-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UAMw6UJATHUONmH31n+UYg5G5aOKOYitCOHBzGGq0zyOlbipB0muvTjDMBAcEQet rQhdhmFWqJVrb+XTJqp/FQ== 0000912057-01-517197.txt : 20010523 0000912057-01-517197.hdr.sgml : 20010523 ACCESSION NUMBER: 0000912057-01-517197 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010522 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ADAPTEC INC CENTRAL INDEX KEY: 0000709804 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 942748530 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: SEC FILE NUMBER: 005-38119 FILM NUMBER: 1645834 BUSINESS ADDRESS: STREET 1: 691 S MILPITAS BLVD STREET 2: M/S25 CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4089458600 MAIL ADDRESS: STREET 1: 691 SOUTH MILPITAS BLVD STREET 2: M/S25 CITY: MILPITAS STATE: CA ZIP: 95035 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ADAPTEC INC CENTRAL INDEX KEY: 0000709804 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 942748530 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: 691 S MILPITAS BLVD STREET 2: M/S25 CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4089458600 MAIL ADDRESS: STREET 1: 691 SOUTH MILPITAS BLVD STREET 2: M/S25 CITY: MILPITAS STATE: CA ZIP: 95035 SC TO-I 1 a2050135zscto-i.txt SC TO-I - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE TO (RULE 13E-4) TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934. ADAPTEC, INC. (Name of Subject Company (Issuer) and Name of Filing Person (Offeror)) OPTIONS UNDER CERTAIN ADAPTEC, INC. OPTION PLANS TO PURCHASE COMMON STOCK, PAR VALUE $0.001 PER SHARE (Title of Class of Securities) 00651F108 (CUSIP Number of Class of Securities) DAVID A. YOUNG VICE PRESIDENT AND CHIEF FINANCIAL OFFICER ADAPTEC, INC. 691 S. MILPITAS BLVD. MILPITAS, CALIFORNIA 95035 (408) 945-8600 (Name, address, and telephone numbers of person authorized to receive notices and communications on behalf of filing persons) COPY TO: DENNIS R. DEBROECK, ESQ. DANIEL WINNIKE, ESQ. SCOTT J. LEICHTNER, ESQ. Fenwick & West, LLP Two Palo Alto Square Palo Alto, California 94306 CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE $29,888,486 $5,978
* Calculated solely for the purpose of determining the amount of filing fee. This amount assumes that options to purchase 9,037,000 shares of common stock of Adaptec, Inc. having an aggregate value of $29,888,486 as of May 21, 2001 will be cancelled pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option-pricing model. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of 1% of the transaction valuation. / / Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not Applicable. Form or Registration No.: Not Applicable. Filing Party: Not Applicable. Date Filed: Not Applicable.
/ / Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: / / third-party tender offer subject to Rule 14d-1. /X/ issuer tender offer subject to Rule 13e-4. / / going-private transaction subject to Rule 13e-3. / / amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing fee is a final amendment reporting the results of the tender offer: / / - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SUMMARY TERM SHEET The information set forth under "Summary Term Sheet" in the Offer to Exchange, dated May 22, 2001 (the "Offer to Exchange"), attached hereto as Exhibit (a)(1), is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION (a) The name of the issuer is Adaptec, Inc., a Delaware corporation (the "Company"), and the address of its principal executive office is 691 S. Milpitas Blvd., Milpitas, California 95035. The Company's telephone number is (408) 945-8600. The information set forth in the Offer to Exchange, Section 9 ("Information Concerning Adaptec") is incorporated herein by reference. (b) This Tender Offer Statement on Schedule TO relates to an offer by the Company to its employees to exchange all outstanding options having an exercise price greater than $15.00 per share granted under the Adaptec, Inc. 1990 Stock Plan, the Adaptec, Inc. 1999 Stock Plan (the "1999 Plan") and the Adaptec, Inc. 2000 Nonstatutory Stock Option Plan (the "2000 Plan") to purchase shares of the Company's common stock, par value $0.001 per share, for new nonqualified stock options (the "New Options"). Employees that elect to exchange outstanding options having an exercise price greater than $15.00 per share must also exchange all stock options granted on or after December 20, 2000, even if those options have an exercise price of $15.00 per share or less (the options submitted for exchange, the "Cancelled Options"). The New Options will be granted by the Company under either the 1999 Plan or the 2000 Plan, and upon the terms and conditions described in the Offer to Exchange and the related letter of transmittal (the "Letter of Transmittal," and together with the Offer to Exchange, as they may be amended from time to time, the "New Grant Program"), attached hereto as Exhibit (a)(4). Non-employee directors of the Company are not eligible to participate in the New Grant Program. As described in greater detail in the Offer to Exchange, the number of shares subject to New Options will equal the number of shares subject to the Cancelled Options, subject to adjustments for any stock splits, stock dividends and similar events. The exercise price of the New Options will equal the closing sale price of the Company's common stock as reported on the Nasdaq National Market on the day before the date on which the New Options are granted. The information set forth in the Offer to Exchange under "Summary Term Sheet," "Introduction," Section 1 ("Number of Options; Expiration Date"), Section 5 ("Acceptance of Options for Exchange and Issuance of New Options") and Section 8 ("Source and Amount of Consideration; Terms of New Options") is incorporated herein by reference. (c) The information set forth in the Offer to Exchange under Section 7 ("Price Range of Common Stock Underlying the Options") is incorporated herein by reference. No trading market exists for the options to purchase Adaptec common stock. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON (a) The Company is also the filing person. The Company's address and telephone number are set forth in Item 2(a) above. Section 10 of the Offer to Exchange ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options"), which contains information regarding the identity and address of the directors and executive officers of the Company, is incorporated herein by reference. ITEM 4. TERMS OF THE TRANSACTION (a) The information set forth in the Offer to Exchange under "Summary Term Sheet," "Introduction," Section 1 ("Number of Options; Expiration Date"), Section 3 ("Procedures for Electing to Exchange Options"), Section 4 ("Withdrawal Rights"), Section 5 ("Acceptance of Options for Exchange and Issuance of New Options"), Section 6 ("Conditions of the New Grant Program"), 2 Section 8 ("Source and Amount of Consideration; Terms of New Options"), Section 11 ("Status of Options Acquired by Us in the New Grant Program; Accounting Consequences of the New Grant Program"), Section 12 ("Legal Matters; Regulatory Approvals"), Section 13 ("Material Income Tax Consequences") and Section 14 ("Extension of the New Grant Program; Termination; Amendment") is incorporated herein by reference. (b) Non-employee directors of the Company are not eligible to participate in the New Grant Program. The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS (e) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. The eligible option plans filed herewith as Exhibits (d)(1) through (d)(3) contain information regarding the subject securities. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS (a) The information set forth in the Offer to Exchange under Section 2 ("Purpose of the New Grant Program") is incorporated herein by reference. (b) The information set forth in the Offer to Exchange under Section 5 ("Acceptance of Options for Exchange and Issuance of New Options") and Section 11 ("Status of Options Acquired by Us in the New Grant Program; Accounting Consequences of the New Grant Program") is incorporated herein by reference. (c) The information set forth in the Offer to Exchange under Section 2 ("Purpose of the New Grant Program") is incorporated herein by reference. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a) The information set forth in the Offer to Exchange under Section 8 ("Source and Amount of Consideration; Terms of New Options") and Section 15 ("Fees and Expenses") is incorporated herein by reference. (b) The information set forth in the Offer to Exchange under Section 6 ("Conditions of the New Grant Program") is incorporated herein by reference. (d) Not applicable. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY (a) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. (b) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED (a) Not applicable. 3 ITEM 10. FINANCIAL STATEMENTS (a) The information set forth in the Offer to Exchange under Section 9 ("Information Concerning Adaptec") and Section 16 ("Additional Information"), and pages 33 to 74 of the Company's Annual Report to Stockholders for its fiscal year ended March 31, 2000, incorporated by reference into the Company's Annual Report on Form 10-K for its fiscal year ended March 31, 2000, and pages 3 to 15 of the Company's Quarterly Report on Form 10-Q for its fiscal quarter ended December 31, 2000 is incorporated herein by reference. (b) Not applicable. ITEM 11. ADDITIONAL INFORMATION (a) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") and Section 12 ("Legal Matters; Regulatory Approvals") is incorporated herein by reference. (b) Not applicable. ITEM 12. EXHIBITS (a) (1) Offer to Exchange, dated May 22, 2001. (2) Form of Letter of Transmittal. (3) Transcript of announcement made to employees on May 17, 2001. (4) Form of Letter to Eligible Option Holders. (5) The Company's annual report on Form 10-K for its fiscal year ended March 31, 2000, filed with the Securities and Exchange Commission on June 27, 2000 (incorporated herein by reference). (6) Those portions of the Company's annual report to stockholders for its fiscal year ended March 31, 2000 incorporated by reference into the Company's annual report on Form 10-K for its fiscal year ended March 31, 2000 (incorporated herein by reference). (7) The Company's quarterly report on Form 10-Q for its fiscal quarter ended December 31, 2000, filed with the Securities and Exchange Commission on January 26, 2001 (incorporated herein by reference). (b) Not applicable. (d) (1) The Company's 1990 Stock Plan, as amended. (2) The Company's 1999 Stock Plan, as amended. (3) The Company's 2000 Nonstatutory Stock Option Plan, as amended. (g) Not applicable. (h) Not applicable.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3 (a) Not applicable. 4 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct. Date: May 22, 2001 ADAPTEC, INC. By: /s/ ROBERT N. STEPHENS ----------------------------------------- Name: Robert N. Stephens Title: CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER)
5 INDEX TO EXHIBITS
EXHIBIT NUMBER - ------- (a) (1) Offer to Exchange, dated May 22, 2001. (2) Form of Letter of Transmittal. (3) Transcript of announcement made to employees on May 17, 2001. (4) Form of Letter to Eligible Option Holders. (5) The Company's annual report on Form 10-K for its fiscal year ended March 31, 2000, filed with the Securities and Exchange Commission on June 27, 2000 (incorporated herein by reference). (6) Those portions of the Company's annual report to stockholders for its fiscal year ended March 31, 2000 incorporated by reference into the Company's annual report on Form 10-K for its fiscal year ended March 31, 2000 (incorporated herein by reference). (7) The Company's quarterly report on Form 10-Q for its fiscal quarter ended December 31, 2000, filed with the Securities and Exchange Commission on January 26, 2001 (incorporated herein by reference). (d) (1) The Company's 1990 Stock Plan, as amended. (2) The Company's 1999 Stock Plan, as amended. (3) The Company's 2000 Nonstatutory Stock Option Plan, as amended.
6 EX-99.(A)1 2 a2050135zex-99_a1.txt EXHIBIT 99.(A)1 EXHIBIT 99.(a)(1) ADAPTEC, INC. OFFER TO EXCHANGE OUTSTANDING OPTIONS TO PURCHASE COMMON STOCK UNDER ELIGIBLE OPTION PLANS THE OFFER AND WITHDRAWAL RIGHTS EXPIRE ON JUNE 21, 2001 AT 9:00 P.M., PACIFIC DAYLIGHT TIME, UNLESS THE OFFER IS EXTENDED Adaptec, Inc. is offering to our employees the right to exchange all outstanding options to purchase shares of our common stock having an exercise price greater than $15.00 per share granted under the Adaptec, Inc. 1990 Stock Plan, the Adaptec, Inc. 1999 Stock Plan (the "1999 Plan") and the Adaptec, Inc. 2000 Nonstatutory Stock Option Plan (the "2000 Plan") (collectively, the "Plans"), for new nonqualified stock options that we will grant under either the 1999 Plan or the 2000 Plan (the "New Grant Program"). If you choose to participate in the New Grant Program by exchanging any of your stock options having an exercise price greater than $15.00 per share, you must also exchange all stock options granted on or after December 20, 2000, even if those options have an exercise price of $15.00 per share or less. Our non-employee directors are not eligible to participate in the New Grant Program. We are making this offer upon the terms and subject to the conditions set forth in this Offer to Exchange and in the accompanying letter of transmittal. Grants of new options will be made on the date of the first meeting of the compensation committee of Adaptec's board of directors held more than six months and one day after the date we cancel the options accepted for exchange (the "replacement grant date"). The New Grant Program is not conditioned upon a minimum number of options being elected for exchange. The New Grant Program is subject to conditions, which we describe in Section 6 of the Offer to Exchange. If you elect to exchange options as described in the Offer to Exchange and if your options are accepted for exchange, we will cancel the options elected for exchange and you will receive a grant of a new nonqualified option issued pursuant to a new option agreement between you and us. Some key features of the new option will include: - the number of shares subject to the new option will equal the number of shares subject to your cancelled options, subject to adjustments for any stock splits, stock dividends and similar events; - the exercise price of the new option will equal the closing sale price of our common stock as reported on the Nasdaq National Market on the day before the replacement grant date; - the term of the new option will be ten years from the replacement grant date; - the new option will be vested to the same degree that your cancelled options were vested on the date of cancellation, with the unvested portion of your new option vesting in equal installments on a quarterly basis over the two years following the replacement grant date (except in certain foreign jurisdictions); and - the other terms and conditions of the new option will be substantially similar to those of the cancelled options. In order to receive the new option, you must still be employed with us on the replacement grant date, and your election to participate in the New Grant Program does not in any way change your status as an at-will employee. In addition, we cannot guarantee you that you will receive a new option in the New Grant Program if a change of control of Adaptec occurs between the cancellation of your options and the replacement grant date. We are implementing the New Grant Program because a considerable number of our employees have stock options, whether or not they are currently exercisable, that have exercise prices significantly above our current and recent trading prices. We are offering this program on a voluntary basis to allow our employees to choose whether to keep their current stock options at their current exercise price, or to cancel those options for new options. The shares of common stock subject to those options cancelled pursuant to the New Grant Program will be retired and will NOT be returned to the pool of shares available for grants of new options under the Plans. ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THE NEW GRANT PROGRAM, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD EXCHANGE OR REFRAIN FROM EXCHANGING YOUR OPTIONS. YOU MUST MAKE YOUR OWN DECISION WHETHER TO EXCHANGE YOUR OPTIONS. Shares of our common stock are quoted on the Nasdaq National Market under the symbol "ADPT." On May 21, 2001, the last sale price of our common stock as reported on the Nasdaq National Market was $9.26 per share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO EXCHANGE YOUR OPTIONS. YOU SHOULD DIRECT QUESTIONS ABOUT THE NEW GRANT PROGRAM OR REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THIS OFFER TO EXCHANGE OR THE LETTER OF TRANSMITTAL TO KELLEY WALL, ADAPTEC STOCK ADMINISTRATION BY EMAIL AT KELLEY_WALL@ADAPTEC.COM, OR BY TELEPHONE AT (408) 957-4536. IMPORTANT If you wish to exchange your options, you must complete and sign the letter of transmittal in accordance with its instructions, and send it and any other required documents to Adaptec Stock Administration by fax at (408) 957-6715 or by mail to Adaptec, Inc., Stock Administration, MS 24, 691 S. Milpitas Blvd., Milpitas, California 95035. We are not aware of any jurisdiction where the implementation of the New Grant Program violates applicable law. If we become aware of any jurisdiction where the implementation of the New Grant Program violates applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the New Grant Program will not be made available to, nor will elections to exchange options be accepted from or on behalf of, the option holders residing in such jurisdiction. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM EXCHANGING YOUR OPTIONS PURSUANT TO THE NEW GRANT PROGRAM. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE NEW GRANT PROGRAM OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE ACCOMPANYING LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US. TABLE OF CONTENTS
PAGE -------- Summary Term Sheet: General Questions About the New Grant Program............... 1 Specific Questions About the Cancelled Options.............. 5 Specific Questions About the New Options.................... 6 Introduction....................................................... 10 The New Grant Program: 1. Number of Options; Expiration Date....................... 11 2. Purpose of the New Grant Program......................... 12 3. Procedures for Electing to Exchange Options.............. 13 4. Withdrawal Rights........................................ 14 5. Acceptance of Options for Exchange and Issuance of New Options..................................................... 14 6. Conditions of the New Grant Program...................... 16 7. Price Range of Common Stock Underlying the Options....... 18 8. Source and Amount of Consideration; Terms of New Options..................................................... 18 9. Information Concerning Adaptec........................... 19 10. Interests of Directors and Officers; Transactions and Arrangements Concerning the Options......................... 21 11. Status of Options Acquired By Us in the New Grant Program; Accounting Consequences of the New Grant Program... 21 12. Legal Matters; Regulatory Approvals..................... 22 13. Material Income Tax Consequences........................ 22 14. Extension of the New Grant Program; Termination; Amendment................................................... 23 15. Fees and Expenses....................................... 24 16. Additional Information.................................. 24 17. Miscellaneous........................................... 25 Attachment: Letter of Transmittal
SUMMARY TERM SHEET The following section answers some of the questions that you may have about the New Grant Program. However, it is only a summary, and you should carefully read the remainder of this Offer to Exchange and the accompanying letter of transmittal because the information in this summary is not complete and because there is additional important information in the remainder of this Offer to Exchange and the letter of transmittal. We have included page references to the remainder of this Offer to Exchange where you can find a more complete description of the topics in this summary. GENERAL QUESTIONS ABOUT THE NEW GRANT PROGRAM 1. WHAT SECURITIES ARE WE OFFERING TO EXCHANGE? We are offering to our employees the right to exchange all outstanding options to purchase shares of Adaptec, Inc. common stock having an exercise price greater than $15.00 per share granted under the Plans for new options. If you choose to participate in the New Grant Program by exchanging any of your stock options having an exercise price greater than $15.00 per share, you must also exchange all stock options granted on or after December 20, 2000, even if those options have an exercise price of $15.00 per share or less. We will grant the new options under either the 1999 Plan or the 2000 Plan as nonqualified stock options. (Page 10) 2. WHY IS ADAPTEC IMPLEMENTING THE NEW GRANT PROGRAM? We are implementing the New Grant Program because a considerable number of our employees have stock options, whether or not they are currently exercisable, that have exercise prices significantly above our current and recent trading prices. We are offering this program on a voluntary basis to allow our employees to choose whether to keep their current stock options at their current exercise prices, or to cancel those options for new options to purchase the same number of shares as the cancelled options. These new options will be granted on the date of the first meeting of the compensation committee of the board of directors held at least six months and one day from the date we cancel the options accepted for exchange (the "replacement grant date"). The number of shares subject to the new options will equal the number of shares subject to the cancelled options, subject to adjustments for any stock splits, stock dividends and similar events. The exercise price of these new options will be equal to the closing sale price of our common stock on the day before the replacement grant date. We are implementing the New Grant Program in order to provide our employees with the opportunity to hold options that over time may have a greater potential to increase in value, which we hope will create better performance incentives for our employees and will maximize the value of our common stock for our current stockholders. While we hope that this program will improve the current "underwater" options issue, this cannot be guaranteed in light of the ever-present risks associated with a volatile and unpredictable stock market. (Page 12) 3. WHO IS ELIGIBLE TO PARTICIPATE? Any current employee of Adaptec who holds stock options under the Plans is eligible to participate in the New Grant Program. Our non-employee directors are not eligible to participate in the New Grant Program. (Page 11) 4. ARE OVERSEAS EMPLOYEES ELIGIBLE TO PARTICIPATE? As described above, any of our current employees holding stock options under the Plans are eligible to participate in the New Grant Program. However, special considerations may apply to employees located abroad depending on the laws of the jurisdiction in which these employees are located. Employees in Belgium, France, Australia and the U.K. should particularly note the special considerations described in Section 13. (Page 22) 5. HOW DOES THE NEW GRANT PROGRAM WORK? To participate in the New Grant Program, an employee must make a voluntary election that will become IRREVOCABLE by 9:00 P.M. PACIFIC DAYLIGHT TIME ON JUNE 21, 2001, to cancel his or her outstanding stock options in exchange for a new nonqualified stock option to be granted on the replacement grant date. The number of shares subject to the new option will be the same number as the cancelled options, subject to adjustments for any stock splits, stock dividends and similar events. The exercise price of the new option will equal the closing market price of our common stock on the day before the replacement grant date. The new option will be vested to the same degree that the cancelled option was vested, with the unvested portion of the new option vesting in equal installments on a quarterly basis over the two years following the replacement grant date (except in certain foreign jurisdictions). The new option will have a new ten-year term, commencing on the replacement grant date. Except for the new exercise price, change in vesting and status as a nonqualified stock option for cancelled incentive stock options, the terms and conditions of the new options will be substantially the same as the cancelled options. If you wish to participate by exchanging any of your options, you will be required to cancel all of your options granted on or after December 20, 2000, even if those options have an exercise price of $15.00 per share or less. (Page 13) 6. WHAT DO I NEED TO DO TO PARTICIPATE IN THE NEW GRANT PROGRAM? To participate, you must complete the letter of transmittal that is attached at the end of this Offer to Exchange, sign it, and ensure that Adaptec Stock Administration receives it no later than 9:00 P.M. PACIFIC DAYLIGHT TIME ON JUNE 21, 2001. You can return your form to Adaptec Stock Administration either by fax to (408) 957-6715 or by mail to Adaptec, Inc., Stock Administration, MS 24, 691 S. Milpitas Blvd., Milpitas, California 95035. Adaptec Stock Administration will send you a confirmation within three business days of receipt of your letter of transmittal. However, if you submit your letter of transmittal shortly before the specified deadline, you may not receive your confirmation before the deadline. (Page 13) 7. DOES THE NEW GRANT PROGRAM EXTEND TO ALL OF ADAPTEC'S EMPLOYEE OPTION PLANS? The New Grant Program extends to options granted under each of the Plans. The New Grant Program does not extend to options granted under either of the Distributed Processing Technology Corp. Omnibus Stock Option Plan or the Data Kinesis, Inc. Stock Option/Stock Issuance Plan, as all options issued under these plans have exercise prices that are below $15.00 per share, and no options were issued under these plans on or after December 20, 2000. (Page 10) 8. IS THIS A REPRICING? No, this is not a stock option repricing. In a repricing, the exercise price of an employee's current options would be adjusted immediately to be equal to the closing price of our common stock on the date of repricing. This results in variable accounting treatment of the option. For financial reporting purposes, we would be required to record additional compensation expense each quarter until the repriced options are exercised, cancelled or terminated. (Page 21) 9. WHY CAN'T ADAPTEC JUST REPRICE MY OPTIONS, AS I HAVE SEEN DONE AT OTHER COMPANIES? In 1998, the Financial Accounting Standards Board adopted rules that have unfavorable accounting charge consequences for companies that reprice options. As described above, if we were to reprice options, we would need to record a variable accounting charge against our earnings. The amount of this charge would be measured by the future appreciation of the common stock subject to the repriced options. As a result, a simple option "repricing" would adversely impact our operating results, as we 2 would be required to take a charge against earnings on any future appreciation of the repriced options. (Page 21) 10. WHY CAN'T I JUST BE GRANTED ADDITIONAL NEW OPTIONS? Because of the large number of options currently outstanding, a grant of additional options could potentially have a severe negative impact on our dilution, outstanding shares and earnings per share. (Page 21) 11. IF I DECIDE TO PARTICIPATE IN THE NEW GRANT PROGRAM, WHAT WILL HAPPEN TO MY CURRENT OPTIONS? If you elect to participate in the New Grant Program, the options you have elected to exchange will be cancelled after 9:00 P.M. PACIFIC DAYLIGHT TIME ON JUNE 21, 2001. (Page 14) 12. WHAT IS THE DEADLINE TO ELECT TO PARTICIPATE IN THE NEW GRANT PROGRAM, AND HOW DO I SO ELECT? The deadline to elect to participate in the New Grant Program is 9:00 P.M. PACIFIC DAYLIGHT TIME ON JUNE 21, 2001, unless we extend it. This means that Adaptec Stock Administration must have your election form in their hands before that time. We may, in our discretion, extend the deadline to participate in the New Grant Program at any time, but we cannot assure you that the New Grant Program will be extended or, if it is extended, for how long. If we extend the deadline to elect to participate in the New Grant Program, we will make an announcement of the extension no later than 9:00 a.m. on the next business day following the previously scheduled expiration date. If we extend the deadline beyond that time, you must deliver these documents before the extended expiration date. We reserve the right to reject any or all options elected for exchange that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept for exchange those stock options for which you have made a proper and timely election that is not withdrawn. Subject to our rights to extend, terminate and amend the New Grant Program, we currently expect that we will accept all such options promptly after the expiration of the deadline to elect to participate in the New Grant Program. (Pages 10, 14) 13. WHAT WILL HAPPEN IF I DO NOT TURN IN MY FORM BY THE DEADLINE? If you do not turn in your election form by the deadline, then you will not participate in the New Grant Program, and all stock options you currently hold will remain unchanged with their original exercise price and original terms. (Page 13) 14. DURING WHAT PERIOD OF TIME MAY I WITHDRAW A PREVIOUS ELECTION TO PARTICIPATE IN THE NEW GRANT PROGRAM? You may withdraw your election to participate in the New Grant Program at any time before 9:00 P.M. PACIFIC DAYLIGHT TIME ON JUNE 21, 2001. If we extend the New Grant Program beyond that time, you may withdraw your options elected for exchange at any time until the expiration of the extended deadline. To withdraw an election to exchange options, you must deliver to Adaptec Stock Administration a written notice of withdrawal, or a facsimile of such notice, with the required information prior to 9:00 P.M. PACIFIC DAYLIGHT TIME ON JUNE 21, 2001. Once you have withdrawn options, you may re-elect to exchange options only by again following the election procedure described in the answer to Question 6. (Page 14) 3 15. WHEN WILL THE OPTIONS THAT I ELECT TO EXCHANGE BE REMOVED FROM THE PAINEWEBBER DATABASE? After you submit your letter of transmittal, the options that you have elected to exchange will continue to appear in the PaineWebber database until the effective date of cancellation. If you attempt to exercise such options through PaineWebber during that period without first withdrawing your election, Adaptec Stock Administration will block the transaction and you will be responsible for any resulting costs and liabilities. 16. AM I ELIGIBLE TO RECEIVE FUTURE GRANTS OF OPTIONS DURING THE FOLLOWING SIX-MONTH PERIOD IF I PARTICIPATE IN THE NEW GRANT PROGRAM? Because of unfavorable accounting charge consequences, participants in the New Grant Program are ineligible to receive any additional stock option grants for which they might otherwise be eligible until after the replacement grant date. (Page 21) 17. IS THERE ANY TAX CONSEQUENCE TO MY PARTICIPATION IN THE NEW GRANT PROGRAM? If you exchange your options for a new option, you will not be required under current law to recognize income for United States federal income tax purposes at the time of the exchange or at the date of grant of the new option. With regard to the new nonqualified stock option, the tax aspects of such option will be the same as any other nonqualified option grant. (Page 18) Special considerations apply to employees located abroad. We recommend that you consult your own tax advisor with respect to the federal, state and local or foreign tax consequences of participating in the New Grant Program. (Page 22) 18. HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE IN THE NEW GRANT PROGRAM? We understand that the decision whether or not to participate in the New Grant Program will be a challenging one for many employees. The program does carry considerable risk, and there are no guarantees of our future stock performance. So, the decision to participate in the New Grant Program must be each individual employee's personal decision, and it will depend largely on each employee's assumptions about the future overall economic environment, the performance of the overall market and companies in our sector and our own business and stock price. 19. WHAT DO WE AND OUR BOARD OF DIRECTORS THINK OF THE NEW GRANT PROGRAM? Although our board of directors has approved the New Grant Program, neither we nor our board of directors make any recommendation as to whether you should participate in the New Grant Program. Our non-employee directors are not eligible to participate in the New Grant Program. 20. WHAT IF MY EMPLOYMENT AT ADAPTEC ENDS BETWEEN THE DATE MY OPTIONS ARE CANCELLED AND THE REPLACEMENT GRANT DATE? Your employment with Adaptec is on an at-will basis and nothing in this Offer to Exchange modifies or changes that. You cannot revoke your letter of transmittal after 9:00 P.M., PACIFIC DAYLIGHT TIME, ON JUNE 21, 2001. Therefore, if your employment with Adaptec or one of its subsidiaries is terminated by you or Adaptec voluntarily, involuntarily or for any reason or no reason, before your new option is granted, you WILL NOT have a right to any stock options that were previously cancelled, and you will not have a right to the grant that would have been issued on the replacement grant date. THEREFORE, IF YOU ARE NOT AN EMPLOYEE OF ADAPTEC OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU ELECT TO PARTICIPATE IN THE NEW GRANT PROGRAM THROUGH THE REPLACEMENT GRANT DATE, YOU WILL NOT RECEIVE A NEW OPTION IN EXCHANGE FOR YOUR CANCELLED OPTIONS. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR THE 4 CANCELLED OPTIONS IF YOU ARE NOT AN EMPLOYEE FROM THE DATE YOU ELECT TO PARTICIPATE IN THE NEW GRANT PROGRAM THROUGH THE REPLACEMENT GRANT DATE. (Page 15) 21. WHAT ARE THE CONDITIONS TO THE NEW GRANT PROGRAM? The implementation of the New Grant Program is not conditioned upon a minimum number of options being cancelled. The New Grant Program is subject to a number of conditions, including the conditions described in Section 6. (Page 16) SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS 22. WHICH OPTIONS CAN BE CANCELLED? Only options that have an exercise price above $15.00 per share may be tendered for exchange in connection with the New Grant Program. If you elect to participate in the New Grant Program, all options granted under the Plans to you on or after December 20, 2000 will be cancelled, even if those options have an exercise price of $15.00 per share or less. In addition, you may voluntarily elect to cancel one or more options granted with an exercise price above $15.00 per share under the Plans prior to December 20, 2000. (Page 10) 23. IF I HAVE MULTIPLE OPTIONS, CAN I CHOOSE WHICH OPTIONS I WANT TO CANCEL? You may choose to cancel one or more option grants if such grants were made prior to December 20, 2000 and such options have an exercise price above $15.00 per share. Inclusion of such grants is entirely discretionary. However, if you wish to participate in the New Grant Program, you must cancel all options granted to you on or after December 20, 2000, regardless of exercise price. (Page 10) 24. CAN I TENDER OPTIONS THAT I HAVE ALREADY EXERCISED? The New Grant Program only pertains to options, and does not apply in any way to shares purchased upon the exercise of options. If you have exercised an eligible option in its entirety, that option is no longer outstanding and is therefore not subject to inclusion in the New Grant Program. However, if you have exercised an eligible option grant in part, the remaining outstanding unexercised portion of the option grant is subject to inclusion in the New Grant Program and may be tendered for exchange and cancellation. 25. CAN I CANCEL AN OPTION GRANT ONLY AS TO CERTAIN SHARES? No, you cannot partially cancel an outstanding option grant. By way of example, if you have an option for 1,000 shares granted in 1998 and for 500 shares granted in May 2000, you could elect to cancel both, either or neither of these grants. You could not elect to cancel just 500 shares of the 1998 grant, or any other partial cancellation of either option grant. Likewise, if an option grant is partially vested and partially unvested, you cannot choose to cancel only the unvested portion. 26. IF I CHOOSE TO PARTICIPATE IN THE NEW GRANT PROGRAM, WHAT WILL HAPPEN TO MY OPTIONS THAT WILL BE CANCELLED? If you elect to participate in the New Grant Program, then on 9:00 P.M., PACIFIC DAYLIGHT TIME, ON JUNE 21, 2001, we will cancel all of your outstanding options with an exercise price above $15.00 per share that you have elected to cancel, plus any other options that were granted on or after December 20, 2000, regardless of exercise price. You will not be eligible to be granted further options after that date until the replacement grant date, when our compensation committee will grant new options. (Page 14) 5 27. WILL THE SHARES SUBJECT TO CANCELLED OPTIONS BE RETURNED TO THE POOL OF SHARES AVAILABLE FOR FUTURE GRANT UNDER THE PLANS? The shares of common stock subject to those options cancelled pursuant to the New Grant Program will be retired and will NOT be returned to the pool of shares available for grants of new options under the Plans. (Page 21) SPECIFIC QUESTIONS ABOUT THE NEW OPTIONS 28. WHAT WILL BE THE SHARE AMOUNT OF THE NEW OPTIONS? Employees who participate in this program will receive a new option on the replacement grant date. The number of shares covered by the new option will be equal to the number of shares covered by the cancelled stock options, subject to adjustments for any stock splits, stock dividends and similar events. Each new option will be granted under either the 1999 Plan or the 2000 Plan pursuant to a new option agreement between you and us. (Page 14) 29. WHAT WILL BE THE EXERCISE PRICE OF THE NEW OPTIONS? The exercise price of the new options which will be granted on the replacement grant date, will be the closing sales price of our common stock as reported on the Nasdaq National Market on the day before the replacement grant date. BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL AT LEAST SIX MONTHS AND ONE DAY AFTER THE DATE WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER EXERCISE PRICE THAN SOME OR ALL OF YOUR CURRENT OPTIONS. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO EXCHANGE YOUR OPTIONS. (Page 14) 30. WHAT WILL BE THE VESTING SCHEDULE OF THE NEW OPTIONS? All new options granted in this program will be vested to the same degree that the cancelled options were vested on the date of cancellation, with the unvested portion of each new option vesting in equal installments on a quarterly basis over the two years following the replacement grant date (except in certain foreign jurisdictions). (Pages 14, 22) 31. IF MY CURRENT OPTIONS ARE INCENTIVE STOCK OPTIONS, WILL MY NEW OPTION BE AN INCENTIVE STOCK OPTION? No. Even if your current options are incentive stock options, your new option will be a nonqualified stock option. (Page 18) 32. WHAT WILL BE THE TERMS AND CONDITIONS OF THE NEW OPTIONS? Except for the new exercise price, change in vesting and status as a nonqualified stock option for cancelled incentive stock options, the terms and conditions of the new options will be substantially the same as the cancelled options. The new options will have a new ten-year term, starting on the replacement grant date. (Page 18) 33. MY OPTIONS ARE SPLIT BETWEEN INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS BECAUSE MY ORIGINAL GRANT EXCEEDED THE $100,000 LIMIT ON INCENTIVE STOCK OPTIONS. CAN I CANCEL ONE PART OF THIS OPTION BUT NOT THE OTHER? You cannot cancel one part of an option grant that has been split into an incentive stock option and a nonqualified stock option because it is still considered a single option grant. It cannot be separated for purposes of the New Grant Program. (Page 18) 6 34. WHEN WILL WE GRANT THE NEW OPTIONS? We will grant the new options on the replacement grant date. If we cancel options elected for exchange on June 21, 2001, the replacement grant date of the new options will be on or after December 22, 2001. (Page 14) 35. WHY WON'T WE GRANT THE NEW OPTIONS IMMEDIATELY AFTER WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE? If we were to grant the new options on any date that is earlier than six months and one day after the date we cancel the options accepted for exchange, we would be required for financial reporting purposes to record compensation expense against our earnings. By deferring the grant of the new options for at least six months and one day, we believe we will not have to record this compensation expense. (Page 21) 36. WHEN WILL I SEE THE NEW OPTIONS AT WWW.CSBS.PAINEWEBBER.COM/ADPT? All employees can view their stock options on the Internet at www.csbs.painewebber.com/adpt. We anticipate that you will see your new stock option in your account within approximately three weeks of the replacement grant date. 37. CAN I HAVE EXAMPLES? The following are some representative examples for two hypothetical employees. Your situation is likely to vary in significant respects. EMPLOYEE A Assumptions: - --------------------------------------------- Grant Date: November 15, 1999 Original Stock Option: 8,000 shares Original Stock Option Exercise Price: $52 Original Vesting Schedule: 25% of the shares vest on November 15, 2000, and 6.25% of the shares vest quarterly thereafter Shares Vested on Date of Cancellation: 3,000 Hypothetical Closing Stock Price on the Day Before the Replacement Grant Date (on or about December 22, 2001): $15
Based on the assumptions above, for the sake of illustrating the New Grant Program, we would cancel your original stock option on June 21, 2001. On the replacement grant date, which would be on or after December 22, 2001, you would receive a new option for 8,000 shares. Based on the purely hypothetical stock price of $15, your new exercise price would be $15. Your new option would be vested with respect to 3,000 shares, with an additional 625 shares vesting each quarter thereafter until the new option is fully vested. 7 EMPLOYEE B Assumptions: - --------------------------------------------- Grant Date: April 21, 1998 Original Stock Option: 4,000 shares Original Stock Option Exercise Price: $21 Original Vesting Schedule: 25% of the shares vest on April 21, 1999, and 6.25% of the shares vest quarterly thereafter Shares Vested on Date of Cancellation: 3,000 Hypothetical Closing Stock Price on the Day Before the Replacement Grant Date (on or about December 22, 2001): $25
Based on the assumptions above, for the sake of illustrating the New Grant Program, we would cancel your original stock option on June 21, 2001. On the replacement grant date, which would be on or after December 22, 2001, you would receive a new option for 4,000 shares. Based on the purely hypothetical stock price of $25, your new exercise price would be $25. Your new option would be vested with respect to 3,000 shares, with an additional 125 shares vesting each quarter thereafter until the new option is fully vested. 38. WHAT HAPPENS IF ADAPTEC IS SUBJECT TO A CHANGE IN CONTROL BEFORE THE NEW OPTIONS ARE GRANTED? In the event of a change of control of Adaptec occurring before we issue the replacement options, to the extent the acquiring company agrees to assume other outstanding options of Adaptec, we will require the acquiring company to also assume the obligation to issue replacement options pursuant to the New Grant Program. The New Grant Program is designed such that employees with the right to receive replacement options will receive similar treatment as employees holding other outstanding options. If such a transaction were to occur and the acquiring company agreed to assume our outstanding options, you would receive a replacement option in the surviving entity provided that you remain continuously employed with Adaptec and the acquiring company through the replacement option grant date. The amount of shares you receive would be determined by taking the number of shares of our common stock that you would have received in the absence of the change of control transaction, adjusted in the same manner as options assumed in connection with the change of control transaction. As a result, the new option you receive may not cover the same number of shares as your cancelled option. We cannot guarantee that the acquiring company in any change of control transaction, and especially in a purchase of assets, would agree to assume existing options and therefore the obligation to issue replacement options. THEREFORE, IT IS POSSIBLE THAT YOU MAY NOT RECEIVE ANY REPLACEMENT OPTIONS, SECURITIES OF THE SURVIVING COMPANY OR OTHER CONSIDERATION IN EXCHANGE FOR YOUR CANCELLED OPTIONS IF WE ARE ACQUIRED BEFORE THE REPLACEMENT OPTIONS ARE GRANTED. In addition, the announcement of a change of control transaction regarding Adaptec could have a substantial effect on our stock price, including substantial stock price appreciation, which could reduce or eliminate potential benefits provided by the New Grant Program. In the event of a sale of some of our assets such as a division or a part of the company, the acquiring party would not be obligated to assume the obligation to issue replacement options under the New Grant Program. In the event of such a transaction, you would not receive options to purchase stock or securities of the acquiring company or any other consideration in exchange for your cancelled options. 8 We reserve the right to take any action, including entering into an asset purchase or similar transaction, that our board of directors believes is in the best interest of our company and our stockholders. (Page 15) 39. AFTER THE GRANT OF MY NEW OPTION, WHAT HAPPENS IF I AGAIN END UP "UNDERWATER"? We are implementing the New Grant Program at this time due to the unusual stock market conditions that have affected many companies throughout the country. Therefore, this is intended to be a one-time offer and we do not expect to implement such a program in the future. As your stock options are valid for ten years from the date of initial grant, subject to continued employment, the price of our common stock may appreciate over the long term even if the exercise price of your options is below the trading price of our common stock for some period of time after the grant date of the new options. HOWEVER, WE CAN PROVIDE NO ASSURANCE AS TO THE PRICE OF OUR COMMON STOCK AT ANY TIME IN THE FUTURE. 40. WHAT DO I NEED TO DO TO PARTICIPATE IN THE NEW GRANT PROGRAM? As described in the answer to Question 6, to participate, you must complete the letter of transmittal that is attached at the end of this Offer to Exchange, sign it, and ensure that Adaptec Stock Administration receives it no later than 9:00 P.M. PACIFIC DAYLIGHT TIME ON JUNE 21, 2001. You can return your form either by fax to (408) 957-6715 or by mail to Adaptec, Inc., Stock Administration, MS 24, 691 S. Milpitas Blvd., Milpitas, California 95035. (Page 13) 9 INTRODUCTION Adaptec, Inc. is offering to our employees the right to exchange all outstanding options to purchase shares of our common stock having an exercise price greater than $15.00 per share granted under the Plans for new nonqualified stock options that we will grant under either the 1999 Plan or the 2000 Plan. If you choose to participate in the New Grant Program by exchanging any of your stock options having an exercise price greater than $15.00 per share, you must also exchange all stock options granted on or after December 20, 2000, even if those options have an exercise price of $15.00 per share or less. Our non-employee directors are not eligible to participate in the New Grant Program. We are making this offer upon the terms and subject to the conditions set forth in this Offer to Exchange and in the accompanying letter of transmittal. Grants of new options will be made on the date of the first meeting of the compensation committee of Adaptec's board of directors held more than six months and one day after the date we cancel the options accepted for exchange. The New Grant Program is not conditioned upon a minimum number of options being elected for exchange. The New Grant Program is subject to conditions, which we describe in Section 6 of the Offer to Exchange. If you elect to exchange options as described in the Offer to Exchange and if your options are accepted for exchange, we will cancel the options elected for exchange and you will receive a grant of a new nonqualified option issued pursuant to a new option agreement between you and us. Some key features of the new option will include: - the number of shares subject to the new option will equal the number of shares subject to your cancelled options, subject to adjustments for any stock splits, stock dividends and similar events; - the exercise price of the new option will equal the closing sale price of our common stock as reported on the Nasdaq National Market on the day before the replacement grant date; - the term of the new option will be ten years from the replacement grant date; - the new option will be vested to the same degree that your cancelled options were vested on the date of cancellation, with the unvested portion of your new option vesting in equal installments on a quarterly basis over the two years following the replacement grant date (except in certain foreign jurisdictions); and - the other terms and conditions of the new option will be substantially similar to those of the cancelled options. In order to receive the new option, you must still be employed with us on the replacement grant date, and your election to participate in the New Grant Program does not in any way change your status as an at-will employee. In addition, we cannot guarantee you that you will receive a new option in the New Grant Program if a change of control of Adaptec occurs between the cancellation of your options and the replacement grant date. We are implementing the New Grant Program because a considerable number of our employees have stock options, whether or not they are currently exercisable, that have exercise prices significantly above our current and recent trading prices. We are offering this program on a voluntary basis to allow our employees to choose whether to keep their current stock options at their current exercise prices, or to cancel those options for new options. The shares of common stock subject to those options cancelled pursuant to the New Grant Program will be retired and will NOT be returned to the pool of shares available for grants of new options under the Plans. As of May 21, 2001, options to purchase 17,925,841 shares of our common stock were issued under the Plans and are currently outstanding. These options had exercise prices ranging from $0.37 to $130.25. All of these options that have an exercise price above $15.00 per share, except those held by 10 our non-employee directors or employees that have recently left Adaptec, are eligible to participate in the New Grant Program. All options we accept in this program will be cancelled and retired. THE NEW GRANT PROGRAM 1. NUMBER OF OPTIONS; EXPIRATION DATE. Upon the terms and subject to the conditions of this Offer to Exchange, we will exchange all eligible outstanding options that are properly elected for exchange and not validly withdrawn in accordance with Section 4 before the "expiration date," as defined below, for new nonqualified stock options to purchase common stock under either the 1999 Plan or the 2000 Plan. If your options are properly elected for exchange and accepted for exchange, you will be entitled to receive a new stock option to purchase the number of shares of our common stock that is equal to the number of shares subject to the options that you elected to exchange, subject to adjustments for any stock splits, stock dividends and similar events. The new option will be subject to the terms of the 1999 Plan or the 2000 Plan, as applicable, pursuant to a new option agreement between us and you. Any current employee of Adaptec who holds stock options under the Plans that have exercise prices above $15.00 per share is eligible to participate in the New Grant Program. Our non-employee directors are not eligible to participate in the New Grant Program. IF YOU ARE NOT AN EMPLOYEE OF ADAPTEC OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE A NEW OPTION IN EXCHANGE FOR YOUR CANCELLED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR CANCELLED OPTIONS IF YOU ARE NOT AN EMPLOYEE FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS. Special considerations may apply to employees abroad, including the required tax election discussed in Section 13 below. If you wish to participate in the New Grant Program, you may elect to cancel any options that were granted before December 20, 2000 that have an exercise price above $15.00 per share and you must cancel all options granted to you on or after December 20, 2000, even if those options have an exercise price of $15.00 per share or less. If you elect to cancel an option, it must be cancelled as to all shares that are outstanding under the option grants. An option cannot be partially cancelled. The term "expiration date" means 9:00 P.M., Pacific Time, on June 21, 2001, unless and until we, in our discretion, have extended the period of time during which you may elect to participate in the New Grant Program, in which event the term "expiration date" refers to the latest time and date on which your right to participate, as so extended, expires. See Section 14 for a description of our rights to extend, delay, terminate and amend the expiration date. If we decide to take any of the following actions, we will notify you of such action, and we will extend the expiration date for a period of no fewer than ten business days after the date of such notice: - we increase or decrease: - the amount of consideration offered for the options; or - the number of options eligible to be elected for exchange in the New Grant Program, except that in the case of an increase, it must be by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to the New Grant Program immediately prior to the increase; and 11 - the date on which your right to participate in the New Grant Program is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in Section 14. For purposes of the New Grant Program, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Standard Time. 2. PURPOSE OF THE NEW GRANT PROGRAM. We issued the options outstanding under the Plans to provide our employees an opportunity to acquire or increase their ownership stake in Adaptec, creating a stronger incentive to expend maximum effort for our growth and success and encouraging our employees to continue their employment with us. Many of these options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price of our common stock. We are implementing the New Grant Program to provide our employees with the opportunity to own options that over time may have a greater potential to increase in value, which we hope will create better performance incentives for employees and will maximize the value of our common stock for our current stockholders. Because of the large number of options currently outstanding, a grant of additional options could potentially have a negative impact on our dilution, outstanding shares and earnings per share. CONSIDERING THE RISKS ASSOCIATED WITH THE VOLATILE AND UNPREDICTABLE NATURE OF THE STOCK MARKET, AND OUR INDUSTRY IN PARTICULAR, THERE IS NO GUARANTEE THAT THE CLOSING MARKET PRICE OF OUR COMMON STOCK ON THE DAY BEFORE THE REPLACEMENT GRANT (AND THEREFORE THE EXERCISE PRICE OF ANY NEW OPTION) WILL BE LESS THAN OR EQUAL TO THE EXERCISE PRICE OF YOUR EXISTING OPTION, OR THAT YOUR NEW OPTION WILL INCREASE IN VALUE OVER TIME. Subject to the foregoing, and except as otherwise disclosed in this Offer to Exchange or in our filings with the Securities and Exchange Commission, we have no plans or proposals that relate to or would result in: - an extraordinary transaction, such as a merger, reorganization or liquidation, involving us or any of our subsidiaries (however, we expect to consider such matters from time to time); - any purchase, sale or transfer of a material amount of our assets or the assets of any of our subsidiaries; - any material change in our present dividend rate or policy, or our indebtedness or capitalization; - any other material change in our corporate structure or business; - our common stock not being authorized for quotation in an automated quotation system operated by a national securities association; - our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act; - the suspension of our obligation to file reports under Section 15(d) of the Securities Exchange Act; - the acquisition by any person of any of our securities or the disposition of any of our securities (other than as a result of the exercise of stock options issued under the Plans or purchases made under our employee stock purchase plan); or 12 - any changes in our certificate of incorporation, bylaws of other governing instruments or any actions that could impede the acquisition of control of us. Neither we nor our board of directors makes any recommendation as to whether you should elect to participate in the New Grant Program, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this Offer to Exchange and to consult your own investment and tax advisors. You must make your own decision whether to elect to participate in the New Grant Program. 3. PROCEDURES FOR ELECTING TO PARTICIPATE IN THE NEW GRANT PROGRAM. PROPER EXCHANGE OF OPTIONS. To elect to participate in the New Grant Program, you must, in accordance with the terms of the letter of transmittal that is attached at the end of this Offer to Exchange, properly complete, duly execute and deliver to us the letter of transmittal, or a facsimile of the letter, along with any other required documents. Adaptec Stock Administration must receive all of the required documents by fax at (408) 957-6715 or by mail to Adaptec, Inc., Stock Administration, MS 24, 691 S. Milpitas Blvd., Milpitas, California 95035 before the expiration date. If you do not turn in your election form by the deadline, then you will not participate in the New Grant Program, and all stock options you currently hold will remain unchanged at their original price and terms. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE ELECTING OPTION HOLDER. YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. DETERMINATION OF VALIDITY; REJECTION OF OPTIONS; WAIVER OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. We will determine, in our discretion, all questions as to form of documents and the validity, eligibility, including time of receipt, and acceptance of any election to participate in the New Grant Program. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any or all elections to participate in the New Grant Program that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept properly and timely elected options that are not validly withdrawn. We also reserve the right to waive any of the conditions of the New Grant Program or any defect or irregularity in any election with respect to any particular options or any particular option holder. No election to participate in the New Grant Program will be valid until all defects or irregularities have been cured by the electing option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in elections, nor will anyone incur any liability for failure to give any such notice. OUR ACCEPTANCE CONSTITUTES AN AGREEMENT. Your election to participate in the New Grant Program pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the New Grant Program. OUR ACCEPTANCE FOR CANCELLATION OF THE OPTIONS ELECTED FOR EXCHANGE BY YOU PURSUANT TO THE NEW GRANT PROGRAM WILL CONSTITUTE A BINDING AGREEMENT BETWEEN US AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE NEW GRANT PROGRAM. Subject to our rights to extend, terminate and amend the New Grant Program, we currently expect that we will accept promptly after the expiration date all properly elected options that have not been validly withdrawn. 4. WITHDRAWAL RIGHTS. You may withdraw the options you have elected to exchange only if you comply with the provisions of this Section 4. 13 You have the right to withdraw the options you have elected to cancel at any time before 9:00 p.m. on June 21, 2001. If we extend the time during which you may elect to participate in the New Grant Program, you have the right to withdraw these options at any time until the extended period expires. In addition, if we do not accept your options for participation in the New Grant Program before July 20, 2001, the 40th business day from the commencement of the New Grant Program, you may withdraw such options at any time after July 20, 2001. To validly withdraw options, you must deliver to us a written notice of withdrawal by mail to Adaptec, Inc., Stock Administration, MS 24, 691 S. Milpitas Blvd., Milpitas, California 95035, or by facsimile thereof to (408) 957-6715, with the required information, while you still have the right to withdraw the election to participate in the New Grant Program. The notice of withdrawal must include your name, the grant date, exercise price and total number of shares included in each option, and the total number of options to be withdrawn. Except as described in the following sentence, the option holder who has elected to participate in the New Grant Program (and who subsequently elects to withdraw his or her options from the New Grant Program) must sign the notice of withdrawal exactly as such option holder's name appears on the option agreement. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, the signer's full title and proper evidence of the authority of such person to act in such capacity must be indicated on the notice of withdrawal. You may not rescind any withdrawal, and any options you withdraw will thereafter be deemed not properly elected for participation in the New Grant Program, unless you properly re-elect those options before the expiration date by following the procedures described in Section 3. Neither Adaptec nor any other person is obligated to give notice of any defects or irregularities in any notice of withdrawal, nor will anyone incur any liability for failure to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal. Our determination of these matters will be final and binding. 5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS. Upon the terms and subject to the conditions of this Offer to Exchange and as promptly as practicable following the expiration date, we will accept for exchange and cancel options properly elected for exchange and not validly withdrawn before the expiration date. If your options are properly elected for exchange and accepted for exchange on June 21, 2001, you will be granted a new nonqualified stock option on the replacement grant date, which will be on or after December 22, 2001. If we extend the date by which we must accept and cancel options properly elected for exchange, you will be granted a new stock option on the date of a meeting of the compensation committee of the board of directors held at least six months and one day after the extended date. If we accept options you elect to exchange in the New Grant Program, you will be ineligible until after the replacement grant date for any additional stock option grants for which you might otherwise have been eligible before the replacement grant date. This allows us to avoid incurring a compensation expense because of accounting rules that could apply to these interim option grants as a result of the New Grant Program. Your new option will entitle you to purchase the same number of shares of our common stock that is equal to the number of shares subject to the options you elect to exchange, subject to adjustments for any stock splits, stock dividends and similar events. Your new option will be vested to the same degree that your cancelled options were vested, with the unvested portion of your new option vesting in equal installments on a quarterly basis over two years following the replacement grant date (except in certain foreign jurisdictions). Your new option will have a ten-year term, starting on the replacement grant date. 14 Your employment with Adaptec is on an at-will basis and nothing in this Offer to Exchange modifies or changes that. Therefore, if your employment with Adaptec or one of its subsidiaries is terminated by you or Adaptec voluntarily, involuntarily, or for any reason or no reason, before your new option is granted, you WILL NOT have a right to any stock options that were previously cancelled, and you will not have a right to any grant that would have been granted on the replacement grant date. IF YOU ARE NOT AN EMPLOYEE OF ADAPTEC OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT BE ELIGIBLE TO RECEIVE A GRANT OF A NEW OPTION IN EXCHANGE FOR YOUR CANCELLED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR CANCELLED OPTIONS IF YOU ARE NOT AN EMPLOYEE FROM THE DATE YOU ELECT TO PARTICIPATE IN THE NEW GRANT PROGRAM THROUGH THE DATE WE GRANT THE NEW OPTIONS. In the event of a change of control of Adaptec occurring before we issue the replacement options, to the extent the acquiring company agrees to assume other outstanding options of Adaptec, we will require the acquiring company to also assume the obligation to issue replacement options pursuant to the New Grant Program. The New Grant Program is designed such that employees with the right to receive replacement options will receive similar treatment as employees holding other outstanding options. If such a transaction were to occur and the acquiring company agreed to assume our outstanding options, you would receive a replacement option in the surviving entity provided that you remain continuously employed with Adaptec and the acquiring company through the replacement option grant date. The amount of shares subject to the new stock option grant you receive would be determined by taking the number of shares of our common stock that you would have received in the absence of the change of control transaction, adjusted in the same manner as options assumed in connection with the change of control transaction. As a result, the new option you receive may not cover the same number of shares as your cancelled option. We cannot guarantee that the acquiring company in any change of control transaction, and especially in a purchase of assets, would agree to assume existing options and therefore the obligation to issue replacement options. THEREFORE, IT IS POSSIBLE THAT YOU MAY NOT RECEIVE ANY REPLACEMENT OPTIONS, SECURITIES OF THE SURVIVING COMPANY OR OTHER CONSIDERATION IN EXCHANGE FOR YOUR CANCELLED OPTIONS IF WE ARE ACQUIRED BEFORE THE REPLACEMENT OPTIONS ARE GRANTED. In addition, the announcement of a change of control transaction regarding Adaptec could have a substantial effect on our stock price, including substantial stock price appreciation, which could reduce or eliminate potential benefits provided by the New Grant Program. In the event of a sale of some of our assets such as a division or a part of the company, the acquiring party would not be obligated to assume the obligation to issue replacement options under the New Grant Program. In the event of such a transaction, you would not receive options to purchase stock or securities of the acquiring company or any other consideration in exchange for your cancelled options. We reserve the right to take any action, including entering into an asset purchase or similar transaction, that our board of directors believes is in the best interest of our company and our stockholders. For purposes of the New Grant Program, we will be deemed to have accepted for exchange options that are validly elected for exchange and not properly withdrawn as, if and when we give oral or written notice to the option holders of our acceptance for exchange of such options. Subject to our rights to extend, terminate and amend the expiration date, we currently expect that you will see your new options at www.csbs.painewebber.com/adpt and that your new option agreement will be mailed to you within three weeks of the replacement grant date. 15 6. CONDITIONS OF THE NEW GRANT PROGRAM. Notwithstanding any other provision of the New Grant Program, we will not be required to accept any options elected for exchange, and we may terminate or amend the New Grant Program, or postpone our acceptance and cancellation of any options elected for exchange, in each case, subject to certain limitations, if at any time on or after May 22, 2001 and prior to June 21, 2001 any of the following events has occurred, or has been determined by us to have occurred, and, in our reasonable judgment in any such case, including any action or omission to act by us, the occurrence of such event or events makes it inadvisable for us to proceed with the New Grant Program or with such acceptance and cancellation of options elected for exchange: - there has been threatened or instituted or is pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly challenges the making of the New Grant Program, the acquisition of some or all of the options elected for exchange pursuant to the New Grant Program, the issuance of new options, or otherwise relates in any manner to the New Grant Program or that, in our reasonable judgment, could materially and adversely affect the business, condition (financial or other), income, operations or prospects of Adaptec or our subsidiaries, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or materially impair the contemplated benefits of the New Grant Program to us; - there has been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the New Grant Program or us or any of our subsidiaries, by any court or any authority, agency or tribunal that, in our reasonable judgment, would or might directly or indirectly: - make the acceptance for exchange of, or issuance of new options for, some or all of the options elected for exchange illegal or otherwise restrict or prohibit completion of the New Grant Program or otherwise relates in any manner to the New Grant Program; - delay or restrict our ability, or render us unable, to accept for exchange, or issue new options for, some or all of the options elected for exchange; - materially impair the contemplated benefits of the New Grant Program to us; or - materially and adversely affect the business, condition (financial or other), income, operations or prospects of Adaptec or our subsidiaries, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or materially impair the contemplated benefits of the New Grant Program to us; - there has occurred: - any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; - the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or not mandatory; - the commencement of a war, armed hostilities or other international or national crisis directly or indirectly involving the United States; - any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that in our reasonable judgment might affect, the extension of credit by banks or other lending institutions in the United States; 16 - any significant decrease in the market price of the shares of our common stock or any change in the general political, market, economic or financial conditions in the United States or abroad that could, in our reasonable judgment, have a material adverse effect on the business, condition (financial or other), operations or prospects of Adaptec or our subsidiaries or on the trading in our common stock; - any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect on the business, condition (financial or other), operations or prospects of Adaptec or our subsidiaries or that, in our reasonable judgment, makes it inadvisable to proceed with the New Grant Program; - in the case of any of the foregoing existing at the time of the commencement of the New Grant Program, a material acceleration or worsening thereof; or - any decline in either the Nasdaq National Stock Market or the Standard and Poor's Index of 500 Companies by an amount in excess of 10% measured during any time period after the close of business on May 22, 2001; - there has occurred any change in generally accepted accounting standards that could or would require us for financial reporting purposes to record compensation expense against our earnings in connection with the New Grant Program; - a tender or exchange offer with respect to some or all of our common stock, or a merger or acquisition proposal for us, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed, or we shall have learned that: - any person, entity or "group," within the meaning of Section 13(d)(3) of the Securities Exchange Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the Securities and Exchange Commission on or before May 22, 2001; - any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the Securities and Exchange Commission on or before May 22, 2001 shall have acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our common stock; or - any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or made a public announcement reflecting an intent to acquire us or any of our subsidiaries or any of the assets or securities of us or any of our subsidiaries; or - any change or changes shall have occurred in the business, condition (financial or other), assets, income, operations, prospects or stock ownership of Adaptec or our subsidiaries that, in our reasonable judgment, is or may be material to Adaptec or our subsidiaries. The conditions to the New Grant Program are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them prior to the expiration date. We may waive them, in whole or in part, at any time and from time to time prior to the expiration date, in our discretion, whether or not we waive any other condition to the New Grant Program. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this section will be final and binding upon all persons. 17 7. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS. Our common stock has been quoted on the Nasdaq National Market System under the symbol "ADPT" since our initial public offering on June 12, 1986. The following table presents the high and low sales prices per share of our common stock for the periods indicated, as reported by the Nasdaq National Market:
HIGH LOW ---- -------- Fiscal Year ending March 31, 2002: First Quarter (through May 21, 2001)...................... $12.01 $ 7.41 Fiscal Year ended March 31, 2001: Fourth Quarter............................................ $15.50 $ 8.25 Third Quarter............................................. 21.50 8.00 Second Quarter............................................ 28.25 19.00 First Quarter............................................. 38.81 15.38 Fiscal Year ended March 31, 2000: Fourth Quarter............................................ $62.25 $35.31 Third Quarter............................................. 57.13 36.69 Second Quarter............................................ 41.94 32.00 First Quarter............................................. 39.25 19.75
WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO PARTICIPATE IN THE NEW GRANT PROGRAM. 8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS. CONSIDERATION. We will issue new options to purchase common stock under either the 1999 Plan or the 2000 Plan in exchange for outstanding eligible options properly elected and accepted for exchange by us. The number of shares of common stock subject to new options to be granted to each option holder will be equal to the number of shares subject to the cancelled options, subject to adjustments for any stock splits, stock dividends and similar events. You cannot cancel one part of an option that has been split into an incentive stock option and a nonqualified stock option because it is still considered a single option. It cannot be separated for purposes of this program. The shares of common stock subject to options cancelled pursuant to the New Grant Program will be retired and will NOT be returned to the pool of shares available for grants of new options under the Plans. TERMS OF NEW OPTIONS. The new nonqualified stock options to be granted will be issued under either the 1999 Plan or the 2000 Plan. We will issue a new option agreement to each option holder who receives a new option on the replacement grant date. Except for the new exercise price, change in vesting and status as a nonqualified stock option for cancelled incentive stock options, the terms and conditions of the new options will be substantially the same as the cancelled options. The new options will have a new ten-year term, starting on the replacement grant date. The terms and conditions of current options under the Plans are set forth in the respective Plans and the stock option agreement you entered into in connection with the grant. The terms and conditions of the Plans are summarized in the applicable prospectuses prepared by us and previously distributed to you. YOU MAY OBTAIN COPIES OF EACH OF THESE PROSPECTUSES AND THE PLANS AS INDICATED BELOW. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. Options granted under the New Grant Program will be nonqualified stock options. No taxable income is recognized by an optionee upon the grant of a nonqualified stock option. The optionee will, in general, recognize ordinary income in the year in which the option is exercised. The amount of ordinary income is equal to the excess of the fair 18 market value of the purchased shares on the exercise date over the exercise price paid for the shares. The optionee will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to a business expense deduction equal to the amount of ordinary income recognized by the optionee with respect to the exercised nonqualified stock option. The deduction will in general be allowed for the taxable year of Adaptec in which the ordinary income is recognized by the optionee. IMPORTANT NOTE: THE STATEMENTS IN THIS OFFER TO EXCHANGE CONCERNING THE PLANS AND THE NEW OPTIONS ARE MERELY SUMMARIES AND DO NOT PURPORT TO BE COMPLETE. THE STATEMENTS ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, ALL PROVISIONS OF THE PLANS AND THE FORM OF STOCK OPTION AGREEMENT UNDER THE PLANS. PLEASE CONTACT KELLEY WALL AT KELLEY_WALL@ADAPTEC.COM OR (408) 957-4536, TO RECEIVE A COPY OF THE PLANS, PROSPECTUSES OR FORMS OF STOCK OPTION AGREEMENTS. WE WILL PROMPTLY FURNISH YOU COPIES OF THESE DOCUMENTS AT OUR EXPENSE. 9. INFORMATION CONCERNING ADAPTEC. We provide broad-markets with intelligent, highly available storage access solutions that reliably move, manage and protect critical data and digital content. Our storage solutions are found in high-performance networks, servers, workstations and desktops from the world's leading manufacturers, and are sold through distribution channels to ISPs, enterprises, medium and small businesses and consumers. We focus on three principal areas: Storage Solutions, Storage Networking and Desktop Solutions. The Storage Solutions Group designs, develops, manufactures and markets I/O management solutions to the entire range of servers, workstations and high-end desktops. These systems employ internal disk drives as their primary mass storage solution, but also require high-performance connectivity to additional internally and externally connected storage and peripherals. The Storage Solutions Group also focuses on building products and complete solutions that address the external storage marketplace. The Storage Networking segment focuses on bringing new levels of functionality and interoperability with storage area network initiatives, including IP storage, fibre channel and infiniband. The Desktop Solutions group offers a wide array of I/O solutions for enabling high-speed data storage access on notebook and desktop computers. We were incorporated in California in 1981, reincorporated in Delaware in 1998 and went public on the Nasdaq National Stock Market in 1986. Our principal offices are located at 691 S. Milpitas Blvd., Milpitas, California 95035. Our main telephone number at this location is (408) 945-8600. Additional information about Adaptec is available from the documents described in Section 16. The financial statements included in our annual report on Form 10-K for the fiscal year ended March 31, 2000 and our quarterly report on Form 10-Q for the quarter ended December 31, 2000 are incorporated herein by reference. The following table summarizes certain of our consolidated financial data. 19
YEARS ENDED NINE MONTHS ENDED MARCH 31, DECEMBER 31, --------------------- ------------------ 1999 2000 2000 --------- --------- ------------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenues......................................... $692,441 $811,161 $555,159 Cost of revenues..................................... 284,503 282,672 232,327 Patent settlement fee................................ -- 9,599 -- -------- -------- -------- Gross profit......................................... 407,938 518,890 322,832 -------- -------- -------- Operating expenses: Research and development........................... 146,172 103,076 95,097 Selling, marketing and administrative.............. 170,666 159,354 135,816 Amortization of goodwill and other intangibles..... 10,320 23,251 58,427 Write-off of acquired in-process technology........ 45,482 20,132 -- Restructuring charges.............................. 39,931 -- -- Other charges...................................... 28,857 -- 28,211 -------- -------- -------- Total operating expenses......................... 441,428 305,813 317,551 -------- -------- -------- Income (loss) from operations........................ (33,490) 213,077 5,281 Interest and other income............................ 35,059 47,080 145,193 Interest expense..................................... (12,103) (11,577) (9,006) Gain on sale of PTS.................................. 31,476 -- -- -------- -------- -------- Income before provision for income taxes............. 20,942 248,580 141,468 Provision for income taxes........................... 34,235 77,791 77,274 -------- -------- -------- Net income (loss).................................... $(13,293) $170,789 $ 64,194 ======== ======== ======== Net income (loss) per share Basic.............................................. $ (0.12) $ 1.65 $ 0.64 -------- -------- -------- Diluted............................................ $ (0.12) $ 1.56 $ 0.63 -------- -------- -------- Shares used in computing net income (loss) per share Basic.............................................. 110,127 103,427 99,594 -------- -------- -------- Diluted............................................ 110,127 109,711 102,132 -------- -------- --------
AS OF MARCH 31, --------------------- AS OF DECEMBER 31, 1999 2000 2000 ---------- -------- ------------------ (IN THOUSANDS) BALANCE SHEET DATA: Cash, cash equivalents and marketable securities.... $ 743,912 $662,691 $631,174 Working capital..................................... 857,651 668,360 637,861 Total current assets................................ 1,010,017 895,586 880,192 Total current liabilities........................... 152,366 227,226 242,331 4 3/4% Convertible Subordinated Notes............... 230,000 229,800 229,800 Other long-term liabilities......................... -- 14,400 20,771 Total stockholders' equity.......................... 790,702 874,858 739,763
20 10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS. The directors and executive officers of Adaptec and their positions and offices as of May 22, 2001 are set forth in the following table:
NAME POSITION - ---- -------- Robert N. Stephens........................... President, Chief Executive Officer and Director Robert L. Schultz, Jr........................ Chief Operating Officer David A. Young............................... Vice President, Chief Financial Officer and Assistant Secretary Kenneth B. Arola............................. Vice President and Corporate Controller Kok Yong (K.Y.) Lim.......................... Vice President of Manufacturing Laurence B. Boucher.......................... Chairman of the Board of Directors Carl J. Conti................................ Director John East.................................... Director Ilene H. Lang................................ Director Robert J. Loarie............................. Director B.J. Moore................................... Director W. Ferrell Sanders........................... Director
The address of each director and executive officer is c/o Adaptec, Inc., 691 S. Milpitas Blvd., Milpitas, California 95035 As of May 21, 2001, our executive officers and directors (12 persons) as a group held options to purchase a total of 3,126,484 shares of our common stock. These options represented approximately 17.4% of the shares subject to all Adaptec options outstanding as of that date. Please see the definitive proxy statement for our 2000 annual meeting of stockholders, filed with the Securities and Exchange Commission on July 12, 2000, for information regarding the amount of our securities beneficially owned by our executive officers and directors as of May 31, 2000. There were no stock and stock option transactions involving our executive officers and directors within the 60 days before the commencement of the New Grant Program, except that on March 31, 2001, Messrs. Loarie, Conti, East, Moore and Sanders and Ms. Lang were each granted a stock option to purchase 15,000 shares of our common stock at an exercise price of $8.67 per share. In addition, on May 1, 2001, Ms. Lang purchased 2,000 shares of our common stock on the open market at a purchase price of $10.89 per share. None of these non-employee directors are eligible to participate in the New Grant Program. 11. STATUS OF OPTIONS ACQUIRED BY US IN THE NEW GRANT PROGRAM; ACCOUNTING CONSEQUENCES OF THE NEW GRANT PROGRAM. The shares of common stock subject to those options cancelled pursuant to the New Grant Program will be retired and will NOT be returned to the pool of shares available for grants of new options under the Plans. We believe that we will not incur any compensation expense solely as a result of the transactions contemplated by the New Grant Program because we will not grant any new options until a business day that is at least six months and one day after the date that we accept and cancel options elected for exchange. Further, the exercise price of all new options will equal the closing market price of the common stock on the day before the date we grant the new options. If we were to grant any options before the scheduled replacement grant date to any option holder electing to cancel options, our grant of those options to the electing option holder would be treated for financial reporting purposes as a variable award to the extent that the number of shares subject to the 21 newly granted options is equal to or less than the number of the option holder's option shares elected for exchange. In this event, we would be required to record as compensation expense the amount by which the market value of the shares subject to the newly granted options exceeds the exercise price of those shares. This compensation expense would accrue as a variable accounting charge to our earnings over the period that the newly granted options are outstanding. We would have to adjust this compensation expense periodically during the option term based on increases or decreases in the market value of the shares subject to the newly granted options. 12. LEGAL MATTERS; REGULATORY APPROVALS. We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our exchange of options and issuance of new options as contemplated by the New Grant Program, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of our options as contemplated herein. Should any such approval or other action be required, we contemplate that we will seek such approval or take such other action. We are unable to predict whether we may determine that we are required to delay the acceptance of options for exchange pending the outcome of any such matter. We cannot assure you that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to our business. Our obligation under the New Grant Program to accept options elected for exchange is subject to conditions, including the conditions described in Section 6. 13. MATERIAL INCOME TAX CONSEQUENCES. The following is a general summary of the material income tax consequences of the exchange of options pursuant to the New Grant Program. This discussion is based on the Internal Revenue Code, its legislative history, Treasury Regulations thereunder and administrative and judicial interpretations thereof as of the date of this Offer to Exchange, all of which are subject to change, possibly on a retroactive basis. The federal tax laws may change and the federal, state and local tax consequences for each employee will depend upon that employee's individual circumstances. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to apply in all respects to all categories of option holders. The option holders who exchange outstanding options for new options will not be required to recognize income for federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non-taxable exchange. Further, at the date of grant of the new options, the option holders will not be required to recognize income for federal income tax purposes. The grant of options does not result in recognition of taxable income. Special tax considerations may apply to employees located abroad. For employees in the UNITED KINGDOM, which has adopted a new law governing the exercise of stock options awarded after April 5, 1999, the grant of the new option will be subject to the execution of a joint election between you and Adaptec or any subsidiary of Adaptec to provide for the shifting of any Secondary Class 1 National Insurance Contribution liability in connection with the exercise, assignment, release or cancellation of the option from Adaptec and/or any subsidiary to you. This tax is currently set at 11.9% of the difference between the exercise price and the fair market value of the stock at the time of exercise. By accepting the new option, to the extent allowable by applicable law, you will be consenting to and agreeing to satisfy any liability that Adaptec and/or any subsidiary realizes with respect to Secondary Class 1 National Insurance Contribution payments required to be paid by Adaptec and/or any subsidiary in connection with the exercise, assignment, release or cancellation of the option. In addition, if you accept the new option, you will be authorizing Adaptec or the subsidiary to withhold any such Secondary Class 1 National Insurance Contributions from the payroll at any time or from 22 your sale of shares upon exercise, assignment, release or cancellation of the option. In the alternative, you agree to make payment on demand for such contributions to Adaptec or any subsidiary that will remit such contributions to the Inland Revenue. In addition, you may be required to consent to United Kingdom income tax withholding for the new grant. If additional consents and/or any elections are required to accomplish the foregoing shifting of liability, you agree to provide them promptly upon request. If you do not enter into the joint election described above at the same time that you accept the new option, or if the joint election is revoked at any time by the Inland Revenue, Adaptec will have the right to cancel the new option without further liability. The taxation of the New Grant Program in Australia is extremely complex. Under the New Grant Program, you will be subject to taxation upon: (1) the cancellation of your existing options, (2) the grant and, if you so elect, upon exercise of your replacement options and (3) upon sale of the shares. We strongly recommend for employees located in Australia that you consult your tax advisor. For employees located in Belgium, under Belgian tax law, the cancellation of your existing options will not result in any tax liability. However, because employee stock options are taxed upon grant, the grant of the replacement option is a taxable event if you choose to accept the option. Upon grant of the replacement option, you will have 30 days to determine whether you want to reject the new option. If you choose to reject the new option, you will not be subject to any taxes. If you choose to accept the new option, the amount taxable is based on 10% or 20% of the "grant value" of the option, subject to certain employee elections. The grant value is measured by the exercise price multiplied by the number of shares under option. For employees located in France, under French tax law, the cancellation of your existing options will not result in any tax liability. Because your replacement option will be granted under a qualified plan, you will not pay any taxes at exercise and you will not be subject to the 20% social security tax if a 4-year holding period is met. To meet this 4-year holding period, the shares must not be sold within 4 years from the date the option was granted. The Adaptec French stock option plan has been structured to ensure that this holding period is satisfied. Your options will vest in full and become exercisable upon the 4th anniversary of the grant date. This guarantees that you will not be subject to the 20% social security tax under the Adaptec French stock option plan. Upon sale of the shares, you will pay 40% income tax (or at your marginal rate if lower) plus a 7.5% social charge on the "bargain element" at exercise. The bargain element is measured by the difference between the exercise price and the fair value on the date of exercise. All appreciation following the date of exercise will be taxed at the 26% capital gain rate. WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE NEW GRANT PROGRAM. 14. EXTENSION OF NEW GRANT PROGRAM; TERMINATION; AMENDMENT. We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event set forth in Section 6 has occurred or is deemed by us to have occurred, to extend the expiration date and thereby delay the acceptance for exchange of any options by giving oral, written or electronic notice of such extension to the option holders. We also expressly reserve the right, in our reasonable judgment, prior to the expiration date, to terminate or amend the New Grant Program and to postpone our acceptance and cancellation of any options elected for exchange upon the occurrence of any of the conditions specified in Section 6, by giving oral, written or electronic notice of such termination or postponement to the option holders. Notwithstanding the foregoing, we will pay the consideration offered or return the options elected for exchange promptly after termination or withdrawal of the New Grant Program. 23 Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event set forth in Section 6 has occurred or is deemed by us to have occurred, to amend the New Grant Program in any respect. Amendments to the New Grant Program may be made at any time and from time to time. In the case of an extension, the amendment must be issued no later than 9:00 a.m., on the next business day after the last previously scheduled or announced expiration date. Any amendment of the New Grant Program will be disseminated promptly to option holders in a manner reasonably designated to inform option holders of such change. Without limiting the manner in which we may choose to disseminate any amendment of the New Grant Program, except as required by law, we have no obligation to publish, advertise or otherwise communicate any such dissemination. If we materially change the terms of the New Grant Program or the information concerning the New Grant Program, or if we waive a material condition of the New Grant Program, we will extend the expiration date. Except for a change in price or a change in percentage of securities sought, the amount of time by which we will extend the expiration date following a material change in the term of the New Grant Program or information concerning the New Grant Program will depend on the facts and circumstances, including the relative materiality of such terms or information. If we decide to take any of the following actions, we will notify you of such action, and we will extend the deadline to participate in the New Grant Program for a period of no fewer than ten business days after the date of such notice: - we increase or decrease: - the amount of consideration offered for the options; or - the number of options eligible to be elected for exchange in the New Grant Program, except that in the case of an increase, it must be by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to the New Grant Program immediately prior to the increase; and - the date on which your right to participate in the New Grant Program is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in this Section 14. 15. FEES AND EXPENSES. We will not pay any fees or commissions to any broker, dealer or other person for soliciting elections to exchange options pursuant to the New Grant Program. 16. ADDITIONAL INFORMATION. We recommend that, in addition to this Offer to Exchange and letter of transmittal, you review the following materials, which we have filed with the Securities and Exchange Commission, before making a decision on whether to participate in the New Grant Program: - our annual report on Form 10-K for the fiscal year ended March 31, 2000, filed with the Securities and Exchange Commission on June 27, 2000; - our quarterly report on Form 10-Q for the fiscal quarter ended December 31, 2000, filed with the Securities and Exchange Commission on January 26, 2001; - the definitive proxy statement for our 2000 annual meeting of stockholders, filed with the Securities and Exchange Commission on July 12, 2000; and 24 - the description of our common stock included in our registration statement on Form 8-A, which was filed with the Securities and Exchange Commission on May 11, 1989, including any amendments or reports we file for the purpose of updating that description. The Securities and Exchange Commission file number for all of these filings is 000-15071. These filings and other reports, registration statements, proxy statements and other filings can be inspected and copied at the reference facilities maintained by the Securities and Exchange Commission located in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at regional offices located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. You may obtain copies of all or any part of these documents from these offices upon the payment of the fees prescribed by the Securities and Exchange Commission. You may obtain information on the operation of the public reference rooms by calling the Securities and Exchange Commission at 1-800-732-0330. These filings are also available to the public on the web site of the Securities and Exchange Commission at http://www.sec.gov. Our common stock is quoted on the Nasdaq National Market under the symbol "ADPT," and our Securities and Exchange Commission filings can be read at the following Nasdaq address: Nasdaq Operations 1735 K Street, N.W. Washington, D.C. 20006 We will also provide without charge to each person to whom a copy of this Offer to Exchange is delivered, upon the written or oral request of any such person, a copy of any or all of the documents to which we have referred you, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to: Kelley Wall Adaptec, Inc. Stock Administration MS 24 691 S. Milpitas Blvd. Milpitas, California 95035 You may also make a request by telephone at (408) 957-4536 between the hours of 9:00 a.m. and 5:00 p.m., Pacific Daylight Time, Monday through Friday. As you read the foregoing documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this Offer to Exchange, you should rely on the statements made in the most recent document. The information contained in this Offer to Exchange about Adaptec should be read together with the information contained in the documents to which we have referred you. 17. MISCELLANEOUS. We are not aware of any jurisdiction where the implementation of the New Grant Program violates applicable law. If we become aware of any jurisdiction where the implementation of the New Grant Program violates applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the New Grant Program will not be made to, nor will elections to exchange options be accepted from or on behalf of, the option holders residing in such jurisdiction. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD PARTICIPATE IN THE NEW GRANT PROGRAM. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY 25 INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE NEW GRANT PROGRAM OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE ACCOMPANYING LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US. Adaptec, Inc. May 22, 2001 26 EX-99.(A)2 3 a2050135zex-99_a2.txt EXHIBIT 99.(A)2 EXHIBIT 99.(a)(2) ADAPTEC, INC. FORM OF LETTER OF TRANSMITTAL PARTICIPATION INSTRUCTIONS: 1. COMPLETE THIS FORM, SIGN IT, AND FAX IT TO ADAPTEC STOCK ADMINISTRATION AT (408) 957-6715 OR DELIVER IT TO ADAPTEC, INC., STOCK ADMINISTRATION, MS 24, 691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA 95035, AS SOON AS POSSIBLE, BUT IN ANY EVENT, BEFORE 9:00 P.M., PACIFIC DAYLIGHT TIME, ON JUNE 21, 2001. 2. ENSURE THAT YOU RECEIVE CONFIRMATION OF RECEIPT FROM ADAPTEC STOCK ADMINISTRATION WITHIN THREE BUSINESS DAYS. NOTE THAT EMPLOYEES WHO RETURN FORMS AFTER JUNE 19, 2001 MAY NOT RECEIVE TIMELY CONFIRMATION. I am an employee of Adaptec, Inc. (the "Company"). I have received and read the Offer to Exchange including the Summary Term Sheet. I understand that I may cancel any options having an exercise price above $15.00 per share under the Adaptec, Inc. 1990 Stock Plan, the Adaptec, Inc. 1999 Stock Plan and the Adaptec, Inc. 2000 Nonstatutory Stock Option Plan (collectively, the "Plans"). I also understand that if I cancel any of these options, I must cancel all options granted on or after December 20, 2000, regardless of exercise price. In return, I will be granted a new nonqualified option no earlier than the date that is six months and one day following the date the Company cancels the options accepted for exchange (the "replacement grant date"), PROVIDED THAT I AM STILL EMPLOYED BY THE COMPANY ON THAT DATE. The number of shares subject to my new option will be equal to the number of shares subject to the options I elected to cancel, subject to adjustments for any stock splits, stock dividends and similar events. The exercise price of the new option will be equal to the closing price of the Company's common stock on the business day before the replacement grant date as reported by the Nasdaq National Market. The new option will be vested to the same degree that my cancelled options were vested, with the unvested portion of my new option vesting in equal installments on a quarterly basis over two years following the replacement grant date. I understand that my employment with Adaptec is on an at-will basis and that nothing in the Offer to Exchange modifies or changes that, and that if my employment with Adaptec or one of its subsidiaries is terminated by me or Adaptec voluntarily, involuntarily, or for any reason or no reason, before my new option is granted, I will not have a right to any stock options that were previously cancelled, and I will not have a right to the grant that I would have been eligible to receive on the replacement grant date. I further understand that in the event of a change of control of Adaptec occurring before the replacement grant date, it is possible that I will not receive a replacement option, securities of the surviving corporation or other consideration in exchange for my cancelled options. I also understand that except for the exercise price, the change in vesting described above and status as a nonqualified stock option for cancelled incentive stock options, the terms and conditions of the new options will be substantially similar to the cancelled options. I understand that the new option will have a new ten-year term starting on the replacement grant date. I further understand that I will not be eligible to receive any other stock options until the replacement grant date. I recognize that, under certain circumstances stated in the Offer to Exchange, the Company may terminate or amend the new grant program and postpone its acceptance and cancellations of any options elected for exchange. In such event, I understand that the options delivered with this letter of transmittal but not accepted for exchange will be returned to me. (INDIVIDUAL OPTIONEE INFORMATION PROVIDED HERE) I have reviewed the list of my options shown above and I hereby elect to cancel and give up my entire ownership interest in the options I have marked with a "X". Additionally, pursuant to the terms and subject to the conditions of the Offer to Exchange and this Letter of Transmittal, I hereby elect to cancel all options granted after December 20, 2000. I understand they will become null and void on the date the Company accepts my options for exchange. I acknowledge that this election is entirely voluntary. I ALSO ACKNOWLEDGE THAT I WILL BE UNABLE TO REVOKE THIS LETTER OF TRANSMITTAL AFTER 9:00 P.M., PACIFIC DAYLIGHT TIME, ON JUNE 21, 2001. Date: Signature of Optionee Name of Optionee Country where employed Social Security Number (U.S. employees only)
EX-99.(A)3 4 a2050135zex-99_a3.txt EXHIBIT 99.(A)3 EXHIBIT 99.(a)(3) +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ADAPTEC, INC. HAS NOT COMMENCED THE OFFER TO EXCHANGE THAT IS REFERRED TO IN THIS COMMUNICATION. UPON COMMENCEMENT OF SUCH OFFER, ADAPTEC WILL FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A SCHEDULE TO AND RELATED EXHIBITS, INCLUDING THE OFFER TO EXCHANGE, LETTER OF TRANSMITTAL AND OTHER RELATED DOCUMENTS. EMPLOYEES OF ADAPTEC WHO ARE OPTION HOLDERS ARE STRONGLY ENCOURAGED TO READ THE SCHEDULE TO AND RELATED EXHIBITS, INCLUDING THE OFFER TO EXCHANGE, LETTER OF TRANSMITTAL AND OTHER RELATED DOCUMENTS, WHEN THESE BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER. THE SCHEDULE TO AND RELATED EXHIBITS WILL BE AVAILABLE WITHOUT CHARGE AT THE SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV AND WILL BE DELIVERED WITHOUT CHARGE TO ALL EMPLOYEES OF ADAPTEC WHO ARE OPTION HOLDERS. ADDITIONAL COPIES OF THESE DOCUMENTS MAY BE OBTAINED WITHOUT CHARGE BY EMPLOYEES OF ADAPTEC WHO ARE OPTION HOLDERS BY CONTACTING THE PERSON SPECIFIED IN THESE DOCUMENTS. +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ [TRANSCRIPT OF ANNOUNCEMENT TO ADAPTEC EMPLOYEES ON MAY 17, 2001] Hi, this is Bob Stephens. Today I am announcing an exciting opportunity for all Adaptec employees with stock options. Stock options play an important role in connecting the results of what we deliver to the market place with increases in shareholder value. However, with the recent economic slowdown and resulting decline in stock values, many of you hold Adaptec stock options with an exercise price that is significantly higher than the current trading price of Adaptec's common stock. In light of this situation, our board of directors has authorized a stock option exchange program. This is a voluntary program that allows you to cancel some or all of your current stock options with an exercise price higher than $15, in exchange for new options to be granted by Adaptec's board of directors no earlier than six months and one day after the cancellation date of the existing options. At this time, we anticipate that cancellation of any options you wish to turn in will become effective in mid to late June, following completion of certain formalities with the SEC and other requirements. The new options granted after the six month period has elapsed will have the following terms: the new grant will cover the same number of shares as the cancelled options, the shares that are fully vested on the date of cancellation will be fully vested in the new grant. The unvested portion of the cancelled options will vest quarterly over two years beginning on the date of the new grant. The exercise price will be the fair market value of Adaptec's stock on the date of the new grant. You will be receiving detailed information about this program next week, including a set of frequently asked questions and answers which will be posted on our intranet website. In addition, we will be conducting employee meetings to review the program and address any other issues. We are looking forward to implementing this program and hope that it will more appropriately align the value of stock options to market realities and at the same time give you a real stake in Adaptec's future success. Thanks and keep up the great work. EX-99.(A)4 5 a2050135zex-99_a4.txt EXHIBIT 99.(A)4 EXHIBIT 99.(a)(4) [FORM OF COVER LETTER TO ELIGIBLE OPTION HOLDERS] ADAPTEC, INC. 691 S. MILPITAS BLVD. MILPITAS, CALIFORNIA 95035 May 23, 2001 Dear Adaptec Employee: As announced last week, our board of directors has authorized a New Grant Program. This is a voluntary program that allows Adaptec employees to cancel their current stock options having an exercise price above $15.00 per share in exchange for a new nonqualified stock option. Adaptec's compensation committee will grant the new options no earlier than six months and one day after the options are cancelled. The attached documents describe the New Grant Program in detail, including the possible benefits and risks of this program. Please take the time to carefully review the documents and instructions enclosed with this letter and consider your decision carefully. There is no way to predict what the price of our common stock will be during the next six months. Our board of directors makes no recommendations as to whether you should participate in the New Grant Program, and we urge you to consult with your own advisors regarding your decision. Included are two (2) copies of the letter of transmittal, one for you to keep and the other for you to return if you decide to participate. If you decide to participate in the New Grant Program, you need to return the letter of transmittal to us no later than 9:00 P.M., PACIFIC DAYLIGHT TIME, ON JUNE 21, 2001. If you have any questions about the New Grant Program, please contact Kelley Wall at (408) 957-4536 or kelley_wall@Adaptec.com. Sincerely, /s/ ROBERT N. STEPHENS -------------------------------------- Robert N. Stephens, President and Chief Executive Officer Enclosures EX-99.(D)1 6 a2050135zex-99_d1.txt EXHIBIT 99.(D)1 EXHIBIT 99.(d)(1) ADAPTEC, INC. 1990 STOCK PLAN 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 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. Stock appreciation rights ("SARs"), incentive stock rights, and stock purchase rights may also be granted under the Plan. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "ADMINISTRATOR" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan. (b) "BOARD" means the Board of Directors of the Company. (c) "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (d) "COMMON STOCK" means the Common Stock, $.001 par value, of the Company. (e) "COMPANY" means Adaptec, Inc., a Delaware corporation. (f) "COMMITTEE" means a Committee, if any, appointed by the Board in accordance with paragraph (a) of Section 4 of the Plan. (g) "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, including, without limitation, directors of the Company who receive a director's fee from the Company. (h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the absence of any interruption or termination of the employment or consulting relationship by the Company or any Subsidiary. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or its successor. (i) "DISABILITY" means total and permanent disability, as defined in Section 22(e)(3) of the Code. (j) "EMPLOYEE" means any person, including officers and directors, employed by the Company or any Subsidiary. The payment of directors' fees by the Company shall not be sufficient to constitute "employment" by the Company. (k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (l) "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 National Market System 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 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; (ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or 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 and low asked prices for the Common Stock or 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; (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. (m) "INCENTIVE STOCK OPTION" means an Option that satisfies the provisions of Section 422 of the Code. (n) "INCENTIVE STOCK RIGHT" means an award under Section 7 below that is payable in cash or in shares of Common Stock upon such terms and conditions as the Administrator may deem appropriate. (o) "NONSTATUTORY STOCK OPTION" means an Option that is not an Incentive Stock Option. (p) "OPTION" means an Option granted pursuant to the Plan. (q) "OPTIONED STOCK" means the Common Stock subject to an Option or Right. (r) "OPTIONEE" means an Employee or Consultant who receives an Option or Right. (s) "PARENT" corporation shall have the meaning defined in Section 424(e) of the Code. (t) "PLAN" means this 1990 Stock Plan. (u) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 9 below. (v) "RIGHT" means and includes Incentive Stock Rights, SARs and Stock Purchase Rights granted pursuant to the Plan. (w) "SAR" means a stock appreciation right granted pursuant to Section 8 below. (x) "SHARE" means the Common Stock, as adjusted in accordance with Section 12 of the Plan. (y) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock pursuant to Section 9. (z) "SUBSIDIARY" corporation shall have the meaning defined in Section 424(f) of the Code. IN ADDITION, THE TERMS "RULE 16b-3" AND "APPLICABLE LAWS," THE TERM "INSIDERS," THE TERM "TAX DATE," AND THE TERMS "CAUSE," "CHANGE OF CONTROL" AND "CHANGE OF CONTROL PRICE," SHALL HAVE THE MEANINGS SET FORTH, RESPECTIVELY, IN SECTIONS 4, 8, 9 AND 11 BELOW. 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of the Plan, the total number of Shares reserved and available for distribution pursuant to awards made under the Plan shall be 23,000,000 Shares, increased each April 1, from and including April 1, 1995, by a number of Shares equal to 4.25% of the number of Shares outstanding as of the last Saturday of the March preceding each such April 1. The maximum number of Shares reserved and available for issuance pursuant to Incentive Stock Options is 23,000,000. Subject to Section 11 of the Plan, if any Shares that have been optioned under an Option cease to be subject to such Option (other than through exercise of the Option), or if any Option or Right granted hereunder is forfeited, or any such award otherwise terminates prior to the issuance of Common Stock to the participant, the Shares that were subject to such Option or Right shall again be available for distribution in connection with future Option or Right grants under the Plan, provided that the Board or the Committee may, at its discretion, determine that the Shares subject to such Option or Right shall not again be available for distribution in connection with future Options or Rights under this Plan or any other plan. In addition, Shares that have been subject to Incentive Stock Rights settled for cash, and SARs exercised for cash, whether such SARs have been granted in connection with or independently of options, shall again be available for distribution under the Plan. Shares that have actually been issued under the Plan, whether upon exercise of an Option or Right, shall not in any event be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, and the original purchaser of such Shares did not receive any benefits of ownership of such Shares, such Shares shall become available for future grant under the Plan. For purposes of the preceding sentence, voting rights shall not be considered a benefit of Share ownership. 4. ADMINISTRATION OF THE PLAN. (a) PROCEDURE. (i) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER EMPLOYEES. With respect to grants of Options or Rights to Employees or Consultants who are neither directors nor officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of California corporate and securities laws and of the Code (the "Applicable Laws"). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws. (ii) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered by different bodies with respect to directors, non-director officers and Employees who are neither directors nor officers and Consultants who are not directors. (iii) 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. (iv) 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. (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, 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 officers, Consultants and Employees to whom Options and Rights may from time to time be granted hereunder; (iii) to determine whether and to what extent Options and Rights or any combination thereof, 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 (including, but not limited to, the share price and any restriction or limitation, or any vesting acceleration or waiver of forfeiture restrictions regarding any Option or other award and/or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator shall determine, in its sole discretion); (vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 8(a)(vi) instead of Common Stock; (viii) to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the participant (including providing for and determining the amount (if any) of any deemed earnings on any deferred amount during any deferral period); (ix) 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; and (x) to determine the terms and restrictions applicable to Options and Rights and any Restricted Stock acquired pursuant to Rights; (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 or Stock Purchase Right 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 and shall be subject to the consent or disapproval of the Administrator. (c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations and interpretations of the Administrator shall be final and binding. 5. ELIGIBILITY. Nonstatutory Stock Options and Rights may be granted only to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee who has been granted an Option or Right may, if he or she is otherwise eligible, be granted additional Options or Rights. Each Option shall be evidenced by a written Option agreement, which shall expressly identify the Options as Incentive Stock Options or as Nonstatutory Stock Options, and which shall be in such form and contain such provisions as the Administrator shall from time to time deem appropriate. Without limiting the foregoing, the Administrator may, at any time, or from time to time, authorize the Company, with the consent of the respective recipients, to issue Options in exchange for the surrender and cancellation of any or all outstanding Options, other options, or Rights. Neither the Plan nor any Option or Right agreement shall confer upon any Optionee any right with respect to continuation of employment by the Company, nor shall it interfere in any way with the Optionee's right or the Company's right to terminate the Optionee's employment at any time. 6. TERM OF PLAN. Subject to Section 17 of the Plan, the Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company as described in Section 17. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 13 of the Plan. 7. INCENTIVE STOCK RIGHTS. (a) PROCEDURE. The Administrator, in its discretion, may grant to eligible participants Incentive Stock Rights composed of incentive stock units. Incentive Stock Rights shall be evidenced by Incentive Stock Right agreements in such form and not inconsistent with the Plan as the Administrator shall approve from time to time, which agreements shall contain in substance the following terms and conditions: (i) INCENTIVE STOCK UNITS. An Incentive Stock Right agreement shall specify the number of incentive stock units to which it pertains. Each incentive stock unit shall be equivalent to one Share, and shall entitle the holder to receive, without payment of cash to the Company, one Share or, in the discretion of the Administrator, the cash equivalent of one Share, in consideration for services performed for the Company or for its benefit by the person receiving the Right subject to the lapse of the incentive periods (hereinafter defined). An incentive stock unit that becomes payable may be paid currently or on a deferred basis with such interest or earnings equivalent as may be determined by the Administrator. (ii) INCENTIVE PERIOD. The holder of Incentive Stock Rights shall be entitled to receive Shares only after the lapse of such incentive periods, and in such manner, as shall be fixed by the Administrator at the time of grant of Incentive Stock Rights. (Such period or periods so fixed is or are herein referred to as the "incentive period".) To the extent the holder of Incentive Stock Rights receives Shares on the lapse of the incentive period, an equivalent number of incentive stock units subject to such Rights shall be deemed to have been discharged. (iii) TERMINATION OF STATUS AS EMPLOYEE OR CONSULTANT BY REASON OF DEATH OR DISABILITY. In the event that the employment or consulting relationship of any person to whom Incentive Stock Rights have been issued under the Plan terminates as a result of death or Disability, the incentive period established pursuant to subsection 7(a)(ii) during which such termination occurs shall lapse as to the incentive stock units that are covered by such Incentive Stock Rights and that otherwise would have become payable at the end of such incentive period. Incentive stock units covered by Incentive Stock Rights of such person that would be payable upon the lapse of incentive periods subsequent to the incentive period in which death or disability occurs shall terminate. (iv) TERMINATION OF STATUS AS EMPLOYEE OR CONSULTANT FOR ANY OTHER REASON. In the event that any person to whom Incentive Stock Rights have been issued under the Plan terminates his or her employment or consulting relationship (as the case may be) for any reason (including dismissal by the Company with or without cause), other than death or Disability, such Rights as to which the incentive period has not lapsed shall terminate on termination of employment or consulting relationship (as the case may be). (v) ISSUANCE OF SHARES. With respect to Incentive Stock Rights payable in Shares, upon the lapse of an incentive period, the Company shall deliver to the person entitled to receive the shares a certificate or certificates for a number of Shares equal to the number of incentive stock units as to which an incentive period has lapsed. (b) DIVIDEND EQUIVALENTS. The holder of an Incentive Stock Right shall be entitled to receive from the Company cash payments at the same time and in the same amounts that the holder of record of a number of Shares equal to the number of incentive stock units covered by such Right would be entitled to receive as dividends on such Shares. Such right to cash payment on an incentive stock unit shall apply to all dividends the record date for which occurs at any time during the period commencing on the date the Incentive Stock Right is granted and ending on the date that the holder of such Right becomes a stockholder of record with respect to such Right as a result of the lapse of an incentive period or the date the Incentive Stock Right otherwise terminates, whichever occurs first. 8. OPTIONS AND SARs. (a) OPTIONS. The Administrator, in its discretion, may grant Options to eligible participants and shall determine whether such Options shall be Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be evidenced by a written Option agreement which shall expressly identify the Options as Incentive Stock Options or as Nonstatutory Stock Options, and be in such form and contain such provisions as the Administrator shall from time to time deem appropriate. Without limiting the foregoing, the Administrator may, at any time, or from time to time, authorize the Company, with the consent of the respective recipients, to issue Options or Rights in exchange for the surrender and cancellation of any or all outstanding Options or Rights. Option agreements shall contain the following terms and conditions: (i) OPTION PRICE; NUMBER OF SHARES. The per Share exercise price for the Shares issuable pursuant to an Option shall be such price as is determined by the Administrator, but shall in no event be less than 50% of the Fair Market Value of Common Stock, determined as of the date of grant of the Option. In the event that the Administrator shall reduce the exercise price, the exercise price shall be no less than 50% of the Fair Market Value as of the date of that reduction. The Option agreement shall specify the number of Shares to which it pertains. (ii) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted, the Administrator will determine the terms and conditions to be satisfied before Shares may be purchased, including the dates on which Shares subject to the Option may first be purchased. The Administrator may specify that an Option may not be exercised until the completion of the service period specified at the time of grant. (Any such period is referred to herein as the "waiting period.") At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised, which shall not be less than the waiting period, if any, nor, in the case of an Incentive Stock Option, more than ten (10) years, from the date of grant. (iii) FORM OF PAYMENT. 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 irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price, (6) delivery of an irrevocable subscription agreement for the Shares which irrevocably obligates the Optionee to take and pay for the Shares not more than twelve months after the date of delivery of the subscription agreement, (7) any combination of the foregoing methods of payment, or (8) such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws. (iv) SPECIAL INCENTIVE STOCK OPTION PROVISIONS. In addition to the foregoing, Options granted under the Plan which are intended to be Incentive Stock Options under Section 422 of the Code shall be subject to the following terms and conditions: (1) EXERCISE PRICE. The per share exercise price of an Incentive Stock Option shall be no less than 100% of the Fair Market Value per Share on the date of grant. (2) DOLLAR LIMITATION. To the extent that the aggregate Fair Market Value of (i) the Shares with respect to which Options designated as Incentive Stock Options plus (ii) the shares of stock of the Company, Parent and any Subsidiary with respect to which other incentive stock options are exercisable for the first time by an Optionee during any calendar year under all plans of the Company and any Parent and Subsidiary exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of the preceding sentence, (i) Options shall be taken into account in the order in which they were granted, and (ii) the Fair Market Value of the Shares shall be determined as of the time the Option or other incentive stock option is granted. (3) 10% STOCKHOLDER. If any Optionee to whom an Incentive Stock Option is to be granted pursuant to the provisions of the Plan is, on the date of grant, the owner of Common Stock (as determined under Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary, then the following special provisions shall be applicable to the Option granted to such individual: (A) The per Share Option price of Shares subject to such Incentive Stock Option shall not be less than 110% of the Fair Market Value of Common Stock on the date of grant; and (B) The Option shall not have a term in excess of five (5) years from the date of grant. Except as modified by the preceding provisions of this subsection 8(a)(iv) and except as otherwise limited by Section 422 of the Code, all of the provisions of the Plan shall be applicable to the Incentive Stock Options granted hereunder. (v) OTHER PROVISIONS. Each Option granted under the Plan may contain such other terms, provisions, and conditions not inconsistent with the Plan as may be determined by the Administrator. (vi) 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. (b) SARS. (i) IN CONNECTION WITH OPTIONS. At the sole discretion of the Administrator, SARs may be granted in connection with all or any part of an Option, either concurrently with the grant of the Option or at any time thereafter during the term of the Option. The following provisions apply to SARs that are granted in connection with Options: (1) The SAR shall entitle the Optionee to exercise the SAR by surrendering to the Company unexercised a portion of the related Option. The Optionee shall receive in exchange from the Company an amount equal to the excess of (x) the Fair Market Value on the date of exercise of the SAR of the Common Stock covered by the surrendered portion of the related Option over (y) the exercise price of the Common Stock covered by the surrendered portion of the related Option. Notwithstanding the foregoing, the Administrator may place limits on the amount that may be paid upon exercise of an SAR; provided, however, that such limit shall not restrict the exercisability of the related Option. (2) When an SAR is exercised, the related Option, to the extent surrendered, shall cease to be exercisable. (3) An SAR shall be exercisable only when and to the extent that the related Option is exercisable and shall expire no later than the date on which the related Option expires. (4) An SAR may only be exercised at a time when the Fair Market Value of the Common Stock covered by the related Option exceeds the exercise price of the Common Stock covered by the related Option. (ii) INDEPENDENT OF OPTIONS. At the sole discretion of the Administrator, SARs may be granted without related Options. The following provisions apply to SARs that are not granted in connection with Options: (1) The SAR shall entitle the Optionee, by exercising the SAR, to receive from the Company an amount equal to the excess of (x) the Fair Market Value of the Common Stock covered by exercised portion of the SAR, as of the date of such exercise, over (y) the Fair Market Value of the Common Stock covered by the exercised portion of the SAR, as of the last market trading date prior to the date on which the SAR was granted; provided, however, that the Administrator may place limits on the aggregate amount that may be paid upon exercise of an SAR or SARs. (2) SARs shall be exercisable, in whole or in part, at such times as the Administrator shall specify in the Optionee's SAR agreement. (iii) FORM OF PAYMENT. The Company's obligation arising upon the exercise of an SAR may be paid in Common Stock or in cash, or in any combination of Common Stock and cash, as the Administrator, in its sole discretion, may determine. Shares issued upon the exercise of an SAR shall be valued at their Fair Market Value as of the date of exercise. (c) METHOD OF EXERCISE. (i) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option or SAR granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator 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 or SAR 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 or SAR by the person entitled to exercise the Option or SAR 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 Administrator (and, in the case of an Incentive Stock Option, determined at the time of grant) and permitted by the Option Agreement consist of any consideration and method of payment allowable under subsection 8(a)(iii) 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 stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter shall 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. Exercise of an SAR in any manner shall, to the extent the SAR is exercised, result in a decrease in the number of Shares which thereafter shall be available for purposes of the Plan, and the SAR shall cease to be exercisable to the extent it has been exercised. (ii) TERMINATION OF EMPLOYMENT. Upon termination of an Optionee's Continuous Status as an Employee or Consultant (other than upon the Optionee's death), the Optionee may, but only within thirty (30) days (or such other period of time as is determined by the Administrator) after the date of such termination, exercise his or her Option or SAR to the extent that it was exercisable at the date of such termination. (iii) DISABILITY OF OPTIONEE. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of the Optionee's Disability, the Optionee may, but only within six (6) months from the date of such termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent that the Optionee was entitled to exercise it at the date of such termination. (iv) DEATH OF OPTIONEE. In the event of the death of an Optionee, Options and SARs granted hereunder to such Optionee shall become vested and exercisable, in addition to Shares as to which such Options and SARs would otherwise be vested and exercisable. (d) OPTION AND SAR LIMITATION. The following limitation shall apply to grants of Options and SARs under the Plan: (i) No Employee shall be granted, in any fiscal year of the Company, Options and SARs under the Plan to purchase more than 1,000,000 Shares. (ii) The foregoing limitation shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 12(a). (iii) If an Option or SAR is canceled (other than in connection with a transaction described in Section 11), the canceled Option or SAR shall be counted against the limits set forth in Section 8(d)(i). For this purpose, if the exercise price of an Option or SAR is reduced, the transaction will be treated as a cancellation of the Option or SAR and the grant of a new Option or SAR. 9. STOCK PURCHASE RIGHTS. (a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid (which price shall not be less than 50% of the Fair Market Value of the Shares as of the date of the offer), and the time within which such person must accept such offer, which shall in no event exceed thirty (30) days from the date upon which the Administrator made the determination to grant the Stock Purchase Right. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right shall be referred to herein as "Restricted Stock." (b) REPURCHASE OPTION. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's employment with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine. (c) OTHER PROVISIONS. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock purchase agreements need not be the same with respect to each purchaser. (d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a stockholder, and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 11 of the Plan. 10. NON-TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the Administrator, Options and Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Right transferable, such Option or Right shall contain such additional terms and conditions as the Administrator deems appropriate. 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER, ASSET SALE OR CHANGE IN CONTROL. (a) Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Option and Right, and the number of Shares which have been authorized for issuance under the Plan but as to which no Options or Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Right, as well as the price per Share covered by each such outstanding Option or Right, 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 aggregate 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." 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 subject to an Option or Right. (b) In the event of the proposed dissolution or liquidation of the Company, all outstanding Options and Rights will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option or Right shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option or Right as to all or any part of the Optioned Stock or Right, including Shares as to which the Option or Right, would not otherwise be exercisable. (c) 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 outstanding Option and Right shall be assumed or an equivalent Option or Right 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 or Right, the Optionee shall fully vest in and have the right to exercise the Option or Right as to one hundred percent (100%) of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Right shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Right shall terminate upon the expiration of such period. 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 Optioned 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 Share 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 if a majority of the outstanding Shares); 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, the Board may, with the consent of the successor corporation and the participant, provide for the consideration to be received upon exercise of the Option or Right 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 sale of assets or merger. (d) In the event of a "Change in Control" of the Company (as such term is defined in paragraph (f) below), then any Options and Rights outstanding upon the date of such Change in Control that are not yet exercisable and vested on such date shall have their vesting accelerated as to an additional twenty-five percent (25%) of the unvested Shares subject to such Options and Rights as of the date of such Change in Control, and such Stock Options and Rights shall continue to otherwise vest, (subject to (i) Optionee remaining in Continuous Status as an Employee or Consultant, and (ii) accelerated vesting as provided for in Sections 11(c) or 11(e) of this Plan) at the same rate and as to the same number of Shares per vesting period as immediately prior to the Change in Control. For example, if an Optionee holds an Option that is fifty percent (50%) vested immediately prior to the date of a Change in Control, which Option ordinarily vests so as to be one hundred percent (100%) vested four years after the date of grant (subject to Optionee maintaining his or her Continuous Status as an Employee or Consultant), the Option would become seventy-five percent (75%) vested upon the date of the Change in Control and would resume vesting (subject to (i) Optionee maintaining his or her Continuous Status as an Employee or Consultant, and (ii) accelerated vesting as provided for in Sections 11(c) or 11(e) of this Plan) so as to be one hundred percent (100%) vested three years following the date of grant. (e) In the event an Optionee is involuntarily terminated without Cause within twelve (12) months following a "Change in Control" of the Company (as such terms are defined in paragraph (f) below), then any Options and Rights outstanding upon the date of such Change in Control that are not yet exercisable and vested on such date shall become one hundred percent (100%) exercisable and vested. Notwithstanding the foregoing, (unless Optionee is party to a duly authorized written agreement with the Company providing otherwise) this Plan does not constitute a contract of employment or impose on the Company any obligation to retain the Optionee, or to change the Company's policies regarding termination of employment or other provision of services. The employment of Optionees who are Employees is and shall continue to be at-will, as defined under applicable law, and may be terminated at any time, with or without cause. (f) DEFINITIONS. (i) CHANGE IN CONTROL. For purposes of this Section 11, a "Change in Control" means the occurrence of any of the following: (A) When any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act (other than the Company, a Subsidiary or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities; or (B) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (I) are directors of the Company as of the date hereof, or (II) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); (C) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (D) The consummation of the sale or disposition by the Company of all or substantially all the Company's assets. (ii) CAUSE. For purposes of this Section 11, "Cause" shall mean (A) any act of personal dishonesty taken by the Optionee in connection with his responsibilities as a service provider to the Company and intended to result in substantial personal enrichment of the Optionee, (B) the Optionee's conviction of a felony, or (C) a willful act by the Optionee which constitutes gross misconduct and which is injurious to the Company, or (D) continued substantial violations by the Optionee of the Optionee's duties to the Company which are demonstrably willful and deliberate on the Optionee's part after there has been delivered to the Optionee a written demand for performance from the Company which specifically sets forth the factual basis for the Company's belief that the Optionee has committed continued substantial violations of his or her duties. (g) GOLDEN PARACHUTE EXCISE TAX VESTING ACCELERATION LIMITATION. Notwithstanding any other provision of this Plan, in the event that the vesting acceleration provided for in this Plan or amounts or benefits otherwise payable to an Optionee (i) constitute "parachute payments" within the meaning of Section 280G of the Code, and (ii) but for this Section 11(g), would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then the Optionee's accelerated vesting hereunder shall be either (i) made in full, or (ii) made as to such lesser extent as would result in no portion of such acceleration, amounts or benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Optionee on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and the Optionee otherwise agree in writing, any determination required under this Section 11(g) shall be made in writing in good faith by the accounting firm serving as the Company's independent public accountants immediately prior to the Change of Control (the "Accountants"). In the event of a reduction in benefits hereunder, the Optionee shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this Section 11(g), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Optionee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11(g). 12. TIME OF GRANTING OPTIONS AND RIGHTS. The date of grant of an Option or Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Right. Notice of the determination shall be given to each Employee or Consultant to whom an Option or Right is so granted within a reasonable time after the date of such grant. 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 Section 422 of the Code (or any other applicable law or regulation), the Company shall obtain stockholder 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 or Rights already granted and such Options and Rights shall remain in full force and effect as if this Plan had not been amended or terminated. 14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with respect to an Option or Right unless the exercise of such Option or Right and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option or the issuance of Shares on exercise of an Option or Right, the Company may require the person exercising such Option or Right 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. 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 non-issuance or sale of such Shares as to which such requisite authority shall not have been obtained. 16. AGREEMENTS. Options and Rights shall be evidenced by written agreements in such form as the Board shall approve from time to time. 17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted as provided in Section 6. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law. EX-99.(D)2 7 a2050135zex-99_d2.txt EXHIBIT 99.(D)2 EXHIBIT 99.(d)(2) ADAPTEC, INC. 1999 STOCK PLAN 1. PURPOSES OF THE PLAN. The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees 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 as shall be administering the Plan, in accordance with 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 from time to time, and any successor thereto. (e) "COMMON STOCK" means the Common Stock, $.001 par value, of the Company. (f) "COMPANY" means Adaptec, Inc., a Delaware corporation. (g) "COMMITTEE" means a Committee, if any, appointed by the Board in accordance with paragraph (a) of Section 4 of the Plan. (h) "CONSULTANT" means any person, including an advisor, who is engaged by the Company or any Parent or Subsidiary to render services including, without limitation, directors of the Company who are not compensated for their services or are paid only a director's fee by the Company. (i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the absence of any interruption or termination of the employment or consulting relationship by the Company or any Parent or Subsidiary. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company, its Parent or Subsidiaries or its successor. If reemployment upon expiration of a leave of absence in excess of ninety (90) days is not guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. (j) "DISABILITY" means total and permanent disability, as defined in Section 22(e)(3) of the Code. (k) "EMPLOYEE" means any person, including officers and directors, employed by the Company or any Subsidiary. The payment of directors' fees 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 National Market System 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 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; (ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or 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 and low asked prices for the Common Stock or 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; (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 that satisfies the provisions of Section 422 of the Code. (o) "NONSTATUTORY STOCK OPTION" means an Option that is not an Incentive Stock Option. (p) "OPTION" means an Option granted pursuant to the Plan. (q) "OPTIONED STOCK" means the Common Stock subject to an Option. (r) "OPTIONEE" means an Employee or Consultant who receives an Option. (s) "PARENT" corporation shall have the meaning defined in Section 424(e) of the Code. (t) "PLAN" means this 1999 Stock Plan. (u) "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. (v) "SHARE" means the Common Stock, as adjusted in accordance with Section 11 of the Plan. (w) "SUBSIDIARY" corporation shall have the meaning defined in Section 424(f) of the Code. IN ADDITION, THE TERMS "CAUSE," AND "CHANGE OF CONTROL" SHALL HAVE THE MEANINGS SET FORTH, RESPECTIVELY, IN SECTION 9 BELOW. 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 9 of the Plan, the total number of Shares reserved and available for distribution pursuant to awards made under the Plan shall be (a) 1,000,000 plus (b) any Shares which have been reserved but unissued under the Company's 1990 Stock Plan (the "1990 Plan") as of the date of stockholder approval of this Plan, and (c) any Shares returned to the 1990 Plan after the date of stockholder approval of this Plan as a result of the termination of options under the 1990 Plan. Subject to Section 9 of the Plan, if any Shares that have been optioned under an Option cease to be subject to such Option (other than through exercise of the Option), or if any Option granted hereunder is forfeited, or any such award otherwise terminates prior to the issuance of Common Stock to the participant, the Shares that were subject to such Option shall again be available for distribution in connection with future Option grants under the Plan; provided that the Board or the Committee may, at its discretion, determine that the Shares subject to such Options under this Plan, or Shares that we returned to the 1990 Plan and would otherwise be available for distribution under this Plan by reason of termination of options under such 1990 Plan, shall not again be available for distribution in connection with future Options. Shares that have actually been issued under the Plan, whether upon exercise of an Option, shall not in any event be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, and the original purchaser of such Shares did not receive any benefits of ownership of such Shares, such Shares shall become available for future grant under the Plan. For purposes of the preceding sentence, voting rights shall not be considered a benefit of Share ownership. 4. ADMINISTRATION OF THE PLAN. (a) PROCEDURE. (i) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER EMPLOYEES. With respect to grants of Options to Employees or Consultants who are neither directors nor officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws. (ii) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered by different bodies with respect to directors, non-director officers and Employees who are neither directors nor officers and Consultants who are not directors. (iii) 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. (iv) 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. (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, 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(m) of the Plan; (ii) to select the Consultants and Employees to whom Options may from time to time be granted hereunder; (iii) to determine whether and to what extent Options or any combination thereof, 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 (including, but not limited to, the share price and any restriction or limitation, or any vesting acceleration or waiver of forfeiture restrictions regarding any Option or other award and/or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator shall determine, in its sole discretion); (vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 7(a)(vi) instead of Common Stock; (viii) to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the participant (including providing for and determining the amount (if any) of any deemed earnings on any deferred amount during any deferral period); (ix) to determine the terms and restrictions applicable to Options; and (x) 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 and shall be subject to the consent or disapproval of the Administrator. (c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations and interpretations of the Administrator shall be final and binding. 5. ELIGIBILITY. Nonstatutory Stock Options may be granted only to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee who has been granted an Option may, if he or she is otherwise eligible, be granted additional Options. Each Option shall be evidenced by a written Option agreement, which shall expressly identify the Options as Incentive Stock Options or as Nonstatutory Stock Options, and which shall be in such form and contain such provisions as the Administrator shall from time to time deem appropriate. Without limiting the foregoing, the Administrator may, at any time, or from time to time, authorize the Company, with the consent of the respective recipients, to issue Options in exchange for the surrender and cancellation of any or all outstanding Options, other options. Neither the Plan nor any Option agreement shall confer upon any Optionee any right with respect to continuation of employment by the Company, nor shall it interfere in any way with the Optionee's right or the Company's right to terminate the Optionee's employment at any time. 6. TERM OF PLAN. Subject to Section 15 of the Plan, the Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company as described in Section 15. It shall continue in effect for a term of ten (10) years from the date the Plan or any amendment to add shares to the Plan was last adopted by the Board unless sooner terminated under Section 11 of the Plan. 7. OPTIONS. (a) OPTIONS. The Administrator, in its discretion, may grant Options to eligible participants and shall determine whether such Options shall be Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be evidenced by a written Option agreement which shall expressly identify the Options as Incentive Stock Options or as Nonstatutory Stock Options, and be in such form and contain such provisions as the Administrator shall from time to time deem appropriate. Without limiting the foregoing, the Administrator may, at any time, or from time to time, authorize the Company, with the consent of the respective recipients, to issue Options in exchange for the surrender and cancellation of any or all outstanding Options. Option agreements shall contain the following terms and conditions: (i) OPTION PRICE; NUMBER OF SHARES. The per Share exercise price for the Shares issuable pursuant to an Option shall be such price as is determined by the Administrator, but shall in no event be less than 75% of the Fair Market Value of Common Stock, determined as of the date of grant of the Option. The Option agreement shall specify the number of Shares to which it pertains. (ii) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted, the Administrator will determine the terms and conditions to be satisfied before Shares may be purchased, including the dates on which Shares subject to the Option may first be purchased. The Administrator may specify that an Option may not be exercised until the completion of the service period specified at the time of grant. (Any such period is referred to herein as the "waiting period.") At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised, which shall not be less than the waiting period, if any, nor, in the case of an Incentive Stock Option, more than ten (10) years, from the date of grant. (iii) FORM OF PAYMENT. 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 irrevocable instructions to a broker to promptly deliver to the Company the amount of 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 under Applicable Laws. (iv) SPECIAL INCENTIVE STOCK OPTION PROVISIONS. In addition to the foregoing, Options granted under the Plan, which are intended to be Incentive Stock Options under Section 422 of the Code shall be subject to the following terms and conditions: (1) EXERCISE PRICE. The per share exercise price of an Incentive Stock Option shall be no less than 100% of the Fair Market Value per Share on the date of grant. (2) DOLLAR LIMITATION. To the extent that the aggregate Fair Market Value of (i) the Shares with respect to which Options designated as Incentive Stock Options plus (ii) the shares of stock of the Company, Parent and any Subsidiary with respect to which other incentive stock options are exercisable for the first time by an Optionee during any calendar year under all plans of the Company and any Parent and Subsidiary exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of the preceding sentence, (i) Options shall be taken into account in the order in which they were granted, and (ii) the Fair Market Value of the Shares shall be determined as of the time the Option or other incentive stock option is granted. Except as modified by the preceding provisions of this Section 7(a)(iv) and except as otherwise limited by Section 422 of the Code, all of the provisions of the Plan shall be applicable to the Incentive Stock Options granted hereunder. (v) OTHER PROVISIONS. Each Option granted under the Plan may contain such other terms, provisions, and conditions not inconsistent with the Plan as may be determined by the Administrator. (vi) 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. (b) METHOD OF EXERCISE. (i) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator 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 Administrator (and, in the case of an Incentive Stock Option, determined at the time of grant) and permitted by the Option Agreement consist of any consideration and method of payment allowable under Section 7(a)(iii) 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 stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 9 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter shall 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. (ii) TERMINATION OF EMPLOYMENT. Upon termination of an Optionee's Continuous Status as an Employee or Consultant (other than upon the Optionee's death or Disability), the Optionee may, but only within three (3) months (or such other period of time as is determined by the Administrator but in no event later than the expiration of the term of such Option as set forth in the stock option agreement) after the date of such termination, exercise his or her Option to the extent that it was exercisable at the date of such termination. (iii) DISABILITY OF OPTIONEE. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of the Optionee's Disability, the Optionee may, but only within six (6) months from the date of such termination (and in no event later than the expiration of the term of such Option as set forth in the stock option agreement), exercise the Option to the extent that the Optionee was entitled to exercise it at the date of such termination. (iv) DEATH OF OPTIONEE. In the event of the death of an Optionee, Options granted hereunder to such Optionee shall become vested and exercisable, in addition to Shares as to which such Options would otherwise be vested and exercisable. (c) OPTION LIMITATION. The following limitation shall apply to grants of Options under the Plan: (i) No Employee shall be granted, in any fiscal year of the Company, Options under the Plan to purchase more than 1,000,000 Shares. (ii) The foregoing limitation shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 9(a). (iii) If an Option is canceled (other than in connection with a transaction described in Section 9), the canceled Option shall be counted against the limits set forth in Section 7(c)(i). 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. 8. NON-TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the Administrator, Options 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. 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER, ASSET SALE OR CHANGE IN CONTROL. (a) Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Option, and 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, 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 aggregate 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." 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 subject to an Option. (b) In the event of the proposed dissolution or liquidation of the Company, all outstanding Options will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. (c) 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 outstanding 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 Optionee shall fully vest in and have the right to exercise the Option as to one hundred percent (100%) of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and 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 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 Optioned 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 Share 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 if a majority of the outstanding Shares); 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, the Board may, with the consent of the successor corporation and the participant, 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 in the sale of assets or merger. (d) In the event of a "Change in Control" of the Company (as such term is defined in paragraph (f) below), then any Options outstanding upon the date of such Change in Control that are not yet exercisable and vested on such date shall have their vesting accelerated as to an additional twenty-five percent (25%) of the unvested Shares subject to such Options as of the date of such Change in Control, and such Stock Options shall continue to otherwise vest, (subject to (i) Optionee remaining in Continuous Status as an Employee or Consultant, and (ii) accelerated vesting as provided for in Sections 9(c) or 9(e) of this Plan) at the same rate and as to the same number of Shares per vesting period as immediately prior to the Change in Control. For example, if an Optionee holds an Option that is fifty percent (50%) vested immediately prior to the date of a Change in Control, which Option ordinarily vests so as to be one hundred percent (100%) vested four years after the date of grant (subject to Optionee maintaining his or her Continuous Status as an Employee or Consultant), the Option would become seventy-five percent (75%) vested upon the date of the Change in Control and would resume vesting (subject to (i) Optionee maintaining his or her Continuous Status as an Employee or Consultant, and (ii) accelerated vesting as provided for in Sections 9(c) or 9(e) of this Plan) so as to be one hundred percent (100%) vested three years following the date of grant. (e) In the event an Optionee is involuntarily terminated without Cause within twelve (12) months following a "Change in Control" of the Company (as such terms are defined in Section 9(f) below), then any Options outstanding upon the date of such Change in Control that are not yet exercisable and vested on such date shall become one hundred percent (100%) exercisable and vested. Notwithstanding the foregoing, (unless Optionee is party to a duly authorized written agreement with the Company providing otherwise) this Plan does not constitute a contract of employment or impose on the Company any obligation to retain the Optionee, or to change the Company's policies regarding termination of employment or other provision of services. The employment of Optionees who are Employees is and shall continue to be at-will, as defined under applicable law, and may be terminated at any time, with or without cause. (f) DEFINITIONS. (i) CHANGE IN CONTROL. For purposes of this Section, a "Change in Control" means the occurrence of any of the following: (A) When any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act (other than the Company, a Subsidiary or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities; or (B) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (I) are directors of the Company as of the date hereof, or (II) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); (C) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (D) The consummation of the sale or disposition by the Company of all or substantially all the Company's assets. (ii) CAUSE. For purposes of this Section, "Cause" shall mean (A) any act of personal dishonesty taken by the Optionee in connection with his responsibilities as a service provider to the Company and intended to result in substantial personal enrichment of the Optionee, (B) the Optionee's conviction of a felony, or (C) a willful act by the Optionee which constitutes gross misconduct and which is injurious to the Company, or (D) continued substantial violations by the Optionee of the Optionee's duties to the Company which are demonstrably willful and deliberate on the Optionee's part after there has been delivered to the Optionee a written demand for performance from the Company which specifically sets forth the factual basis for the Company's belief that the Optionee has committed continued substantial violations of his or her duties. (g) GOLDEN PARACHUTE EXCISE TAX VESTING ACCELERATION LIMITATION. Notwithstanding any other provision of this Plan, in the event that the vesting acceleration provided for in this Plan or amounts or benefits otherwise payable to an Optionee (i) constitute "parachute payments" within the meaning of Section 280G of the Code, and (ii) but for this Section, would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then the Optionee's accelerated vesting hereunder shall be either (i) made in full, or (ii) made as to such lesser extent as would result in no portion of such acceleration, amounts or benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Optionee on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and the Optionee otherwise agree in writing, any determination required under this Section shall be made in writing in good faith by the accounting firm serving as the Company's independent public accountants immediately prior to the Change of Control (the "Accountants"). In the event of a reduction in benefits hereunder, the Optionee shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Optionee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section. 10. 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. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. 11. 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 Section 422 of the Code (or any other applicable law or regulation), the Company shall obtain stockholder 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. 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 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 or the issuance of Shares on 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. 13. 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. 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 non-issuance or sale of such Shares as to which such requisite authority shall not have been obtained. 14. AGREEMENTS. Options shall be evidenced by written agreements in such form as the Board shall approve from time to time. 15. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted as provided in Section 6. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law. EX-99.(D)3 8 a2050135zex-99_d3.txt EXHIBIT 99.(D)3 EXHIBIT 99.(d)(3) ADAPTEC, INC. 2000 NONSTATUTORY STOCK OPTION PLAN 1. PURPOSES OF THE PLAN. The purposes of this Nonstatutory Stock Option Plan are: o to attract and to retain the best available personnel for positions of substantial responsibility, o to provide additional incentive to personnel of the Company, and o to promote the success of the Company's business. Options granted under the Plan will be Nonstatutory Stock Options. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "ADMINISTRATOR" means the Board or any of its Committees as shall be administering the Plan, in accordance with 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) "CAUSE" shall have the meaning as set forth in Section 12(f)(i) of the Plan. (e) "CHANGE OF CONTROL" shall have the meaning as set forth in Section 12(f)(ii) of the Plan. (f) "CODE" means the Internal Revenue Code of 1986, as amended. (g) "COMMITTEE" means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan. (h) "COMMON STOCK" means the Common Stock of the Company. (i) "COMPANY" means Adaptec, Inc., a Delaware corporation. (j) "CONSULTANT" means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity. (k) "DIRECTOR" means a member of the Board. (l) "DISABILITY" means total and permanent disability as defined in Section 22(e)(3) of the Code. (m) "EMPLOYEE" means any person, including Officers, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (o) "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; (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (p) "NOTICE OF GRANT" means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The Notice of Grant is part of the Option Agreement. (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 nonstatutory stock option granted pursuant to the Plan, that is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (s) "OPTION AGREEMENT" means an 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) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding options are surrendered in exchange for options with a lower exercise price. (u) "OPTIONED STOCK" means the Common Stock subject to an Option. (v) "OPTIONEE" means the holder of an outstanding Option granted under the Plan. -2- (w) "PARENT" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (x) "PLAN" means this 2000 Nonstatutory Stock Option Plan. (y) "SERVICE PROVIDER" means an Employee including an Officer, Consultant or Director. (z) "SHARE" means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan. (aa)"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 12 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is eight million (8,000,000) Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided that the Board or the Committee may, at its discretion, determine that the Shares subject to such Option under this Plan shall not again be available for distribution in connection with future Options. 4. ADMINISTRATION OF THE PLAN. (a) ADMINISTRATION. The Plan shall be administered by (i) the Board or (ii) 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, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: (i) to determine the Fair Market Value of the Common Stock; (ii) to select the Service Providers to whom Options may 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 Option 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 -3- performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the shares of 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 institute an Option Exchange Program; (ix) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (x) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (xi) to modify or amend each Option (subject to Section 14(b) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan; (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; (xiv) 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; and (xv) to make all other determinations deemed necessary or advisable for administering the Plan. (c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options. 5. ELIGIBILITY. Options may be granted to Service Providers; provided, however, that notwithstanding anything to the contrary contained in the Plan, Options may not be granted to Officers and Directors. 6. LIMITATION. Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall -4- they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause. 7. TERM OF PLAN. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for ten (10) years, unless sooner terminated under Section 14 of the Plan. 8. TERM OF OPTION. The term of each Option shall be stated in the Option Agreement. 9. OPTION EXERCISE PRICE AND CONSIDERATION. (a) EXERCISE PRICE. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator. (b) WAITING PERIOD AND EXERCISE DATES. 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. (c) FORM OF CONSIDERATION. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. Such consideration may consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) 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; (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement; (vii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (viii) any combination of the foregoing methods of payment. 10. EXERCISE OF OPTION. (a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions -5- as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), 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 Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter 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 RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option, but only within such period of time as is specified in the Option Agreement, and only to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for six (6) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) DEATH OF OPTIONEE. In the event of the death of an Optionee while a Service Provider, Options granted hereunder to such Optionee shall become vested and exercisable, in addition to Shares as to which such Options would otherwise be vested and exercisable, for the lesser of the full number of Shares covered by the Options or an aggregate of 50,000 Shares. Each Option held by the Optionee at the time of death may be exercised at any time within six (6) months -6- following the date of death by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance. In no event shall an Option be exercised later than the expiration of the term of the Option, as set forth in the stock option agreement. (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. 11. 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. 12. 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 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 Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an 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, each outstanding Option shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation -7- refuses to assume or substitute for the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and 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 sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock, 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); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock 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 sale of assets. (d) ACCELERATION UPON A CHANGE OF CONTROL. In the event of a "Change of Control" of the Company then any Options outstanding upon the date of such Change of Control that are not yet exercisable and vested on such date shall have their vesting accelerated as to an additional twenty-five percent (25%) of the unvested Shares subject to such Options as of the date of such Change of Control, and such Stock Options shall continue to otherwise vest, (subject to (i) Optionee remaining in Continuous Status as an Employee or Consultant, and (ii) accelerated vesting as provided for in Sections 12(c) or 12(e) of this Plan) at the same rate and as to the same number of Shares per vesting period as immediately prior to the Change of Control. For example, if an Optionee holds an Option that is fifty percent (50%) vested immediately prior to the date of a Change of Control, which Option ordinarily vests so as to be one hundred percent (100%) vested four years after the date of grant (subject to Optionee maintaining his or her Continuous Status as an Employee or Consultant), the Option would, upon the date of the Change of Control, become vested as to an additional twelve and one-half percent (12.5%) of the total number of Shares covered by the Option (that is, 25% of the 50% that remained unvested as of the date of the Change of Control). The Option would resume vesting (subject to (i) Optionee maintaining his or her Continuous Status as an Employee or Consultant, and (ii) accelerated vesting as provided for in Sections 12(c) or 12(e) of this Plan) so as to be one hundred percent (100%) vested three and one-half years following the date of grant. On the twelve month anniversary date (the "Anniversary Date") following the date of the Change of Control each Service Provider who is an Optionee shall have 25% of the unvested Shares subject to such Options as of the Anniversary Date accelerated, provided, however, that such Optionee was a Service Provider on the date the Change of Control occurred and is a Service Provider on the Anniversary Date. For purposes of this section 12(d), any acceleration applies only to options that have not expired. (e) TERMINATION WITHOUT CAUSE. In the event an Optionee is involuntarily terminated without Cause within twelve (12) months following a "Change of Control" of the Company (as such terms are defined in Section 12(f) below), then any unexpired Options outstanding upon the date of -8- such Change of Control that are not yet exercisable and vested on such date shall become one hundred percent (100%) exercisable and vested. Notwithstanding the foregoing, (unless Optionee is party to a duly authorized written agreement with the Company providing otherwise) this Plan does not constitute a contract of employment or impose on the Company any obligation to retain the Optionee, or to change the Company's policies regarding termination of employment or other provision of services. The employment of Optionees who are Employees is and shall continue to be at-will, as defined under applicable law, and may be terminated at any time, with or without cause. (f) DEFINITIONS. (i) CHANGE OF CONTROL. For purposes of this Section, a "Change of Control" means the occurrence of any of the following: (A) When any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act (other than the Company, a Subsidiary or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities; or (B) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (I) are directors of the Company as of the date hereof, or (II) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); (C) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (D) The consummation of the sale or disposition by the Company of all or substantially all the Company's assets. (ii) CAUSE. For purposes of this Section, "Cause" shall mean (A) any act of personal dishonesty taken by the Optionee in connection with his responsibilities as a service provider to the Company and intended to result in substantial personal enrichment of the Optionee, (B) the Optionee's conviction of a felony, or (C) a willful act by the Optionee which constitutes gross misconduct and which is injurious to the Company, or (D) continued substantial violations by the Optionee of the Optionee's duties to the Company which are demonstrably willful and deliberate on the Optionee's part after there has been delivered to the Optionee a written demand for performance from the Company which specifically sets forth the factual basis for the Company's belief that the Optionee has committed continued substantial violations of his or her duties. -9- 13. DATE OF GRANT. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant. 14. AMENDMENT AND TERMINATION OF THE PLAN. (a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter, suspend or terminate the Plan. (b) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to options granted under the Plan prior to the date of such termination. 15. CONDITIONS UPON ISSUANCE OF SHARES. (a) LEGAL COMPLIANCE. 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 shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) INVESTMENT REPRESENTATIONS. 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. 16. INABILITY TO OBTAIN AUTHORITY. 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. 17. 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. -10- ADAPTEC, INC. 2000 NONSTATUTORY STOCK OPTION PLAN STOCK OPTION AGREEMENT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. I. NOTICE OF STOCK OPTION GRANT [OPTIONEE'S NAME AND ADDRESS] You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows: Grant Number _____________________________________________ Date of Grant _____________________________________________ Vesting Commencement Date _____________________________________________ Exercise Price per Share $____________________________________________ Total Number of Shares Granted _____________________________________________ Total Exercise Price $____________________________________________ Type of Option: Nonstatutory Stock Option Term/Expiration Date: _____________________________________________ VESTING SCHEDULE: Subject to the Optionee continuing to be a Service Provider on such dates, this Option shall vest and become exercisable in accordance with the following schedule: 50% of the Shares subject to the Option shall vest twelve (12) months after the Vesting Commencement Date, and the remaining 50% of the Shares subject to the Option shall vest twenty-four (24) months after the Vesting Commencement Date. TERMINATION PERIOD: This Option may be exercised for three (3) months after Optionee ceases to be a Service Provider. Upon the death or Disability of the Optionee, this Option may be exercised for such longer period as provided in the Plan. In no event shall this Option be exercised later than the Term/Expiration Date as provided above. II. AGREEMENT 1. GRANT OF OPTION. The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the "Optionee") an option (the "Option") to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price"), subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 14(b) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail. 2. EXERCISE OF OPTION. (a) RIGHT TO EXERCISE. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement. (b) METHOD OF EXERCISE. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the "Exercised Shares"), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be completed by the Optionee and delivered to the Company's Stock Plan Administrator. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price. No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares. 3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee: (a) cash; (b) check; (c) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; or (d) surrender of other Shares which (i) 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 (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares. 4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 5. TERM OF OPTION. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement. 6. TAX CONSEQUENCES. Some of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. -2- (a) EXERCISING THE OPTION. The Optionee may incur regular federal income tax liability upon exercise of an NSO. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. (b) DISPOSITION OF SHARES. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. 7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California. 8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE. By your signature and the signature of the Company's representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. OPTIONEE ADAPTEC, INC. _____________________________________ ________________________________________ Signature By -3- _____________________________________ ________________________________________ Print Name Title _____________________________________ Residence Address _____________________________________ -4- EXHIBIT A --------- ADAPTEC, INC. 2000 NONSTATUTORY STOCK OPTION PLAN EXERCISE NOTICE Adaptec, Inc. 691 Milpitas Boulevard Milpitas, CA 95035 Attention: Stock Plan Administrator 1. EXERCISE OF OPTION. Effective as of today, ________________, 20___, the undersigned ("Purchaser") hereby elects to purchase ______________ shares (the "Shares") of the Common Stock of Adaptec, Inc. (the "Company") under and pursuant to the 2000 Nonstatutory Stock Option Plan (the "Plan") and the Stock Option Agreement dated, _________, 20___ (the "Option Agreement"). The purchase price for the Shares shall be $_______, as required by the Option Agreement. 2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the full purchase price for the Shares. 3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 4. RIGHTS AS SHAREHOLDER. 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 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 Shares so acquired shall be issued to the Optionee as soon as practicable after 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 of issuance, except as provided in Section 12 of the Plan. 5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser's purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice. 6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser's interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California Submitted by: Accepted by: PURCHASER ADAPTEC, INC. _____________________________________ ________________________________________ Signature By _____________________________________ ________________________________________ Print Name Title ________________________________________ Date Received ADDRESS: ____________________________ ADDRESS: 691 South Milpitas Boulevard ____________________________ Milpitas, CA 95035 -2- -----END PRIVACY-ENHANCED MESSAGE-----