DFRN 14A — ADAPTEC, INC.
SCHEDULE
14A
(Rule 14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the
Registrant o
Filed by a
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Preliminary
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive
Proxy Statement |
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o |
Definitive
Additional Materials |
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Soliciting
Material Under Rule 14a-12 |
ADAPTEC, INC. |
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(Name of Registrant as Specified in Its Charter)
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STEEL PARTNERS II, L.P. |
| STEEL PARTNERS, L.L.C. |
WARREN G. LICHTENSTEIN |
JACK HOWARD |
JOHN QUICKE |
| JOHN MUTCH |
| HOWARD LEITNER |
ANTHONY BERGAMO |
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(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant) |
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED AUGUST 24, 2007
STEEL
PARTNERS II, L.P.
_____,
2007
Dear
Fellow Stockholder:
Steel
Partners II, L.P. (“Steel Partners” or “we”) is the beneficial owner of an
aggregate of 17,825,808 shares of Common Stock of Adaptec, Inc. (“Adaptec” or
the “Company”), representing approximately 14.9% of the outstanding Common Stock
of the Company. For the reasons set forth in the attached Proxy
Statement, Steel Partners does not believe that the Board of Directors of
the
Company is acting in the best interests of its stockholders. We are
therefore seeking your support at the annual meeting of stockholders (the
“Annual Meeting”) scheduled to be held at _________________, on ________, ______
__, 2007, at __:___ __.M. (local time) for the following:
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1.
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To
elect Steel Partners’ slate of five director nominees to the Company’s
Board of Directors in opposition to five of the Company’s incumbent
directors.
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2.
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To
ratify the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending
March 31, 2008.
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Through
the attached Proxy Statement, we are soliciting proxies to elect not only
our
five director nominees, but also the candidates who have been nominated by
the
Company other than _________, _________, _________, _________ and
_________. This gives stockholders the ability to vote for the total
number of directors up for election at the Annual Meeting. The names,
backgrounds and qualifications of the Company’s nominees, and other information
about them, can be found in the Company’s proxy statement. There is
no assurance that any of the Company’s nominees will serve as directors if our
nominees are elected.
We
urge
you to carefully consider the information contained in the attached Proxy
Statement and then support our efforts by signing, dating and returning the
enclosed GOLD proxy card today. The attached Proxy
Statement and the enclosed GOLD proxy card are first being
furnished to the stockholders on or about _____, 2007.
If
you
have already voted a proxy card furnished by the Company’s management, you have
every right to change your votes by signing, dating and returning a later
dated
proxy.
If
you
have any questions or require any assistance with your vote, please contact
MacKenzie Partners, Inc., which is assisting us, at their address and toll-free
numbers listed on the following page.
Thank
you
for your support,
Warren
G.
Lichtenstein
Steel
Partners II, L.P.
If you have any questions, require assistance in voting your GOLD proxy card,
or need additional copies of Steel Partners’ proxy materials, please call
MacKenzie Partners, Inc. at the phone numbers listed below.
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105
Madison Avenue
New
York,
New York 10016
(212)
929-5500 (Call Collect)
proxy@mackenziepartners.com
or
CALL
TOLL
FREE (800) 322-2885
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PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED AUGUST 24, 2007
ANNUAL
MEETING OF STOCKHOLDERS
OF
ADAPTEC,
INC.
_________________________
PROXY
STATEMENT
OF
STEEL
PARTNERS II, L.P.
_________________________
PLEASE
SIGN, DATE AND MAIL THE ENCLOSED GOLD PROXY CARD TODAY
Steel
Partners II, L.P., a Delaware limited partnership (“Steel Partners” or “we”), is
the largest stockholder of Adaptec, Inc., a Delaware corporation (“Adaptec” or
the “Company”). We are writing to you in connection with the election
of five director nominees to the board of directors of Adaptec (the “Adaptec
Board”) at the annual meeting of stockholders scheduled to be held at
_________________, on ________, ______ __, 2007, at __:___ __.M. (local time),
including any adjournments or postponements thereof and any meeting which
may be
called in lieu thereof (the “Annual Meeting”). This proxy statement
(the “Proxy Statement”) and the enclosed GOLD proxy card are first being
furnished to stockholders on or about _________ __, 2007.
This
Proxy Statement and the enclosed GOLD proxy card are being furnished to
stockholders of Adaptec by Steel Partners in connection with the solicitation
of
proxies from Adaptec’s stockholders for the following:
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1.
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To
elect Steel Partners’ director nominees, Jack L. Howard, John J. Quicke,
John Mutch, Howard M. Leitner and Anthony Bergamo (the “Nominees”) to
serve as directors of Adaptec, in opposition to five of the Company’s
incumbent directors whose terms expire at the Annual
Meeting.
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2.
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To
ratify the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending
March 31, 2008.
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This
Proxy Statement is soliciting proxies to elect not only our Nominees, but
also
the candidates who have been nominated by Adaptec other than _________,
_________, _________, _________ and ________. This gives stockholders
who wish to vote for our Nominees the ability to vote for eight nominees
in
total.
Steel
Partners, Steel Partners, L.L.C. (“Partners LLC”), Warren G. Lichtenstein and
the Nominees are members of a group (the “Group”) formed in connection with this
proxy solicitation and are deemed participants in this proxy
solicitation.
Adaptec
has set the record date for determining stockholders entitled to notice of
and
to vote at the Annual Meeting as _________ (the “Record
Date”). The mailing address of the principal executive offices of
Adaptec is 691 S. Milpitas Blvd., Milpitas, California
95035. Stockholders of record at the close of business on the Record
Date will be entitled to vote at the Annual Meeting. According to
Adaptec, as of the Record Date, there were _______ shares of common stock,
$.001
par value per share (the “Shares”) outstanding and entitled to vote at the
Annual Meeting. As of the Record Date, Steel Partners, along with all
of the participants in this solicitation, were the beneficial owners of an
aggregate of ________ Shares, which represents approximately ____% of the
voting securities outstanding (based on the Company’s proxy
statement). The participants in this solicitation intend to vote such
Shares (i) for the election of the Nominees and for the candidates who have
been
nominated by the Company other than _________, _________, _________, _________
and ________, and (ii) for the ratification of the appointment of
PricewaterhouseCoopers LLP as described herein.
THIS
SOLICITATION IS BEING MADE BY STEEL PARTNERS AND NOT ON BEHALF OF THE BOARD
OF
DIRECTORS OR MANAGEMENT OF ADAPTEC. STEEL PARTNERS IS NOT AWARE OF
ANY OTHER MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING. SHOULD
OTHER MATTERS, WHICH STEEL PARTNERS IS NOT AWARE OF A REASONABLE TIME BEFORE
THIS SOLICITATION, BE BROUGHT BEFORE THE ANNUAL MEETING, THE PERSONS NAMED
AS
PROXIES IN THE ENCLOSED GOLD PROXY CARD WILL VOTE ON SUCH MATTERS IN THEIR
DISCRETION.
STEEL
PARTNERS URGES YOU TO SIGN, DATE AND RETURN THE GOLD PROXY CARD IN FAVOR
OF THE
ELECTION OF ITS NOMINEES.
IF
YOU
HAVE ALREADY SENT A PROXY CARD FURNISHED BY ADAPTEC’S MANAGEMENT TO THE COMPANY,
YOU MAY REVOKE THAT PROXY AND VOTE FOR THE ELECTION OF STEEL PARTNERS’ NOMINEES
BY SIGNING, DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD. THE
LATEST DATED PROXY IS THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO THE ANNUAL MEETING BY DELIVERING A WRITTEN NOTICE
OF REVOCATION OR A LATER DATED PROXY FOR THE ANNUAL MEETING TO STEEL PARTNERS,
C/O MACKENZIE PARTNERS, INC. WHICH IS ASSISTING IN THIS SOLICITATION, OR
TO THE
SECRETARY OF ADAPTEC, OR BY VOTING IN PERSON AT THE ANNUAL MEETING.
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IMPORTANT
Your
vote
is important, no matter how many or how few Shares you own. We urge
you to sign, date, and return the enclosed GOLD proxy card today to vote
FOR the
election of our Nominees.
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If
your Shares are registered in your own name, please sign and date
the
enclosed GOLD proxy card and return it to Steel Partners, c/o MacKenzie
Partners, Inc., in the enclosed envelope
today.
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If
your Shares are held in a brokerage account or bank, you are considered
the beneficial owner of the Shares, and these proxy materials,
together
with a GOLD voting form, are being forwarded to you by your broker
or
bank. As a beneficial owner, you must instruct your broker,
trustee or other representative how to vote. Your broker cannot
vote your Shares on your behalf without your
instructions.
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Depending
upon your broker or custodian, you may be able to vote either by
toll-free
telephone or by the Internet. Please refer to the enclosed
voting form for instructions on how to vote electronically. You
may also vote by signing, dating and returning the enclosed voting
form.
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Since
only your latest dated proxy card will count, we urge you not to return any
proxy card you receive from the Company. Even if you return the
management proxy card marked “withhold” as a protest against the incumbent
directors, it will revoke any proxy card you may have previously sent to
Steel
Partners. Remember, you can vote for our five independent nominees
only on our GOLD proxy card. So please make certain
that the latest dated proxy card you return is the GOLD proxy
card.
If
you
have any questions regarding your proxy,
or
need
assistance in voting your Shares, please call:
105
Madison Avenue
New
York,
New York 10016
(212)
929-5500 (Call Collect)
proxy@mackenziepartners.com
or
CALL
TOLL FREE (800) 322-2885
BACKGROUND
TO OUR SOLICITATION
Steel
Partners is currently the
beneficial owner of 17,825,808 Shares, representing approximately 14.9% of
the
issued and outstanding voting securities of Adaptec.
On
May 29, 2007, Steel Partners
delivered a letter to the Adaptec Board in which Steel Partners expressed
its
concern with the direction in which the Company is headed and Steel Partners
requested to discuss with the Company immediate minority representation on
the
Adaptec Board, including representation on the Transaction Committee of the
Adaptec Board. In the letter, Steel Partners also expressed its
concern with the Company’s “ill-conceived acquisitions during the past five
years” and requested, as a signal of the Adaptec Board’s commitment to a
successful turnaround, that the Adaptec Board agree not to commence further
acquisitions until Steel Partners is granted representation on the Adaptec
Board. Steel Partners further stated that, without such a commitment,
it would nominate a full slate of directors for election to the Adaptec Board
at
the Annual Meeting.
On
June 25, 2007, Steel Partners
delivered a letter to Adaptec nominating Jack L. Howard, John J. Quicke,
John
Mutch, Howard M. Leitner and Anthony Bergamo for election to the Adaptec
Board
at the Annual Meeting (the “Nomination Letter”).
Also
on
June 25, 2007, Steel Partners communicated to the Company its preference
to
settle the issue of minority representation on the Adaptec Board without
the
need for a proxy contest and that Steel Partners delivered the Nomination
Letter
to reserve its right to nominate the Nominees in the event the Company and
Steel
Partners do not reach an amicable settlement.
On
June 25, 2007, Jack Howard of Steel Partners sent a message to Scott
Mercer,
the Chairman of the Adpatec Board, proposing that the Company (i) appoint
Mr.
Howard, Mr. Quicke and one other Nominee selected by the Company to the Adpatec
Board, (ii) appoint either Mr. Howard or Mr. Quicke to the Adaptec Board’s
Transaction Committee, (iii) hire a profit-improvement consulting firm to
create
a strategic plan to return the Company to profitability and (iv) propose
at the
Annual Meeting that stockholders vote to opt-out of Section 203 of the Delaware
General Corporation Law (the “DGCL”).
Section 203 of the Delaware General Corporation Law provides, in effect, that if any person acquires beneficial ownership of 15% or more of a corporation’s outstanding shares (thereby becoming an “Interested Stockholder”), the Interested Stockholder may not engage in a business combination with the corporation for three years thereafter, subject to certain exceptions.
Mr. Howard
further communicated to the Company Steel Partners’ belief in the long-term
value of Adaptec and its desire to increase its ownership position in the
Company to up to 25% of the outstanding Shares and that Steel Partners has
no
current intention to propose an acquisition of Adaptec.
On
August
3, 2007, Steel Partners delivered a letter to Adaptec requesting, pursuant
to
Section 220 of the DGCL, a complete list of Adaptec’s stockholders and other
corporate records in order to allow Steel Partners to communicate with Adaptec’s
stockholders in connection with the election of directors to be submitted
to a
vote of the stockholders at the Annual Meeting, and any other matters as
may
properly come before the Annual Meeting (the “Steel 220 Demand”).
On
August
10, 2007, the Company’s President and CEO, S. “Sundi” Sundaresh, delivered a
letter to Steel Partners providing responses to Steel Partners’ settlement
proposals previously communicated by Mr. Howard of Steel Partners to Mr.
Mercer,
Chairman of the Adpatec Board. In the letter, Mr. Sundaresh expressed
(i) the Adaptec Board’s willingness to add only one designee of Steel Partners
to the Adaptec Board, (ii) that while the Adaptec Board is willing to consider
appointing the Steel Partners’ designee to certain board committees, the Adaptec
Board would not guarantee that the designee would be placed on the Transaction
Committee, (iii) that the Adaptec Board will require Steel Partners to enter
into a “standstill” agreement through the end of 2008 as a condition of adding a
designee of Steel Partners to the Adaptec Board, (iv) that the Adaptec Board
does not believe that it is in the interests of the Company’s stockholders that
it propose and support a proposal to elect not to be governed by Section
203 and
(v) the Adaptec Board’s willingness to hire a mutually agreed upon
profit-improvement consulting firm.
On
August
13, 2007, the Company delivered a letter to Steel Partners in response to
the
Steel 220 Demand in which the Company agreed to make available certain records
requested in the Steel 220 Demand provided that Steel Partners signs and
delivers a confidentiality agreement prior to the provision of such
records. In the letter, the Company expressed its belief that the
scope of records requested in the Steel 220 Demand exceeds what the Company
is
required to provide under Section 220 of the DGCL or the scope of information
that it would be appropriate for the Company to provide. The letter
further stated that the Company would only provide Steel Partners with certain
materials it has requested in electronic format in such format if Adaptec
itself
holds the materials in electronic format and that Adaptec is not obligated
to
provide the information requested in the Steel 220 Demand that is not readily
available to Adaptec. The letter also requested that Steel Partners
consent to these and other arrangements the Company was prepared to agree
to
with respect to the Steel 220 Demand.
On
August
17, 2007, counsel to Steel Partners delivered a letter to the Company’s outside
counsel expressing that although it believes that Steel Partners is entitled
to
receive all of the materials it requested in the Steel 220 Demand, in order
to
move forward without further delay, Steel Partners is prepared to sign an
appropriate confidentiality agreement covering all materials the Company
furnishes to Steel Partners in response to the Steel 220 Demand. The
letter further stated that Steel Partners counsel is not aware of any rule
under
Delaware law that would require Steel Partners to provide to the Company
the
consent requested by Mr. Sundaresh in his letter as a condition to sending
the
confidentiality agreement and requested that the Company forward Steel Partners
counsel a form of the confidentiality agreement as soon as possible for
review.
On
August
20, 2007, Steel Partners delivered a letter to the Adaptec Board expressing
that while the Company’s offer to add one of Steel Partners’ designees to the
Board and the Adaptec Board’s willingness to hire a mutually agreed upon
profit-improvement consulting firm represent a positive first step, Steel
Partners was disappointed overall with the substance of the Adaptec Board’s
response to Steel Partners’ proposals, and that Steel Partners does not believe
that the Adaptec Board has adequately addressed the significant concerns
and
issues that Steel Partners has raised. The letter further stated that
Steel Partners’ sole interest in seeking minority representation on the Adaptec
Board is to provide assistance to the Company in its next steps towards
profitability and to ensure that the interests of the Adaptec Board and the
Company’s stockholders are aligned and that the Adaptec Board’s offer of one
board seat does not provide sufficient representation, in Steel Partners’
opinion, to protect stockholders’ interests. Steel Partners stated
its belief that the Adaptec Board be fixed at eight members and reiterated
its
request that the Adaptec Board include and recommend three of Steel Partners’
Nominees on the Company’s slate for election at the Annual Meeting, consisting
of two representatives of Steel Partners - Jack Howard and John Quicke -
and one
other Nominee selected by the Adaptec Board. In the letter,
Steel Partners further requested that either Mr. Howard or Mr. Quicke be
appointed to the Transaction Committee and that any significant transaction
would require unanimous approval of all members of the Transaction
Committee. Regarding Section 203, Steel Partners reiterated its
belief in the long-term value of Adaptec and that it had spoken to the Adaptec
Board about increasing its ownership position in the Company to up to 25%
of the
outstanding Shares. Steel Partners stated that if the Adaptec Board
is unwilling to waive Section 203 on its own, then the Adaptec Board should
put
it to a stockholder vote at the Annual Meeting.
On August 23, 2007, Mr. Howard and Mr. Quicke participated in a meeting with the members of the Adaptec Board (the “Board Meeting”). The primary purpose of the Board Meeting was to further discuss Steel Partners’ specific proposals regarding representation on the Adaptec Board and Section 203 and for Messrs. Howard and Quicke to address certain questions from members of the Adaptec Board. During the Board Meeting, the Adaptec Board made it clear that it would not waive Section 203 for Steel Partners and that if Steel Partners wants to increase its ownership above 15% of the outstanding Shares, then it would have to do so without the Adaptec Board granting a waiver.
Steel Partners continues to believe that the Company’s Shares are undervalued and may proceed to acquire additional Shares that would result in Steel Partners increasing its ownership position in the Company above 15% of the outstanding Shares.
REASONS
FOR OUR SOLICITATION
As
the
beneficial owner of 17,825,808 Shares, representing approximately 14.9% of
the
issued and outstanding voting securities, Steel Partners is the largest
stockholder of the Company. As such, we have one simple goal –
to maximize the value of the Shares for all
stockholders.
The
Company would have you believe that this election contest is a means for
Steel
Partners intention to take control of the Company without paying a
premium. However, Steel Partners has commenced this election
contest as a last resort to maximize stockholder value. In fact,
prior to nominating five individuals for election as directors, Steel Partners
sought to initiate a dialogue regarding minority representation on the Adaptec
Board. We have repeatedly expressed to the Company our serious
concerns that the Company may continue its unfortunate trend of conducting
ill-conceived acquisitions, which we believe has led to significant erosion
of
stockholder value during the past five years. We were seeking
minority representation that would place us in a position to assist the Company
in taking steps towards profitability and effecting a successful
turnaround. We only nominated a slate of five directors in order to
reserve our rights in connection with the Annual Meeting in the event an
amicable resolution could not be reached with the Company regarding minority
representation, and only after the Company refused to commit to not undertaking
any further acquisitions until Steel Partners has representation on the Adaptec
Board.
Our
Nominees, if elected, will comprise a majority of the Adaptec Board and will
attempt to work constructively with other elected members of the Adaptec
Board
to pursue the options that they believe are in the best interests of the
stockholders and which they believe will maximize stockholder
value. We are committed to safeguarding stockholder interests and
helping to ensure that all efforts are being undertaken to maximize stockholder
value. We do not believe that the Company’s management team or the
Adaptec Board have served the best interests of the Company’s stockholders, and
we have serious questions as to whether the Adaptec Board can provide the
best
solutions to the Company’s current problems. We also fear that the
Company’s intrinsic value may continue to erode under the continued stewardship
of current management and the Adaptec Board.
Given
the
Company’s poor track record, we believe that the Adaptec Board should not be
trusted to assess acquisitions, growth investments, and product expansions
while
overseeing a restructuring plan.
Specifically,
our concerns include the following:
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Adaptec’s
operational performance has deteriorated under management and the
Adaptec
Board;
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Adaptec’s
poor acquisition strategy and recent about-faces in strategic direction
have resulted in further erosion to stockholder
value;
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Adaptec’s
stock performance has lagged indices and peers;
and
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Adaptec
has rewarded executive officers with excessive compensation packages
and
retention bonuses despite the Company’s poor
performance.
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Our
Nominees are committed to working
to improve the Company’s operational performance, closely monitoring and
promoting the accountability of senior management and encouraging and overseeing
efforts to maximize stockholder value. The reasons why we believe you
should vote for the Nominees is set forth in greater detail below.
ADAPTEC’S
OPERATIONAL PERFORMANCE HAS DETERIORATED UNDER MANAGEMENT AND THE ADAPTEC
BOARD
For
the past ten quarters, the Company
has lost money on an operational basis. In fact, during fiscal years
2005 and 2006, the Company suffered total operating losses of approximately
$188.4 million. Net revenue has declined from approximately $402.5 million
in
2005 to approximately $255.2 million in 2007. Gross margin has
declined from 40% in 2005 to 32% in 2007.
We believe the Company’s research and development expenses are unreasonable in light of the Company’s operational failures and its inability to increase revenues. In the past three fiscal years alone, the Company has spent approximately $218 million on research and development. During that same period, the Company’s net revenue declined by almost $150 million.
In
light of the Company’s dismal
financial performance over the past five years coupled with the trend in
declining operating margin, we have concerns about management and the Adaptec
Board’s ability to implement a restructuring plan that will create significant
profitability for the Company in order to maximize stockholder
value.
ADAPTEC’S
POOR ACQUISITION STRATEGY AND RECENT ABOUT-FACES IN STRATEGIC DIRECTION HAVE
RESULTED IN FURTHER EROSION TO STOCKHOLDER VALUE
During
the past five years, the Company has conducted acquisitions that have resulted
in acquired technology intangibles and goodwill write-offs in excess of $175
million. We believe that the Company’s acquisition strategy has
resulted in significant deterioration to stockholder value. Earlier
this year on an earnings conference call, Mr. Sundaresh stated that the key
to
the Company’s turnaround is to undertake further acquisitions. Given
the Company’s poor financial performance and the recent history of ill-conceived
acquisitions, we do not believe Mr. Sundaresh or the Adaptec Board should
be
trusted to conduct further acquisitions while stockholder value continues
to
erode. Instead, we believe that Mr. Sundaresh and his management team
should focus their efforts on the Company’s core RAID
business. Consider the following:
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The
Company acquired Snap Appliance, Inc. (“Snap Appliance”) in 2004 for
approximately $100 million and acquired Eurologic Systems in 2003
for
approximately $30 million. The Company stated that its purpose
for these two acquisitions was to build its Systems Business Unit,
and the
Company publicly stated that the Systems Business Unit would be
the growth
engine for the Company. Along those same lines, in the
Company’s Quarterly Report on Form 10-Q filed on August 9, 2004, the
Company stated the following: “Our growth and future revenues remains
largely dependent on the success of our external and networked
storage
solutions and, to a lesser extent, on our products addressing new
technologies (i.e., Serial Attached SCSI, Serial ATA and
iSCSI).” The Snap Appliance acquisition proved, however, to be
an ill-advised one. Revenues from Snap Appliance’s products
fell below expectations for the first three quarters after the
acquisition. In an about-face of strategic direction less than
a year following the acquisition of Snap Appliance, the Company
announced
that it had hired Credit Suisse to assist in the sale process for
the
Company’s Systems Business Unit. This is what Mr. Sundaresh had
to say about this sale: “It was a hard decision for us, but we
feel that selling our systems business is the best move for the
company
and its shareholders as we take the necessary steps in Adaptec's
recovery.
This will allow us to focus our internal resources on capturing
a
leadership position in the emerging Serial ATA and Serial Attached
SCSI
markets.”
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On
June 29, 2004, the Company completed the acquisition of IBM’s i/p Series
RAID component business line for a total purchase price of $49.3
million. Then, on September 30, 2005, a little over a year
later, the Company sold its IBM i/p Series RAID component business
to IBM
for approximately $22.0 million plus $1.3 million for certain
fixed assets. Mr. Sundaresh stated the following about the
sale: “In analyzing Adaptec’s various businesses, it became
clear to us that delivering add-on products for IBM’s eServer
iSeries and pSeries systems would not be a long term profitable
business opportunity for Adaptec…Today’s agreement is part of our ongoing
effort to improve Adaptec’s focus and execution on profitable business
ventures.” As a result of the IBM i/p Series RAID transaction,
the Company recorded approximately $26 million in losses on the
sale of assets and impairment of related
goodwill.
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In
fact,
if we had not expressed our strong disapproval of the Company’s current
acquisition strategy, we believe the Company’s management team and the Adaptec
Board would have proceeded with the acquisition of Zantaz, an email archiving
service provider, earlier this year. We do not believe that the same
management that has failed to deliver on any profitability or growth benchmarks
during the past 2 ½ fiscal years should be trusted to make large-scale
acquisitions and manage new business segments. In light of the
Company’s poor financial performance described in detail above, we agree with
Morgan Keegan analyst Brian Freed’s statement in his May 11, 2007 research
report that the Adaptec Board “has in our opinion not earned the right to spend
shareholder money on the acquisition of new businesses.” He further
says “We believe the key to shareholder value is simple, a 100% focus on
delivering the promise of profitability in the Company's core RAID business,
not
spending the Company's cash hoard on an acquisition because the task of
profitability in the RAID business proved more difficult than first believed.
We
believe to do otherwise turns a deaf ear to the voice of shareholders, none
of
whom I have ever spoken with (and I have spoken to many) supports a large
cash
acquisition at this time.”
PERFORMANCE
OF ADAPTEC’S COMMON STOCK HAS LAGGED INDICES AND PEERS
We
believe the stock price of a company is the ultimate report card for its
management and its board of directors. Adaptec’s stock performance has fared
poorly over the past five years. We believe that the market price of
the Shares does not accurately reflect the intrinsic value of the Company
and
that the Adaptec Board has not taken the necessary steps to close this value
gap. During the past three years alone, the Company’s stock price has
decreased by almost 50%.
Adaptec’s
stock performance fares just as poorly on a relative basis as on an absolute
one:
|
·
|
During
the period from March 31, 2002 to March 31, 2007, an investment
in Adaptec
would have lost approximately 71% of its value compared to a gain
of more
than 39% had the same investment been made in the NASDAQ Composite
Index.
|
|
·
|
During
the period from March 31, 2002 to March 31, 2007, an investment
in Adaptec
would have lost approximately 71% of its value compared to a gain
of
approximately 33% had the same investment been made in the NASDAQ
Computer
and Data Processing Index.
|
|
·
|
Between
March 31, 2002 and March 31, 2007, Adaptec’s stock price has lost
approximately
71% of its value.
|
The
following table, which appears in the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on June 6, 2007, highlights
Adaptec’s poor stock performance.
|
|
|
3/02
|
3/03
|
3/04
|
3/05
|
3/06
|
3/07
|
| |
|
|
|
|
|
|
|
|
Adaptec,
Inc.
|
|
100.00
|
45.10
|
65.52
|
35.83
|
41.36
|
28.95
|
|
NASDAQ
Composite
|
|
100.00
|
72.11
|
109.76
|
111.26
|
132.74
|
139.65
|
|
NASDAQ
Computer & Data Processing
|
|
100.00
|
76.72
|
96.82
|
104.03
|
122.64
|
133.49
|
ADAPTEC
HAS REWARDED EXECUTIVE OFFICERS WITH EXCESSIVE COMPENSATION PACKAGES AND
RETENTION BONUSES DESPITE THE COMPANY’S POOR PERFORMANCE
According to Morgan Keegan analyst Brian Freed in his May 11, 2007 research report, “the recent pay packages disclosed for recent hires seem excessive in light of the recent failure of management to successfully deliver. Furthermore, while we had believed management was of character such that they would not plunder the company for personal gain, the recent title and pay packages bestowed on members of the executive management team lead us to question our prior assessment.”We also do not believe the recently announced retention agreements for certain of the Company’s executive officers are justified by the Company’s performance
We also do not believe the retention agreements approved by the Adaptec Board on August 14, 2007 for certain of the Company’s executive officers are justified by the Company’s poor performance. The retention agreements provide that the executive officer will receive a retention bonus equal to six months of his base salary, with two months of the bonus to be paid on November 23, 2007 and the remaining four months of the bonus to be paid on February 29, 2008. This retention bonus is in addition to any payment the executive officer is eligible to receive under the Adaptec Incentive Plan or any severance benefits he is entitled to receive under his employment agreement.
.
The Company also maintains lucrative severance and “change of control” arrangements with
certain of its executive officers. There are provisions in the executive officers' employment agreements that allow them to receive severance benefits following termination
of their employment by the Company for "Good Reason.” Upon such termination, the executive officer would be entitled to (1) his unpaid salary and unused vacation
benefits he has accrued prior to the date of his termination; (2) a one-time payment equal to one year of base salary, plus an additional week of base salary for each
year of service beyond three years of service; (3) outplacement services in an amount not to exceed $10,000; and (4) coverage for the executive officer and his
dependents under Adaptec's health, vision and dental insurance plans pursuant to the terms of the Consolidated Omnibus Budget and Reconciliation Act ("COBRA")
for the one-year period following the termination of his employment. Additionally, upon certain “change of control” provisions being triggered, the executive officer
would be entitled to (a) a one-time payment equal to one and one-half times his then-current annual base salary, (b) his then-current targeted bonus payout,
(c) COBRA benefits for one year, (d) outplacement services not to exceed $10,000 and (e) accelerated vesting of his stock options as provided for under
the 2004 Equity Incentive Plan.
In addition we were surprised to see Mr. Sundaresh receive subsequent salary increases on November 14, 2005 and January 26, 2006, respectively, despite the Company's
poor operating performance. In fact since September 21, 2005, his salary has increased from $375,000 to $450,000. In the same two-year period, the Company's net revenues
have declined by almost $150 million. Based on the Company's proxy statement, Mr. Sundaresh would be entitled to a change in control payment equal to $________, assuming
any of the number of “change of control” conditions are triggered.
We believe that executive compensation should be linked to value delivered to stockholders and that a public company's compensation programs should be designed to provide a correlation between the financial success of management and the stockholders. We see no correlation between Adaptec's poor financial performance and Mr. Sundaresh's compensation.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
Adaptec Board is currently composed of eight directors whose terms expire
at the
Annual Meeting. We expect that the Adaptec Board will nominate these incumbent
directors for re-election at the Annual Meeting. For the reasons stated above,
we are seeking your support at the Annual Meeting to elect the Nominees in
opposition to Adaptec’s director nominees.
We
believe that Adaptec’s current Share price does not reflect the true value of
the Common Stock, and we do not believe the current management team and the
Adaptec Board have the ability, nor should be trusted, to successfully
restructure the Company in order to maximize stockholder value.
We
believe the election of the Nominees represents the best means for stockholders
to have the ability to maximize the present value of their Shares. If
elected, the Nominees will, subject to their fiduciary duties, explore all
available alternatives to maximize stockholder value.
We
wish
to provide the stockholders, the true owners of Adaptec, with the opportunity
to
elect directors that are unaffiliated with the existing Adaptec
Board. If all are elected, the Nominees will constitute a majority of
the current eight-member Adaptec Board. Your vote to elect the
Nominees does not constitute a vote in favor of our value-enhancing
plans. Your vote to elect the Nominees will have the legal effect of
replacing five incumbent directors with our Nominees.
THE
NOMINEES
We
have
nominated a slate of highly qualified nominees who we believe possess the
expertise necessary to work to restore and enhance stockholder value. The
Nominees are independent of the Company in accordance with SEC and Nasdaq
Stock
Market rules on board independence and are committed to exploring all
alternatives to increase stockholder value. If elected, the Nominees are
committed to acting in the best interest of Adaptec’s stockholders and will
pursue their efforts diligently and promptly. The following information sets
forth the name, age, business address, present principal occupation, and
employment and material occupations, positions, offices, or employments for
the
past five years of each of the Nominees. This information has been
furnished to Steel Partners by the Nominees. The Nominees are
citizens of the United States of America.
Jack
L. Howard (age 45) has served as Vice Chairman of Steel Partners, Ltd.
(“SPL”), a management and advisory company that provides management services to
Steel Partners and its affiliates, since December 2003. He has been a
registered principal of Mutual Securities, Inc., a registered broker-dealer,
since 1989. He has served as a director of WHX Corporation (“WHX”), a
holding company, since July 2005. Mr. Howard has served as Chairman
of the Board of WebFinancial Corporation (“WebFinancial”), a consumer and
commercial lender, since June 2005, as a director of WebFinancial since 1996,
and as its Vice President since 1997. From 1997 to May 2000, he also
served as Secretary, Treasurer and Chief Financial Officer of
WebFinancial. He has been a director of CoSine Communications, Inc.,
a global telecommunications equipment supplier, since July 2005. The business address of
Mr. Howard is c/o Steel Partners II, L.P., 590 Madison Avenue, 32nd Floor,
New York,
New York 10022. Mr. Howard does not beneficially own, and has not
purchased or sold during the past two years, any securities of
Adaptec.
John
J. Quicke (age 58) has served as an Operating Partner of SPL since
September 2005. Mr. Quicke has served as Chairman of the Board of
NOVT since April 2006 and served as President and Chief Executive Officer
of
NOVT from April 2006 to November 2006. He has served as a director of
WHX since July 2005, as a Vice President since October 2005 and as President
and
Chief Executive Officer of its Bairnco Corporation subsidiary since April
2007. Mr. Quicke currently serves as a director of Angelica
Corporation, a leading provider of healthcare linen management
services. He served as a director, President and Chief Operating
Officer of Sequa Corporation (“Sequa”), a diversified industrial company, from
1993 to March 2004, and Vice Chairman and Executive Officer of Sequa from
March
2004 to March 2005. As Vice Chairman and Executive Officer of Sequa,
Mr. Quicke was responsible for the Automotive, Metal Coating, Specialty
Chemicals, Industrial Machinery and Other Product operating segments of the
company. From March 2005 to August 2005, Mr. Quicke occasionally
served as a consultant to Steel Partners and explored other business
opportunities. The business address of Mr. Quicke is c/o Steel
Partners II, L.P., 590 Madison Avenue, 32nd Floor, New York, New York
10022. Mr. Quicke does not beneficially own, and has not purchased or
sold during the past two years, any securities of Adaptec.
John
Mutch (Age 50) is the founder and a managing partner of MV Advisors,
LLC. In March 2003, Mr. Mutch was appointed to the Board of Directors of
Peregrine Systems (NASD:PRGN.PK) (“Peregrine”), a global enterprise software
provider, to assist Peregrine and its management in development of a plan
of
reorganization, which ultimately led to Peregrine’s emergence from
bankruptcy. From August 2003 to December 2005, Mr. Mutch served as
President and Chief Executive Officer of Peregrine, during which time he
restructured and stabilized its business operations and led Peregrine through
its acquisition by Hewlett-Packard. From December 1999 through August 2002,
Mr.
Mutch was the Chief Executive Officer of HNC Software, Inc. (NASD:HNCS) (“HNC”),
an enterprise analytics software provider. He also served as President of
HNC
from May 2001 through August 2002. Mr. Mutch joined HNC in 1997, and from
1997
to 1999 served in various other senior executive positions, including Vice
President, Marketing and President of HNC Insurance Solutions. In 1994, Mr.
Mutch founded MVenture Holdings, Inc., a private equity fund that invests
in
public and private technology companies, which became Mventure Holdings LLC
in
2002. From December 1986 to June 1994, Mr. Mutch held a variety of executive
sales and marketing positions with Microsoft Corporation, including director
of
organization marketing. Mr. Mutch is currently a director of Phoenix
Technologies Ltd., a manufacturer and provider of core systems software
applications and platforms, and EDGAR Online, Inc., a provider of value-added
business and financial information on global companies to financial, corporate
and advisory professionals. Mr. Mutch served
on the
Board of Directors of Brio Software (NASD:BRIO), a developer of software
products, from 2002 to 2003. Mr. Mutch holds a B.S. from Cornell
University and an M.B.A. from the University of Chicago. The
principal business address of Mr. Mutch is c/o MV Advisors, LLC, 420 Stevens
Avenue, Suite 270, Solana Beach, CA 92075. Mr. Mutch does not
beneficially own, and has not purchased or sold during the past two years,
any
securities of Adaptec.
Howard
M. Leitner (age 66) served as Senior Vice President, Finance of Sequa
from November 1999 to January 2006. From 1980 to 1999, he served in
various capacities including President and Chief Financial Officer of Chock
Full
O’ Nuts Corporation, a marketer of coffee. From 1977 to 1980, Mr.
Leitner was a Senior Audit Manager with the accounting firm of Ernst &
Young. From 1963 to 1977, he was an accountant with SD Leidesdorf
& Co., an accounting firm that was acquired by Ernst &
Young. Mr. Leitner is presently retired from active
employment. His principal address is 78335 Griffin Drive, Palm
Desert, California 92211. Mr. Leitner does not beneficially own, and
has not purchased or sold during the past two years, any securities of
Adaptec.
Anthony
Bergamo (age 60) has served in a variety of capacities with Milstein
Hotel Group, a hotel operator, since April 1996, most recently as Managing
Director. He has also served as the Chief Executive Officer of
Niagara Falls Redevelopment, Ltd., a real estate development company, since
August 1998. He has held various positions with MB Real Estate, a
property management company based in New York City and Chicago, since April
1996, including the position of Vice Chairman since May 2003. Mr.
Bergamo served as a director from 2002 to 2006 of Lone Star Steakhouse &
Saloon, Inc., an owner and operator of restaurants, where he served as the
Chair
of the Audit Committee. He has also been a director since 1995, a
Trustee since 1986 and currently is Chairman of the Audit Committee, and
a
member of the Executive and Nominating Committees of Dime Community
Bancorp. Mr. Bergamo is also the Founder and Chairman of the Federal
Law Enforcement Foundation, a foundation that provides economic assistance
to
both federal and local law enforcement officers suffering from serious illness
and to communities recovering from natural disasters, and has served as its
Chairman since 1988. The business address of Mr. Bergamo is c/o MB
Real Estate, 335 Madison Avenue, 14th Floor, New York, New York
10017. Mr. Bergamo does not beneficially own, and has not purchased
or sold during the past two years, any securities of Adaptec.
The
Nominees will not receive any compensation from Steel Partners for their
services as directors of Adaptec. Other than as stated herein, there are
no
arrangements or understandings between Steel Partners and any of the Nominees
or
any other person or persons pursuant to which the nomination described herein
is
to be made, other than the consent by each of the Nominees to be named in
this
Proxy Statement and to serve as a director of Adaptec if elected as such
at the
Annual Meeting. None of the Nominees is a party adverse to Adaptec or
any of its subsidiaries or has a material interest adverse to Adaptec or
any of
its subsidiaries in any material pending legal proceedings.
Steel
Partners does not expect that the Nominees will be unable to stand for election,
but, in the event that such persons are unable to serve or for good cause
will
not serve, the Shares represented by the enclosed GOLD proxy card will be
voted
for substitute nominees. In addition, Steel Partners reserves the
right to nominate substitute persons if Adaptec makes or announces any changes
to the Bylaws or takes or announces any other action that has, or if consummated
would have, the effect of disqualifying the Nominees. In any such
case, Shares represented by the enclosed GOLD proxy card will be voted for
such
substitute nominees. Steel Partners reserves the right to nominate
additional persons if the Company increases the size of the Adaptec Board
above
its existing size. Additional nominations made pursuant to the
preceding sentence are without prejudice to the position of Steel Partners
that
any attempt to increase the size of the current Adaptec Board constitutes
an
unlawful manipulation of Adaptec’s corporate machinery.
YOU
ARE URGED TO VOTE FOR THE ELECTION OF THE NOMINEES ON THE ENCLOSED GOLD PROXY
CARD.
PROPOSAL
NO. 2
COMPANY
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
As
discussed in further detail in the Company’s proxy statement, the Company’s
Audit Committee engaged PricewaterhouseCoopers LLP, as the Company’s independent
registered public accounting firm for the fiscal year ending March 31,
2008. The Company is asking stockholders to ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors for the Company’s fiscal year
ending March 31, 2008.
We
do not object to the ratification of the appointment of PricewaterhouseCoopers
LLP as the Company’s independent auditors for the Company’s fiscal year ending
March 31, 2008.
VOTING
AND PROXY PROCEDURES
Only
stockholders of record on the Record Date will be entitled to notice of and
to
vote at the Annual Meeting. Each Share is entitled to one
vote. Stockholders who sell Shares before the Record Date (or acquire
them without voting rights after the Record Date) may not vote such
Shares. Stockholders of record on the Record Date will retain their
voting rights in connection with the Annual Meeting even if they sell such
Shares after the Record Date. Based on publicly available
information, Steel Partners believes that the only outstanding classes of
securities of Adaptec entitled to vote at the Annual Meeting are the shares
of
Common Stock.
Shares
represented by properly executed GOLD proxy cards will be voted at the Annual
Meeting as marked and, in the absence of specific instructions, will be voted
FOR the election of the Nominees to the Adaptec Board, FOR the candidates
who
have been nominated by the Company other than _________, _________, _________,
________ and ________, FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors for the Company’s fiscal year
ending March 31, 2008 and in the discretion of the persons named as proxies
on
all other matters as may properly come before the Annual Meeting.
According
to Adaptec’s proxy statement for the Annual Meeting, the Adaptec Board intends
to nominate eight candidates for election as directors at the Annual
Meeting. This Proxy Statement is soliciting proxies to elect not only
our Nominees, but also the candidates who have been nominated by the Company
other than _________, _________, _________, ________ and
________. This gives stockholders who wish to vote for our Nominees
and such other persons the ability to do so. Under applicable proxy
rules we are required either to solicit proxies only for our Nominees, which
could result in limiting the ability of stockholders to fully exercise their
voting rights with respect to Adaptec’s nominees, or to solicit for our Nominees
and for fewer than all of the Company’s nominees, which enables a stockholder
who desires to vote for our Nominees to also vote for those of the Company’s
nominees for whom we are soliciting proxies. The names, backgrounds
and qualifications of the Company’s nominees, and other information about them,
can be found in the Company’s proxy statement. There is no assurance
that any of the Company’s nominees will serve as directors if our Nominees are
elected.
QUORUM
In
order
to conduct any business at the Annual Meeting, a quorum must be present in
person or represented by valid proxies. A quorum consists of a
majority of the Shares issued and outstanding on the Record Date. All
Shares that are voted “FOR”, “AGAINST” or “ABSTAIN” (or “WITHHOLD” in the case
of election of directors) on any matter will count for purposes of establishing
a quorum and will be treated as Shares entitled to vote at the Annual Meeting
(the “Votes Present”).
VOTES
REQUIRED FOR APPROVAL
Election
of Directors. A plurality of the total votes cast by holders of
the Shares for the Nominees is required for the election of directors and
the
eight nominees who receive the most votes will be elected (assuming a quorum
is
present). A vote to “WITHHOLD” for any nominee for director will be counted for
purposes of determining the Votes Present, but will have no other effect
on the
outcome of the vote on the election of directors. Stockholders do not
have the right to cumulate their votes in the election of
directors.
Ratification
of Appointment of PricewaterhouseCoopers LLP. The affirmative
vote of the holders of a majority of the Shares present in person or represented
by proxy at the Annual Meeting is required to approve the ratification of
the
appointment of PricewaterhouseCoopers LLP.
ABSTENTIONS
Abstentions
will count as Votes Present for the purpose of determining whether a quorum
is
present. Abstentions will not be counted as votes cast in the
election of directors. Abstentions will have the effect of a vote
against the proposal to ratify the appointment of PricewaterhouseCoopers
LLP.
DISCRETIONARY
VOTING
Shares
held in “street name” and held of record by banks, brokers or nominees may not
be voted by such banks, brokers or nominees unless the beneficial owners
of such
shares provide them with instructions on how to vote.
REVOCATION
OF PROXIES
Stockholders
of Adaptec may revoke their proxies at any time prior to exercise by attending
the Annual Meeting and voting in person (although attendance at the Annual
Meeting will not in and of itself constitute revocation of a proxy) or by
delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will constitute a
revocation of any earlier proxy. The revocation may be delivered either to
Steel
Partners in care of MacKenzie Partners, Inc. at the address set forth on
the
back cover of this Proxy Statement or to Adaptec at 691 S. Milpitas Blvd.,
Milpitas, California 95035 or any other address provided by
Adaptec. Although a revocation is effective if delivered to Adaptec,
Steel Partners requests that either the original or photostatic copies of
all
revocations be mailed to Steel Partners in care of MacKenzie Partners, Inc.
at
the address set forth on the back cover of this Proxy Statement so that Steel
Partners will be aware of all revocations and can more accurately determine
if
and when proxies have been received from the holders of record on the Record
Date of a majority of the outstanding Shares. Additionally, MacKenzie
Partners, Inc. may use this information to contact stockholders who have
revoked
their proxies in order to solicit later dated proxies for the election of
the
Nominees.
IF
YOU WISH TO VOTE FOR THE ELECTION OF THE NOMINEES TO THE ADAPTEC BOARD OR
FOR
THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP, PLEASE
SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED GOLD PROXY CARD IN THE POSTAGE-PAID
ENVELOPE PROVIDED.
The
solicitation of proxies pursuant to this Proxy Statement is being made by
Steel
Partners. Proxies may be solicited by mail, facsimile, telephone,
telegraph, Internet, in person and by advertisements.
Steel
Partners has entered into an agreement with MacKenzie Partners, Inc. for
solicitation and advisory services in connection with this solicitation,
for
MacKenzie Partners, Inc. will receive a fee not to exceed $____.00, together
with reimbursement for its reasonable out-of-pocket expenses, and will be
indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws. MacKenzie Partners, Inc. will
solicit proxies from individuals, brokers, banks, bank nominees and other
institutional holders. Steel Partners has requested banks, brokerage
houses and other custodians, nominees and fiduciaries to forward all
solicitation materials to the beneficial owners of the Shares they hold of
record. Steel Partners will reimburse these record holders for their
reasonable out-of-pocket expenses in so doing. It is anticipated that
MacKenzie Partners, Inc. will employ approximately [25] persons to solicit
Adaptec’s stockholders for the Annual Meeting.
The
entire expense of soliciting proxies is being borne by Steel Partners pursuant
to the terms of the Joint Filing and Solicitation Agreement (as defined
below). Costs of this solicitation of proxies are currently estimated
to be approximately $_______. Steel Partners estimates that through
the date hereof, its expenses in connection with this solicitation are
approximately $_______.
OTHER
PARTICIPANT INFORMATION
Each
member of the Group is a participant in this solicitation. Warren G.
Lichtenstein is Chairman of the Board, Secretary and the Managing Member
of
Partners LLC, a Delaware limited liability company. Partners LLC is
the general partner of Steel Partners. The principal business of Mr.
Lichtenstein, Partners LLC and Steel Partners is investing in the securities
of
companies. The principal business address of Mr. Lichtenstein,
Partners LLC and Steel Partners is 590 Madison Avenue, 32nd Floor, New York,
New
York 10022. As of the date hereof, Steel Partners is the beneficial
owner of [______] Shares. As the general partner of Steel Partners,
Partners LLC may be deemed to beneficially own the [_______] Shares of Adaptec
owned by Steel Partners. Mr. Lichtenstein may be deemed to
beneficially own the [_______] Shares of Adaptec owned by Steel Partners
by
virtue of his positions with Partners LLC. For information regarding
purchases and sales of securities of Adaptec during the past two years by
Steel
Partners, see Schedule I.
On
June
25, 2007, the members of the Group entered into a Joint Filing and Solicitation
Agreement in which, among other things, (i) the parties agreed to the joint
filing on behalf of each of them of statements on Schedule 13D with respect
to
the securities of Adaptec, (ii) the parties agreed to solicit proxies or
written
consents for the election of the Nominees, or any other person(s) nominated
by
Steel Partners, to the Adaptec Board at the Annual Meeting (the “Solicitation”),
and (iii) Steel Partners agreed to bear all expenses incurred in connection
with
the Group’s activities, including approved expenses incurred by any of the
parties in connection with the Solicitation, subject to certain
limitations. Steel Partners intends to seek reimbursement from
Adaptec of all expenses it incurs in connection with the
Solicitation. Steel Partners does not intend to submit the question
of such reimbursement to a vote of security holders of the Company.
Except
as
set forth in this Proxy Statement (including the Schedules hereto), (i) during
the past 10 years, no participant in this solicitation has been convicted
in a
criminal proceeding (excluding traffic violations or similar misdemeanors);
(ii)
no participant in this solicitation directly or indirectly beneficially owns
any
securities of Adaptec; (iii) no participant in this solicitation owns any
securities of Adaptec which are owned of record but not beneficially; (iv)
no
participant in this solicitation has purchased or sold any securities of
Adaptec
during the past two years; (v) no part of the purchase price or market value
of
the securities of Adaptec owned by any participant in this solicitation is
represented by funds borrowed or otherwise obtained for the purpose of acquiring
or holding such securities; (vi) no participant in this solicitation is,
or
within the past year was, a party to any contract, arrangements or
understandings with any person with respect to any securities of Adaptec,
including, but not limited to, joint ventures, loan or option arrangements,
puts
or calls, guarantees against loss or guarantees of profit, division of losses
or
profits, or the giving or withholding of proxies; (vii) no associate of any
participant in this solicitation owns beneficially, directly or indirectly,
any
securities of Adaptec; (viii) no participant in this solicitation owns
beneficially, directly or indirectly, any securities of any parent or subsidiary
of Adaptec; (ix) no participant in this solicitation or any of his/its
associates was a party to any transaction, or series of similar transactions,
since the beginning of Adaptec’s last fiscal year, or is a party to any
currently proposed transaction, or series of similar transactions, to which
Adaptec or any of its subsidiaries was or is to be a party, in which the
amount
involved exceeds $120,000; (x) no participant in this solicitation or any
of
his/its associates has any arrangement or understanding with any person with
respect to any future employment by Adaptec or its affiliates, or with respect
to any future transactions to which Adaptec or any of its affiliates will
or may
be a party; and (xi) no person, including the participants in this solicitation,
who is a party to an arrangement or understanding pursuant to which the Nominees
are proposed to be elected has a substantial interest, direct or indirect,
by
security holdings or otherwise in any matter to be acted on at the Annual
Meeting.
OTHER
MATTERS AND ADDITIONAL INFORMATION
Other
Matters
Other
than those discussed above, Steel Partners is unaware of any other matters
to be
considered at the Annual Meeting. However, should other matters,
which Steel Partners is not aware of a reasonable time before this solicitation,
be brought before the Annual Meeting, the persons named as proxies on the
enclosed GOLD proxy card will vote on such matters in their
discretion.
Stockholder
Proposals
Any
proposal of a stockholder intended to be presented for consideration at
Adaptec’s 2008 annual meeting of stockholders must comply with the proxy rules
promulgated by the SEC and the Bylaws. Stockholders wishing to present a
proposal at the Company’s 2008 annual meeting of stockholders must submit such
proposal to the Company by [_____] if they wish for it to be eligible for
inclusion in the Company’s proxy statement and form of proxy relating to that
meeting. In addition, under the Bylaws, a stockholder wishing to nominate
a
person to the Adaptec Board at the 2008 annual meeting of stockholders (but
not
include such nomination in the Company’s proxy statement) or wishing to make a
proposal with respect to any other matter (but not include such proposal
in the
Company’s proxy statement) at the 2008 annual meeting of stockholders, must
submit the required information to the Company by [________].
The
information set forth above regarding the procedures for submitting stockholder
nominations and proposals for consideration at Adaptec’s 2008 annual meeting of
stockholders is based on information contained in the Company’s proxy
statement. The incorporation of this information in this Proxy
Statement should not be construed as an admission by us that such procedures
are
legal, valid or binding.
Incorporation
by Reference
Steel
Partners has omitted from this Proxy Statement certain disclosure required
by
applicable law that is expected to be included in the Company’s proxy statement
relating to the Annual Meeting. This disclosure is expected to
include, among other things, current biographical information on Adaptec’s
current directors, information concerning executive compensation, and other
important information. Although we do not have any knowledge
indicating that any statement made by Steel Partners herein is untrue, we
do not
take any responsibility for the accuracy or completeness of statements taken
from public documents and records that were not prepared by or on our behalf,
or
for any failure by Adaptec to disclose events that may affect the significance
or accuracy of such information. See Schedule II for information
regarding persons who beneficially own more than 5% of the Shares and the
ownership of the Shares by the directors and management of Adaptec.
The
information concerning Adaptec contained in this Proxy Statement and the
Schedules attached hereto has been taken from, or is based upon, publicly
available information.
STEEL
PARTNERS II, L.P.
_______,
2007
SCHEDULE
I
TRANSACTIONS
IN SECURITIES OF ADAPTEC
DURING
THE PAST TWO YEARS
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
450,900
|
|
3.6292
|
02/09/07
|
|
Common
Stock
|
|
132,308
|
|
3.6532
|
02/12/07
|
|
Common
Stock
|
|
627,460
|
|
3.6872
|
02/13/07
|
|
Common
Stock
|
|
428,000
|
|
3.6849
|
02/14/07
|
|
Common
Stock
|
|
200,000
|
|
3.6788
|
02/14/07
|
|
Common
Stock
|
|
660,700
|
|
3.6825
|
02/15/07
|
|
Common
Stock
|
|
108,300
|
|
3.6641
|
02/16/07
|
|
Common
Stock
|
|
700,743
|
|
3.6828
|
02/20/07
|
|
Common
Stock
|
|
17,500
|
|
3.6700
|
02/20/07
|
|
Common
Stock
|
|
812,080
|
|
3.6989
|
02/21/07
|
|
Common
Stock
|
|
143,000
|
|
3.7200
|
02/22/07
|
|
Common
Stock
|
|
259,574
|
|
3.7711
|
02/26/07
|
|
Common
Stock
|
|
821,338
|
|
3.7065
|
02/27/07
|
|
Common
Stock
|
|
760,121
|
|
3.6580
|
02/28/07
|
|
Common
Stock
|
|
3,527,762
|
|
3.6393
|
03/01/07
|
|
Common
Stock
|
|
1,600,000
|
|
3.6281
|
03/02/07
|
|
Common
Stock
|
|
122,400
|
|
3.4700
|
03/05/07
|
|
Common
Stock
|
|
47,700
|
|
3.5472
|
03/06/07
|
|
Common
Stock
|
|
385,800
|
|
3.6316
|
03/07/07
|
|
Common
Stock
|
|
554,501
|
|
3.6918
|
03/08/07
|
|
Common
Stock
|
|
357,400
|
|
3.6977
|
03/09/07
|
|
Common
Stock
|
|
574,928
|
|
3.7110
|
05/22/07
|
|
Common
Stock
|
|
317,876
|
|
3.7912
|
05/23/07
|
|
Common
Stock
|
|
55,528
|
|
3.7500
|
05/24/07
|
|
Common
Stock
|
|
974,148
|
|
3.8198
|
05/25/07
|
|
Common
Stock
|
|
366,130
|
|
3.8776
|
05/29/07
|
|
Common
Stock
|
|
374,855
|
|
4.0306
|
05/30/07
|
|
Common
Stock
|
|
462,489
|
|
4.0588
|
05/31/07
|
|
Common
Stock
|
|
164,104
|
|
4.0700
|
06/01/07
|
|
Common
Stock
|
|
372,355
|
|
4.0730
|
06/04/07
|
|
Common
Stock
|
|
15,124
|
|
3.5113
|
08/01/07
|
|
Common
Stock
|
|
141,715
|
|
3.6401
|
08/02/07
|
|
Common
Stock
|
|
198,200
|
|
3.6197
|
08/03/07
|
|
Common
Stock
|
|
60,000
|
|
3.5571
|
08/06/07
|
|
Common
Stock
|
|
153,348
|
|
3.6418
|
08/07/07
|
|
Common
Stock
|
|
454,957
|
|
3.6197
|
08/08/07
|
|
Common
Stock
|
|
10,137
|
|
3.6000
|
08/09/07
|
|
Common
Stock
|
|
412,327
|
|
3.5429
|
08/10/07
|
SCHEDULE
II
|
|
The
following table is reprinted from Amendment No. 1 to the Company’s Annual
Report on Form 10-K/A filed with the Securities and Exchange Commission
on
July 27, 2007
|
Name
of Beneficial Owner (1)
|
|
Percentage
of Shares
Outstanding
|
|
|
|
|
Directors
and Executive Officers:
|
|
Jon
S. Castor
|
|
|
|
|
Joseph
S. Kennedy
|
|
|
|
|
Robert
J. Loarie(2)
|
|
|
|
|
D.
Scott Mercer
|
|
|
|
|
Judith
M. O'Brien
|
|
|
|
|
Charles
J. Robel
|
|
|
|
|
Douglas
E. Van Houweling
|
|
|
|
|
Subramanian
"Sundi" Sundaresh
|
|
|
|
|
Russell
Johnson
|
|
|
|
|
Manoj
Goyal
|
|
|
|
|
Marcus
D. Lowe
|
|
|
|
|
Christopher
G. O'Meara
|
|
|
|
|
Directors
and all Executive Officers as a Group (14
Persons)
|
|
|
|
| |
|
|
|
|
5% Stockholders: |
|
|
|
|
Steel Partners II, L.P. (3) |
|
|
|
|
Wellington Management Company, LLP (4) |
|
|
|
|
Dimensional Advisors, L.P. (5) |
|
|
|
| |
|
|
|
|
(1)
|
Includes
the following shares that may be acquired upon exercise of stock
options
granted under our stock option plans within 60 days after June
29, 2007
(August 28, 2007):
|
| |
Jon
S. Castor
|
8,125
|
| |
Joseph
S. Kennedy
|
115,000
|
| |
Robert
J. Loarie
|
145,000
|
| |
D.
Scott Mercer
|
132,500
|
| |
Judith
M. O'Brien
|
8,125
|
| |
Charles
J. Robel
|
12,500
|
| |
Douglas
E. Van Houweling
|
115,000
|
| |
Subramanian
"Sundi" Sundaresh
|
322,499
|
| |
Russell
Johnson
|
148,953
|
| |
Manoj
Goyal
|
54,687
|
| |
Marcus
D. Lowe
|
149,166
|
| |
Christopher
G. O'Meara
|
133,750
|
| |
Directors
and executive officers as group
|
1,345,305
|
|
(2)
|
Includes
53,854 shares held in the name of a trust for the benefit of Mr.
Loarie
and his family.
|
|
(3)
|
Based
solely upon the Amendment No. 2 to the Schedule 13D filed by Steel
Partners with the SEC on June 25,
2007
|
|
(4)
|
Wellington
Management Company, LLP ("Wellington") reported that it has shared
voting
power over 4,722,600 shares and shared dispositive power with respect
to
all of the shares. All of the shares are owned of record by clients
of
Wellington. Wellington's address is 75 State Street, Boston, Massachusetts
02109. All information regarding Wellington is based solely upon
the
Amendment No. 1 to Schedule 13G filed by it with the SEC on February
14,
2007.
|
|
(5)
|
Dimensional
Fund Advisors, L.P. ("Dimensional") reported that it has sole voting
power
and dispositive power with respect to all of the shares. All of
the shares
are owned of record by clients of Dimensional. Dimensional's address
is
1299 Ocean Avenue, Santa Monica, California 90401. All information
regarding Dimensional is based solely upon the Schedule 13G filed
by it
with the SEC on February 9,
2007.
|
IMPORTANT
Tell
your
Board what you think! Your vote is important. No matter how many
Shares you own, please give Steel Partners your proxy FOR the election of
Steel
Partners’ Nominees by taking three steps:
|
|
• |
SIGNING the enclosed GOLD proxy card, |
|
|
• |
DATING the enclosed GOLD proxy card, and |
|
|
• |
MAILING
the enclosed GOLD proxy card TODAY in the envelope
provided (no postage is required if mailed in the United
States).
|
If
any of
your Shares are held in the name of a brokerage firm, bank, bank nominee
or
other institution, only it can vote such Shares and only upon receipt of
your
specific instructions. Depending upon your broker or custodian, you
may be able to vote either by toll-free telephone or by the
Internet. Please refer to the enclosed voting form for instructions
on how to vote electronically. You may also vote by signing, dating
and returning the enclosed GOLD voting form.
If
you
have any questions or require any additional information concerning this
Proxy
Statement, please contact MacKenzie Partners, Inc. at the address set forth
below.
MacKenzie
Partners, Inc.
105
Madison Avenue
New
York,
NY 10016
Call
Toll-Free: l-800-322-2885
E-Mail:
proxy@MacKenziepartners.com
PRELIMINARY
COPY - SUBJECT TO COMPLETION, DATED AUGUST 24, 2007
GOLD
PROXY CARD
ADAPTEC,
INC.
2007
ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF STEEL PARTNERS II, L.P.
THE
BOARD OF DIRECTORS OF ADAPTEC, INC.
IS
NOT SOLICITING THIS PROXY
P R O X Y
The
undersigned appoints ___________ and _________, and each of them, attorneys
and
agents with full power of substitution to vote all shares of Common Stock
of
Adaptec, Inc. (the “Company”) which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company
scheduled to be held on ________, ______ __, 2007, at __:___ __.M. (local
time),
at _________________, and including at any adjournments or
postponements thereof and at any meeting called in lieu thereof (the “Annual
Meeting”).
The
undersigned hereby revokes any other proxy or proxies heretofore given to
vote
or act with respect to the shares of Common Stock of the Company held by
the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take
by
virtue hereof. If properly executed, this Proxy will be voted as
directed on the reverse and in the discretion of the herein named attorneys
and
proxies or their substitutes with respect to any other matters as may properly
come before the Annual Meeting that are unknown to Steel Partners II, L.P.
(“Steel”) a reasonable time before this solicitation.
IF
NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED “FOR” SUCH PROPOSALS.
This
Proxy will be valid until the sooner of one year from the date indicated
on the
reverse side and the completion of the Annual Meeting.
IMPORTANT:
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
GOLD
PROXY CARD
STEEL
RECOMMENDS A VOTE “FOR” THE NOMINEES LISTED BELOW IN PROPOSAL NO.
1
x Please
mark vote as in this example
1. APPROVAL
OF STEEL’S PROPOSAL TO ELECT DIRECTORS:
|
|
FOR
ALL NOMINEES
|
WITHHOLD
AUTHORITY TO VOTE FOR ALL NOMINEES
|
FOR
ALL EXCEPT NOMINEE(S) WRITTEN BELOW
|
|
Nominees:
|
Jack L. Howard
John J. Quicke
John Mutch
Howard M. Leitner
Anthony Bergamo |
o |
o |
o
|
STEEL
INTENDS TO USE THIS PROXY TO VOTE (I) “FOR” MESSRS. HOWARD, QUICKE, MUTCH,
LEITNER AND BERGAMO AND (II) “FOR” THE CANDIDATES WHO HAVE BEEN NOMINATED BY THE
COMPANY TO SERVE AS DIRECTORS OTHER THAN __________, __________, __________,
__________, AND __________ FOR WHOM STEEL IS NOT SEEKING AUTHORITY TO VOTE
FOR
AND WILL NOT EXERCISE ANY SUCH AUTHORITY. THE NAMES, BACKGROUNDS AND
QUALIFICATIONS OF THE CANDIDATES WHO HAVE BEEN NOMINATED BY THE COMPANY,
AND
OTHER INFORMATION ABOUT THEM, CAN BE FOUND IN THE COMPANY’S PROXY
STATEMENT.
THERE
IS
NO ASSURANCE THAT ANY OF THE CANDIDATES WHO HAVE BEEN NOMINATED BY THE COMPANY
WILL SERVE AS DIRECTORS IF STEEL’S NOMINEES ARE ELECTED.
NOTE:
IF
YOU DO NOT WISH FOR YOUR SHARES TO BE VOTED “FOR” A PARTICULAR STEEL NOMINEE,
MARK THE “FOR ALL NOMINEES EXCEPT” BOX AND WRITE THE NAME(S) OF THE NOMINEE(S)
YOU DO NOT SUPPORT ON THE LINE BELOW. YOUR SHARES WILL BE VOTED FOR
THE REMAINING STEEL NOMINEE(S). YOU MAY ALSO WITHHOLD AUTHORITY TO
VOTE FOR ONE OR MORE ADDITIONAL CANDIDATES WHO HAVE BEEN NOMINATED BY THE
COMPANY BY WRITING THE NAME OF THE NOMINEE(S) BELOW.
_______________________________________________________________
2. APPROVAL
OF THE COMPANY’S PROPOSAL TO RATIFY APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS FOR THE COMPANY’S FISCAL YEAR ENDING MARCH 31,
2008.
| |
FOR
|
AGAINST
|
ABSTAIN
|
| |
o |
o |
o |
DATED: ____________________________
____________________________________
(Signature)
____________________________________
(Signature,
if held jointly)
____________________________________
(Title)
WHEN SHARES
ARE
HELD JOINTLY, JOINT OWNERS SHOULD EACH
SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC., SHOULD
INDICATE THE CAPACITY IN WHICH SIGNING. PLEASE SIGN EXACTLY AS NAME
APPEARS ON THIS PROXY.
