Problems with installation or utilization of
the new systems could cause substantial difficulties in operations, financial
reporting and management and thus could have a material adverse effect on the
Company's business or operating results.
Year 2000 Issues. The "Year 2000 issue" arises because most computer systems and
programs were designed to handle only a two-digit year not a four-digit year.
When the Year 2000 begins, these computers may interpret "00" as the year 1900
and could either stop processing date-related computations or could
12
14
process them incorrectly. The Company has recently implemented new information
systems and accordingly does not anticipate any internal Year 2000 issues from
its own information systems, databases or programs. However, the Company could
be adversely impacted by Year 2000 issues faced by major distributors,
suppliers, customers, vendors and financial service organizations with which the
Company interacts. The Company has sent surveys to certain third parties to
determine whether they are Year 2000 compliant and is in the process of
evaluating and following up on responses to determine the impact that third
parties who are not Year 2000 compliant may have on the operations of the
Company. The Company believes it is currently being impacted by the redirection
of corporate management information system budgets towards resolving the Year
2000 issue. Continuation of this trend could lower the demand for the Company's
products if corporate buyers defer purchases of high-end business PCs.
Competition. The markets for the Company's products are intensely competitive
and are characterized by rapid technological advances, frequent new product
introductions, evolving industry standards, and price erosion. In the host
adapter market, the Company competes with a number of host adapter
manufacturers. The Company's principal competitors for semiconductor solutions
in the mass storage market are captive suppliers and Cirrus Logic, Inc. As the
Company has continued to broaden its bandwidth management product offerings into
the desktop, server, and networking environments, it has experienced, and
expects to experience in the future, significantly increased competition both
from existing competitors and from additional companies that may enter its
markets. Some of these companies have greater technical, marketing,
manufacturing, and financial resources than the Company. There can be no
assurance that the Company will be able to make timely introduction of new
leading-edge solutions in response to competitive threats, that the Company will
be able to compete successfully in the future against existing or potential
competitors or that the Company's business or operating results will not be
materially adversely affected by price competition.
Certain Issues Related to Distributors. The Company's distributors generally
offer a diverse array of products from several different manufacturers.
Accordingly, there is a risk that these distributors may give higher priority to
selling products from other suppliers, thus reducing their efforts to sell the
Company's products. A reduction in sales efforts by the Company's current
distributors could have a materially adverse effect on its business or operating
results. The Company's distributors may on occasion build inventories in
anticipation of substantial growth in sales, and if such growth does not occur
as rapidly as anticipated, distributors may decrease the amount of product
ordered from the Company in subsequent quarters. In addition, there has recently
been an industry trend towards the elimination of price protection and
distributor incentive programs. This trend could result in a change in
distributor business habits, with distributors possibly deciding to decrease the
amount of product held so as to reduce inventory levels and this in turn could
reduce the Company's revenues in any given quarter and give rise to fluctuation
in the Company's operating results.
Dependence on Key Personnel. The Company's future success depends in large part
on the continued service of its key technical, marketing, and management
personnel, and on its ability to continue to attract and retain qualified
employees, particularly those highly skilled design, process, and test engineers
involved in the design enhancements and manufacture of existing products and the
development of new products and processes. The competition for such personnel is
intense, and the loss of key employees could have a material adverse effect on
the Company's business or operating results. The Company believes the recent
weakness in its financial performance and the resulting decline in its stock
price has adversely impacted its ability to attract and retain qualified
employees.
13
15
Certain Risks Associated with International Operations. The Company's
manufacturing facility and various subcontractors it utilizes from time to time
are located primarily in Asia. Additionally, the Company has various sales
offices and customers throughout Europe, Japan, and other countries. The
Company's international operations and sales are subject to political and
economic risks, including political instability, currency controls, exchange
rate fluctuations, and changes in import/export regulations, tariffs, and
freight rates. The Company may use forward exchange contracts to manage any
exposure associated with certain foreign currency denominated commitments. In
addition, because the Company's principal wafer supplier, TSMC, is located in
Taiwan, the Company is subject to the risk of political instability in Taiwan,
including the potential for conflict between Taiwan and the People's Republic of
China.
Intellectual Property Protection and Disputes. The Company has historically
devoted significant resources to research and development and believes that the
intellectual property derived from such research and development is a valuable
asset that has been and will continue to be important to the success of the
Company's business. Although the Company actively maintains and defends its
intellectual property rights, no assurance can be given that the steps taken by
the Company will be adequate to protect its proprietary rights. In addition, the
laws of certain territories in which the Company's products are or may be
developed, manufactured, or sold, including Asia and Europe, may not protect the
Company's products and intellectual property rights to the same extent as the
laws of the United States. The Company has from time to time discovered
counterfeit copies of its products being manufactured or sold by others.
Although the Company maintains an active program to detect and deter the
counterfeiting of its products, should counterfeit products become available in
the market to any significant degree it could materially adversely affect the
business or operating results of the Company.
From time to time, third parties may assert exclusive patent, copyright, and
other intellectual property rights to technologies that are important to the
Company. There can be no assurance that third parties will not assert
infringement claims against the Company in the future, that assertions by third
parties will not result in costly litigation or that the Company would prevail
in such litigation or be able to license any valid and infringed patents from
third parties on commercially reasonable terms. Litigation, regardless of its
outcome, could result in substantial cost and diversion of resources of the
Company. Any infringement claim or other litigation against or by the Company
could materially adversely affect the Company's business or operating results.
Need for Interoperability. The Company's products must be designed to
interoperate effectively with a variety of hardware and software products
supplied by other manufacturers, including microprocessors, peripherals, and
operating system software. The Company depends on significant cooperation with
these manufacturers in order to achieve its design objectives and produce
products that interoperate successfully. While the Company believes that it
generally has good relationships with leading system, peripheral, and
microprocessor suppliers, there can be no assurance that such suppliers will not
from time to time make it more difficult for the Company to design its products
for successful interoperability or decide to compete with the Company.
Natural Disasters. The Company's corporate headquarters are located near major
earthquake faults. Any damage to the Company's information systems caused as a
result of an earthquake, fire, La Nina related floods or any other natural
disasters could have a material adverse effect on the Company's business,
results of operations and financial condition.
Volatility of Stock Price. The stock market in general, and the market for
shares of technology companies in particular, have from time to time experienced
extreme price fluctuations, which have often been unrelated
14
16
to the operating performance of the affected companies. In addition, factors
such as technological innovations or new product introductions by the Company,
its competitors, or its customers may have a significant impact on the market
price of the Company's Common Stock. Furthermore, as occurred in the fourth
quarter of fiscal 1998, quarter-to-quarter fluctuations in the Company's results
of operations caused by changes in customer demand, changes in the microcomputer
and peripherals markets, or other factors, may have a significant impact on the
market price of the Company's Common Stock. In addition, the Company's stock
price may be affected by general market conditions and international
macroeconomic factors unrelated to the Company's performance such as those
recently evidenced by the financial turmoil in Asia. These conditions, as well
as factors that generally affect the market for stocks of high technology
companies, could cause the price of the Company's Common Stock to fluctuate
substantially over short periods.
ITEM 2. PROPERTIES
The Company owns seven buildings (approximately 439,000 square feet) in
Milpitas, California, which are primarily used by the Company for corporate
offices, research, manufacturing, marketing, and sales, and one building
(approximately 200,000 square feet) in Longmont, Colorado, for research,
technical support, marketing, sales, and administrative support. The Company
leases three buildings (approximately 81,000 square feet) in Milpitas,
California, which are mainly occupied to support administrative and sales
functions, and other facilities in Irvine, California (82,000 square feet);
Bellevue, Washington (9,000 square feet); Hudson, Wisconsin (6,000 square feet);
and Nashua, New Hampshire (23,000 square feet) to support technical design
efforts and sales.
Adaptec Manufacturing Singapore is located in two leased facilities
(approximately 126,000 square feet). The two buildings are used by the Company
for research, manufacturing, and sales. The Company also leases six sales
offices in the United States, and one sales office each in Waterloo, Belgium;
Munich, Germany; Bretonneux, France; Camberley, England; Singapore; Seoul,
Korea; Taipei, Taiwan; and Tokyo, Japan. The Tokyo office also provides
technical design efforts and technical support with the Brussels office
providing technical support to Europe. The Company believes its existing
facilities and equipment are well maintained and in good operating condition and
believes its manufacturing facilities, together with the use of independent
manufacturers where required or desirable, will be sufficient to meet its
anticipated manufacturing needs through fiscal 1999.
During fiscal 1998 and fiscal 1996, the Company acquired parcels of land in
Fremont and Irvine, California, for approximately $12 million and $11 million
respectively. The Company's future facilities requirements will depend upon the
Company's business, and the Company believes additional space, if required, may
be obtained on reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
Incorporated by reference from the information under the caption: Item 5 "Other
Events" in the Company's Form 8-K dated February 19, 1998 and from the
information under the caption "Note 11 Commitments and Contingencies" in the
Notes to Consolidated Financial Statements in the Company's Annual Report to
Stockholders for the year ended March 31, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
15
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Incorporated by reference from the information under the caption: "Common Stock
Prices and Dividends" on page B27 of the Company's Annual Report to Stockholders
for the fiscal year ended March 31, 1998.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the information under the caption: "Selected
Financial Data" on page B27 of the Company's Annual Report to Stockholders for
the fiscal year ended March 31, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference from the information under the caption: "Management's
Discussion and Analysis of Financial Condition and Results of Operations" from
pages B3 through B6 of the Company's Annual Report to Stockholders for the
fiscal year ended March 31, 1998.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference from the information appearing under the caption:
"Market Risk Disclosure" under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page B6.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of Adaptec, Inc. at March 31, 1998 and 1997
and for each of the three years in the period ended March 31, 1998 and the
independent accountants' report thereon are incorporated by reference from pages
B7 through B26 of the Annual Report to Stockholders for the year ended March 31,
1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors of Adaptec is incorporated by reference
from the information under the captions: "Election of Directors--Nominees" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Company's definitive Proxy Statement for the annual meeting of shareholders to
be held, August 21, 1998 (the "Proxy Statement"). Information with respect to
the executive officers of Adaptec is included in Part I of this Form 10-K under
the heading "Executive Officers".
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ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information under the caption: "Executive
Compensation and Other Matters" and "Election of Directors, Certain
Relationships and Related Transactions" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information under the caption: "Election of
Directors -- Security Ownership of Management" in the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information under the caption: "Election of
Directors, Certain Relationships and Related Transactions" in the Company's
Proxy Statement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following Consolidated Financial Statements of Adaptec, Inc. and the
Report of Independent Public Accountants, as listed under (a)(1) below,
are incorporated by reference to the Registrant's Annual Report to
Stockholders for the year ended March 31, 1998.
(1) FINANCIAL STATEMENTS:
Page in Annual Report
---------------------
Consolidated Statements of Operations - Fiscal Years
ended March 31, 1998, 1997, and 1996 B7
Consolidated Balance Sheets at March 31, 1998
and 1997 B8
Consolidated Statements of Cash Flows -
Fiscal Years ended March 31, 1998, 1997, and 1996 B9
Consolidated Statements of Stockholders'
Equity - Fiscal Years ended March 31, 1998, 1997,
and 1996. B10
Notes to Consolidated Financial Statements B11
Report of Management B25
Report of Independent Accountants B26
(2) All schedules are omitted because they are not applicable or
the required information is shown in the consolidated financial
statements or notes thereto.
(b) EXHIBITS:
(1) Exhibits included herein (numbered in accordance with Item 601
of Regulation S-K):
18
20
EXHIBIT
NUMBER DESCRIPTION NOTES
- ------ ----------- -----
2.1(a) Stock Purchase Agreement by and among Adaptec, Inc., Future
Domain Corporation, Jack A. Allweiss, Patricia A. Allweiss and
Certain Shareholders of Future Domain Corporation dated
July 13, 1995. (6)
2.1(b) Stock Purchase Agreement by and between Adaptec, Inc. and Certain
Shareholders of Future Domain Corporation dated July 13, 1995 (6)
2.2 Agreement and Plan of Reorganization by and among Adaptec, Inc.,
Incat Systems Software USA, Inc., ISS Acquisition Corporation and
Certain Shareholders of Incat Systems Software USA, Inc. dated
August 23, 1995. (2)
2.3 Agreement for Purchase and Sale of Stock by and among Western
Digital Corporation, Western Digital CSG Corporation, and
Adaptec, Inc. dated April 9, 1996. (3)
2.4 Agreement and Plan of Reorganization by and among Adaptec, Inc.,
Cogent Data Technologies, Inc., CDT Acquisition Corp., and Certain
Shareholders of Cogent Data Technologies, Inc. dated May 31, 1996. (4)
2.5 Agreement and Plan of Reorganization by and among Adaptec, Inc.,
Adaptec Acquisition Corporation, and Data Kinesis, Inc. dated
August 6, 1996. (4)
2.6 Asset Acquisition Agreement by and among Adaptec, Inc. and
Analog Devices, Inc. dated March 24, 1998
2.7 Agreement and Plan of Reorganization by and among Adaptec,
Inc., Ridge Technologies and RDS Acquisition dated as of May
21, 1998.
2.8 Agreement and Plan of Merger dated February 23, 1998 between
Registrant and Adaptec, Inc., a California corporation.
3.1 Certificate of Incorporation of Registrant filed with Delaware
Secretary of State on November 19, 1997.
3.2 Bylaws of Registrant, as adopted on November 19, 1997.
19
21
4.1 Second Amended and Restated Rights Agreement dated December 5,
1996 between Registrant and Chase Mellon Shareholder Services,
Inc. as Rights Agents. (9)
4.2 First Amendment dated March 12, 1998 to Second Amended and
Restated Rights Agreement.
4.3 Indenture dated as of February 3, 1997 between Registrant and
State Street Bank and Trust Company. (1)
4.4 First Supplemental indenture dated as of March 12, 1998 between
Registrant and State Street Bank and Trust Company.
10.1 + Registrant's 1986 Employee Stock Purchase Plan. (7)
10.2 Technology License Agreement dated January 1, 1985 between
the Registrant and International Business Machines
Corporation. (11)
10.3 + Registrant's Savings and Retirement Plan. (10)
10.4 + 1990 Stock Plan, as amended. (13)
10.5 + Forms of Stock Option Agreement, Tandem Stock Option/SAR
Agreement, Restricted Stock Purchase Agreement, Stock
Appreciation Rights Agreement, and Incentive Stock Rights
Agreement for use in connection with the 1990 Stock Plan,
as amended. (8)
10.6 + 1990 Directors' Option Plan and forms of Stock Option
Agreement. (7)
10.7 Revolving Loan Agreement dated June 3, 1992 between
Registrant and Plaza Bank of Commerce (incorporated by
reference to Exhibit 10.26 filed with Registrant's Annual
Report on form 10-K for fiscal year ended March 31, 1992)
and Amendment Number Three to the Revolving Credit Loan
Agreement dated April 29, 1994 between the Registrant and
Comerica Bank - California (formerly Plaza Bank of Commerce)
expiring August 31, 1997. (7)
10.8 Amendments Four, Five and Six to the Revolving Credit Loan
Agreement dated April 29, 1994 between the Registrant and
Comerica Bank - California expiring August 31, 1997. (7)
10.9* Option Agreement I Between Adaptec Manufacturing (S) Pte. Ltd.
and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. (2)
20
22
10.10* Option Agreement II Between Adaptec Manufacturing (S) Pte. Ltd.
and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. (2)
10.11 Consignment Agreement between Adaptec, Inc. and AT&T Corp.
dated January 10, 1996. (2)
10.12 Letter Agreement between Adaptec, Inc. and Lucent Technologies,
Inc. dated January 1, 1997. (14)
10.13 Form of Indemnification Agreement entered into with directors
and officers of Adaptec, Inc., a California corporation, prior
to Registrant's reincorporation into Delaware. (12)
10.14 Form of Indemnification Agreement entered into between
Registrant and its officers and directors.
10.14 Term Loan Agreement dated June 24, 1992 between the
Registrant and Plaza Bank of Commerce expiring June 30, 1988. (12)
10.15* Deposit and Supply Agreement between Taiwan
Semiconductor Manufacturing Co., Ltd. and Adaptec
Manufacturing Pte. Ltd. (7)
10.16 Industrial Lease Agreement between the Registrant, as Lessee, and
Jurong Town Corporation, as Lessor. (6)
10.17 Amendments Seven, Eight, and Nine to the Revolving Credit Loan
Agreement dated April 29, 1994 between the Registrant and Comerica
Bank - California expiring August 31, 1997. (5)
10.18 Amendments One, Two, Three, and Four to the Term Loan Agreement
dated June 24, 1992 between the Registrant and Comerica Bank -
California (formerly the Plaza Bank of Commerce) expiring
June 30, 1998. (13)
13.1 Those portions of Registrant's Annual Report to Stockholders
incorporated by reference herein.
21.1 Subsidiaries of Registrant.
23.1 Consent of Independent Accountants, Price Waterhouse LLP.
24.1 Power of Attorney. (See Pages 25).
21
23
27.1 Financial Data Schedule for the year ended March 31, 1998.
27.2 Financial Data Schedule for the year ended March 31, 1997.
27.3 Financial Data Schedule for the year ended March 31, 1996.
- --------------------------------------------------------------------------------
(1) Incorporated by reference to exhibits filed with Registrant's Registration
Statement Number 333-24557 on Form S-1 on April 4, 1997.
(2) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1996.
(3) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 28, 1996.
(4) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 27, 1996.
(5) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 27, 1996.
(6) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1995.
(7) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1994.
(8) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1993.
(9) Incorporated by reference to Exhibit 1 filed with Amendment No. 4 to
Registrant's Registration Statement Number 0-15071 on Form 8-A as filed on
January 4, 1997.
(10) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1987.
(11) Incorporated by reference to Exhibit 10.15 filed in response to Item 16(a)
"Exhibits," of Registrant's Registration Statement on Form S-1 and
Amendment No. 1 and Amendment No. 2 thereto (file No. 33-5519), which
became effective on June 11, 1986.
(12) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.
(13) Incorporated by reference to Exhibit 4.2 to Form 10-Q as filed February 7,
1996.
22
24
(14) Incorporated by reference to Exhibits filed with Registrants Annual Report
on Form 10-K for the fiscal year ended March 31, 1997.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of said form.
* Confidential treatment has been granted for portions of this agreement.
(c) REPORTS ON FORM 8-K
A current Report on Form 8-K dated February 19, 1998 was filed by the
Registrant with the Securities and Exchange Commission to report under
Item 5 thereof the press release issued to the public on February 19, 1998
regarding the agreement to acquire Symbios, Inc. The Form 8-K dated
February 19, 1998 also reported under Item 5 details regarding several
putative securities class action lawsuits filed against the Registrant.
A current Report on Form 8-K dated March 12, 1998 was filed by the
Registrant with the Securities and Exchange Commission to report under
Item 5 thereof the reincorporation of the Registrant as a Delaware
corporation.
23
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ADAPTEC, INC.
Date: June 18, 1998 \s\ F. Grant Saviers
---------------------------------------------
F. Grant Saviers
Chairman and Chief Executive Officer
24
26
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints F. Grant Saviers and Paul G. Hansen, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Report on Form 10-K,
and to file the same, with exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
\s\ F. Grant Saviers Chairman and Chief Executive Officer June 18, 1998
- ---------------------------------------------------------
(F. Grant Saviers)
\s\ Robert N. Stephens Chief Operating Officer June 18, 1998
- ---------------------------------------------------------
(Robert N. Stephens)
\s\ Paul G. Hansen Vice President of Finance, June 18, 1998
- --------------------------------------------------------- Chief Financial Officer and
(Paul G. Hansen) Assistant Secretary
\s\ Andrew J. Brown Vice President, Corporate Controller and June 18, 1998
- --------------------------------------------------------- Principal Accounting Officer
(Andrew J. Brown)
\s\ Laurence B. Boucher Director June 18, 1998
- ---------------------------------------------------------
(Laurence B. Boucher)
\s\ Carl J. Conti Director June 18, 1998
- ---------------------------------------------------------
(Carl J. Conti)
\s\ John C. East Director June 18, 1998
- ---------------------------------------------------------
(John C. East)
\s\ Ilene H. Lang Director June 18, 1998
- ---------------------------------------------------------
(Ilene H. Lang)
\s\ Robert J. Loarie Director June 18, 1998
- ---------------------------------------------------------
(Robert J. Loarie)
\s\ B. J. Moore Director June 18, 1998
- ---------------------------------------------------------
(B. J. Moore)
\s\ W. Ferrell Sanders Director June 18, 1998
- ---------------------------------------------------------
(W. Ferrell Sanders)
\s\ Phillip E. White Director June 18, 1998
- ---------------------------------------------------------
(Phillip E. White)
25
27
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION NOTES
- ------ ----------- -----
2.1(a) Stock Purchase Agreement by and among Adaptec, Inc., Future
Domain Corporation, Jack A. Allweiss, Patricia A. Allweiss and
Certain Shareholders of Future Domain Corporation dated
July 13, 1995. (6)
2.1(b) Stock Purchase Agreement by and between Adaptec, Inc. and Certain
Shareholders of Future Domain Corporation dated July 13, 1995 (6)
2.2 Agreement and Plan of Reorganization by and among Adaptec, Inc.,
Incat Systems Software USA, Inc., ISS Acquisition Corporation and
Certain Shareholders of Incat Systems Software USA, Inc. dated
August 23, 1995. (2)
2.3 Agreement for Purchase and Sale of Stock by and among Western
Digital Corporation, Western Digital CSG Corporation, and
Adaptec, Inc. dated April 9, 1996. (3)
2.4 Agreement and Plan of Reorganization by and among Adaptec, Inc.,
Cogent Data Technologies, Inc., CDT Acquisition Corp., and Certain
Shareholders of Cogent Data Technologies, Inc. dated May 31, 1996. (4)
2.5 Agreement and Plan of Reorganization by and among Adaptec, Inc.,
Adaptec Acquisition Corporation, and Data Kinesis, Inc. dated
August 6, 1996. (4)
2.6 Asset Acquisition Agreement by and among Adaptec, Inc. and
Analog Devices, Inc. dated March 24, 1998
2.7 Agreement and Plan of Reorganization by and among Adaptec,
Inc., Ridge Technologies and RDS Acquisition dated as of May
21, 1998.
2.8 Agreement and Plan of Merger dated February 23, 1998 between
Registrant and Adaptec, Inc., a California corporation.
3.1 Certificate of Incorporation of Registrant filed with Delaware
Secretary of State on November 19, 1997.
3.2 Bylaws of Registrant, as adopted on November 19, 1997.
28
4.1 Second Amended and Restated Rights Agreement dated December 5,
1996 between Registrant and Chase Mellon Shareholder Services,
Inc. as Rights Agents. (9)
4.2 First Amendment dated March 12, 1998 to Second Amended and
Restated Rights Agreement.
4.3 Indenture dated as of February 3, 1997 between Registrant and
State Street Bank and Trust Company. (1)
4.4 First Supplemental indenture dated as of March 12, 1998 between
Registrant and State Street Bank and Trust Company.
10.1 + Registrant's 1986 Employee Stock Purchase Plan. (7)
10.2 Technology License Agreement dated January 1, 1985 between
the Registrant and International Business Machines
Corporation. (11)
10.3 + Registrant's Savings and Retirement Plan. (10)
10.4 + 1990 Stock Plan, as amended. (13)
10.5 + Forms of Stock Option Agreement, Tandem Stock Option/SAR
Agreement, Restricted Stock Purchase Agreement, Stock
Appreciation Rights Agreement, and Incentive Stock Rights
Agreement for use in connection with the 1990 Stock Plan,
as amended. (8)
10.6 + 1990 Directors' Option Plan and forms of Stock Option
Agreement. (7)
10.7 Revolving Loan Agreement dated June 3, 1992 between
Registrant and Plaza Bank of Commerce (incorporated by
reference to Exhibit 10.26 filed with Registrant's Annual
Report on form 10-K for fiscal year ended March 31, 1992)
and Amendment Number Three to the Revolving Credit Loan
Agreement dated April 29, 1994 between the Registrant and
Comerica Bank - California (formerly Plaza Bank of Commerce)
expiring August 31, 1997. (7)
10.8 Amendments Four, Five and Six to the Revolving Credit Loan
Agreement dated April 29, 1994 between the Registrant and
Comerica Bank - California expiring August 31, 1997. (7)
10.9* Option Agreement I Between Adaptec Manufacturing (S) Pte. Ltd.
and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. (2)
29
10.10* Option Agreement II Between Adaptec Manufacturing (S) Pte. Ltd.
and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. (2)
10.11 Consignment Agreement between Adaptec, Inc. and AT&T Corp.
dated January 10, 1996. (2)
10.12 Letter Agreement between Adaptec, Inc. and Lucent Technologies,
Inc. dated January 1, 1997. (14)
10.13 Form of Indemnification Agreement entered into with directors
and officers of Adaptec, Inc., a California corporation, prior
to Registrant's reincorporation into Delaware. (12)
10.14 Form of Indemnification Agreement entered into between
Registrant and its officers and directors.
10.14 Term Loan Agreement dated June 24, 1992 between the
Registrant and Plaza Bank of Commerce expiring June 30, 1988. (12)
10.15* Deposit and Supply Agreement between Taiwan
Semiconductor Manufacturing Co., Ltd. and Adaptec
Manufacturing Pte. Ltd. (7)
10.16 Industrial Lease Agreement between the Registrant, as Lessee, and
Jurong Town Corporation, as Lessor. (6)
10.17 Amendments Seven, Eight, and Nine to the Revolving Credit Loan
Agreement dated April 29, 1994 between the Registrant and Comerica
Bank - California expiring August 31, 1997. (5)
10.18 Amendments One, Two, Three, and Four to the Term Loan Agreement
dated June 24, 1992 between the Registrant and Comerica Bank -
California (formerly the Plaza Bank of Commerce) expiring
June 30, 1998. (13)
13.1 Those portions of Registrant's Annual Report to Stockholders
incorporated by reference herein.
21.1 Subsidiaries of Registrant.
23.1 Consent of Independent Accountants, Price Waterhouse LLP.
24.1 Power of Attorney. (See Pages 25).
30
27.1 Financial Data Schedule for the year ended March 31, 1998.
27.2 Financial Data Schedule for the year ended March 31, 1997.
27.3 Financial Data Schedule for the year ended March 31, 1996.
- --------------------------------------------------------------------------------
(1) Incorporated by reference to exhibits filed with Registrant's Registration
Statement Number 333-24557 on Form S-1 on April 4, 1997.
(2) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1996.
(3) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 28, 1996.
(4) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 27, 1996.
(5) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 27, 1996.
(6) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1995.
(7) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1994.
(8) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1993.
(9) Incorporated by reference to Exhibit 1 filed with Amendment No. 4 to
Registrant's Registration Statement Number 0-15071 on Form 8-A as filed on
January 4, 1997.
(10) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1987.
(11) Incorporated by reference to Exhibit 10.15 filed in response to Item 16(a)
"Exhibits," of Registrant's Registration Statement on Form S-1 and
Amendment No. 1 and Amendment No. 2 thereto (file No. 33-5519), which
became effective on June 11, 1986.
(12) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.
(13) Incorporated by reference to Exhibit 4.2 to Form 10-Q as filed February 7,
1996.
(14) Incorporated by reference to Exhibits filed with Registrants Annual Report
on Form 10-K for the fiscal year ended March 31, 1997.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of said form.
* Confidential treatment has been granted for portions of this agreement.