UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q



(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 29, 2001

or

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________ to __________________________.

Commission File No: 0-18033

EXABYTE CORPORATION

(Exact name of registrant as specified in its charter)



|Delaware                 | 84-0988566                          
|------------------------ | ------------------------------------
|(State of Incorporation) | (I.R.S. Employer Identification No.)

1685 38th Street

Boulder, Colorado 80301

(Address of principal executive offices, including zip code)

(303) 442-4333

(Registrant's Telephone Number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. [ ] Yes [X ] No

As of November 5, 2001, there were 23, 287,184 shares outstanding of the Registrant's Common Stock (par value $.001 per share).





EXABYTE CORPORATION AND SUBSIDIARIES



TABLE OF CONTENTS



|PART I. FINANCIAL INFORMATION                                                                                            | Page 
|------------------------------------------------------------------------------------------------------------------------ | -----
|                                                                                                                         |      
|Item 1. Financial Statements (Unaudited)                                                                                 | 3-4  
|                                                                                                                         |      
|Consolidated Balance Sheets--September 29, 2001 and December 30, 2000 (Unaudited)                                        | 5    
|                                                                                                                         |      
|Consolidated Statements of Operations--Three and Nine Months Ended September 29, 2001 and September 30, 2000 (Unaudited) | 6-7  
|                                                                                                                         |      
|Consolidated Statements of Cash Flows--Nine Months Ended September 29, 2001 and September 30, 2000 (Unaudited)           | 8-14 
|                                                                                                                         |      
|Notes to Consolidated Financial Statements (Unaudited)                                                                   | 8-14 
|                                                                                                                         |      
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations                            | 15-25
|                                                                                                                         |      
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                       | 26   
|                                                                                                                         |      
|PART II. OTHER INFORMATION                                                                                               |      
|                                                                                                                         |      
|Item 5. Other Information                                                                                                | 27-52
|                                                                                                                         |      
|Item 6. Exhibits and Reports on Form 8-K                                                                                 | 53   
|                                                                                                                         |      

















PART I

Item 1. Financial Statements

EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|(In thousands, except per share data)                                                                                                                                                                       | December 30,
2000 | September 29,
2001
(Unaudited)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------------------------------
|ASSETS                                                                                                                                                                                                      |                   |                               
|Current assets:                                                                                                                                                                                             |                   |                               
|Cash and cash equivalents                                                                                                                                                                                   | $ 3,159           | $2,079                        
|Short-term investments                                                                                                                                                                                      | 90                | 90                            
|Accounts receivable, less allowance for doubtful accounts and reserves for customer returns and credits of $7,413 and $4,368, respectively                                                                  | 37,412            | 22,283                        
|Inventories, net                                                                                                                                                                                            | 40,143            | 31,009                        
|Other current assets                                                                                                                                                                                        | 2,807             | 2,705                         
|Total current assets                                                                                                                                                                                        | 83,611            | 58,166                        
|Property and equipment, net                                                                                                                                                                                 | 18,754            | 13,098                        
|Other assets                                                                                                                                                                                                | 1,427             | 1,032                         
|                                                                                                                                                                                                            | $103,792          | $72,296                       
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                        |                   |                               
|Current liabilities:                                                                                                                                                                                        |                   |                               
|Accounts payable, including book overdrafts of $2,343 and $268, respectively                                                                                                                                | $26,944           | $19,022                       
|Accrued liabilities                                                                                                                                                                                         | 15,190            | 11,023                        
|Line of credit                                                                                                                                                                                              | 12,307            | 14,163                        
|Current portion of long-term obligations                                                                                                                                                                    | 2,147             | 3,567                         
|Total current liabilities                                                                                                                                                                                   | 56,588            | 47,775                        
|Long-term liabilities:                                                                                                                                                                                      |                   |                               
|Warranties                                                                                                                                                                                                  | 6,679             | 7,922                         
|Other long-term obligations                                                                                                                                                                                 | 1,467             | 1,152                         
|Stockholders' equity:                                                                                                                                                                                       |                   |                               
|Preferred stock; no series; $.001 par            value; 12,000 shares authorized; no shares            issued, and outstanding                                                                              | --                | --                            
|Preferred stock; series A; $0.001 par value;            500 shares authorized; no shares issued and            outstanding                                                                                  | --                | --                            
|Convertible preferred stock; series G; $0.001            par value; 1,500 shares authorized; no shares            and 1,500 shares issued, respectively; $3,125            aggregate liquidation preference | --                | 2                             
|Common stock, $.001 par value; 50,000 shares            authorized; 23,234 and 23,302 shares issued,            respectively                                                                                | 23                | 23                            
|Capital in excess of par value                                                                                                                                                                              | 69,154            | 72,196                        
|Treasury stock, at cost, 455 shares                                                                                                                                                                         | (2,742)           | (2,742)                       
|Retained deficit                                                                                                                                                                                            | (27,377)          | (54,032)                      
|Total stockholders' equity                                                                                                                                                                                  | 39,058            | 15,447                        
|                                                                                                                                                                                                            | $103,792          | $72,296                       

The accompanying notes are an integral part of the consolidated financial statements.

EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|Unaudited)                                                                    | Three Months Ended
|----------------------------------------------------------------------------- | ------------------
|(In thousands, except per share data)                                         | September 30, 2000
|                                                                              |                   
|Net sales                                                                     | $60,100           
|Cost of goods sold                                                            | 48,892            
|                                                                              |                   
|Gross profit                                                                  | 11,208            
|                                                                              |                   
|Operating expenses:                                                           |                   
|Selling, general and administrative                                           | 12,995            
|Research and development                                                      | 9,244             
|                                                                              |                   
|Loss from operations                                                          | (11,031)          
|Other income (expense):                                                       |                   
|Interest income                                                               | 425               
|Interest expense                                                              | (86)              
|Other                                                                         | (662)             
|Loss before income taxes                                                      | (11,354)          
|                                                                              |                   
|Benefit from income taxes                                                     | 49                
|                                                                              |                   
|Net loss                                                                      | $(11,305)         
|                                                                              |                   
|                                                                              |                   
|Basic and diluted net loss per share                                          | $(0.50)           
|                                                                              |                   
|Common shares used in the calculation of basic and diluted net loss per share | 22,600            

The accompanying notes are an integral part of the consolidated financial statements.





EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|(Unaudited)                                                                   | Nine Months Ended 
|----------------------------------------------------------------------------- | ------------------
|(In thousands, except per share data)                                         | September 30,
2000
|                                                                              |                   
|Net sales                                                                     | $160,990          
|Cost of goods sold                                                            | 126,283           
|                                                                              |                   
|Gross profit                                                                  | 34,707            
|                                                                              |                   
|Operating expenses:                                                           |                   
|Selling, general and administrative                                           | 40,232            
|Research and development                                                      | 28,970            
|                                                                              |                   
|Loss from operations                                                          | (34,495)          
|                                                                              |                   
|Other income (expense):                                                       |                   
|Gain from sale of investment                                                  | --                
|Interest income                                                               | 986               
|Interest expense                                                              | (283)             
|Other                                                                         | (588)             
|Loss before income taxes                                                      | (34,380)          
|                                                                              |                   
|Provision for income taxes                                                    | (142)             
|Equity interest in net loss of investee                                       | --                
|                                                                              |                   
|Net loss                                                                      | $(34,522)         
|                                                                              |                   
|Basic and diluted net loss per share                                          | $(1.53)           
|                                                                              |                   
|Common shares used in the calculation of basic and diluted net loss per share | 22,520            

The accompanying notes are an integral part of the consolidated financial statements.





EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|(Unaudited)                                      | Nine Months Ended 
|------------------------------------------------ | ------------------
|(In thousands)                                   | September 30,
2000
|                                                 |                   
|Cash flows from operating activities:            |                   
|Cash received from customers                     | $160,687          
|Cash paid to suppliers and employees             | (183,677)         
|Interest received                                | 993               
|Interest paid                                    | (282)             
|Income taxes paid                                | (239)             
|Income tax refund received                       | 1,393             
|Net cash used by operating activities            | (21,125)          
|                                                 |                   
|Cash flows from investing activities:            |                   
|Purchase of short-term investments               | (2,051)           
|Proceeds from the sale of investments            | 9,000             
|Capital expenditures                             | (7,541)           
|Proceeds from the sale of fixed assets           | --                
|Net cash provided (used) by investing activities | (592)             
|                                                 |                   
|Cash flows from financing activities:            |                   
|Net proceeds from issuance of stock              | 967               
|Cash overdraft                                   | --                
|Borrowings under line of credit                  | --                
|Borrowings under bridge loan                     | --                
|Payments on line of credit                       | --                
|Principal payments under long-term obligations   | (1,277)           
|Net cash provided (used) by financing activities | (310)             
|                                                 |                   
|Net decrease in cash and cash equivalents        | (22,027)          
|Cash and cash equivalents at beginning of period | 25,610            
|                                                 |                   
|Cash and cash equivalents at end of period       | $3,583            

The accompanying notes are an integral part of the consolidated financial statements.





EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|(Unaudited)                                                                         | Nine Months Ended 
|----------------------------------------------------------------------------------- | ------------------
|(In thousands)                                                                      | September 30,
2000
|Reconciliation of net loss to net cash used by operating activities:                |                   
|Net loss                                                                            | $(34,522)         
|Adjustments to reconcile net loss to net
        cash used by operating activities: |                   
|Depreciation, amortization and other                                                | 9,927             
|Write down of assets                                                                | 1,268             
|Provision for losses and reserves on              accounts receivable               | 3,779             
|Equity in loss of investee                                                          | --                
|Gain on sale of investment                                                          | --                
|                                                                                    |                   
|Change in assets and liabilities:                                                   |                   
|Accounts receivable                                                                 | (4,438)           
|Inventories, net                                                                    | (7,525)           
|Other current assets                                                                | 1,030             
|Other assets                                                                        | (510)             
|Accounts payable                                                                    | 3,635             
|Accrued liabilities                                                                 | 3,918             
|Warranties                                                                          | 947               
|Other long-term obligations                                                         | 1,366             
|                                                                                    |                   
|Net cash used by operating activities                                               | $(21,125)         
|                                                                                    |                   
|                                                                                    |                   
|Supplemental schedule of non-cash investing and financing activities:               |                   
|Capital lease obligations                                                           | $933              

The accompanying notes are an integral part of the consolidated financial statements.





EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 1--ACCOUNTING PRINCIPLES

The consolidated balance sheet as of September 29, 2001, the consolidated statements of operations for the three and nine months ended September 29, 2001 and September 30, 2000, as well as the consolidated statements of cash flows for the nine months ended September 29, 2001 and September 30, 2000, have been prepared by Exabyte Corporation ("Exabyte" or the "Company") without an audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation thereof, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 30, 2000 annual report to stockholders heretofore filed with the Securities and Exchange Commission (the "Commission") as Part II to the Company's Annual Report on Form 10-K. The results of operations for interim periods presented are not necessarily indicative of the operating results for the full year.

The Company has incurred operating losses over the last four years. Additionally, as of September 29, 2001, the Company had only $2,169,000 in cash, cash equivalents and short-term investments and $973,000 of remaining borrowing capacity under its line of credit. In January, 2001, the Company reassessed its business and commenced an investigation of various strategic alternatives that would result in increased liquidity. These alternatives included one or more of the following:

-   sale of all or part of our operating and off-balance sheet assets;

-   restructuring of current operations;

-   additional equity infusions; or

-   strategic alliance, acquisition or merger.

The Company engaged an investment banker, Broadview International LLC, to assist in this process. As a result of these efforts, the Company issued Series G preferred stock as described in Note 4 and has entered into the merger agreement with Ecrix as described in Note 8.

If the Company does not consummate the merger and does not execute its current business plan, it is possible that the Company would be unable to achieve its currently contemplated business objectives or have enough funds to support its operations, which could affect its ability to continue as a going concern.

Note 2--INVENTORIES

Inventories, net of reserves for excess quantities and obsolescence, consist of the following:

|(In thousands)                    | December 30, 2000 | September 29, 2001
|--------------------------------- | ----------------- | ------------------
|                                  |                   |                   
|Raw materials and component parts | $23,361           | $22,524           
|Work-in-process                   | 1,817             | 1,087             
|Finished goods                    | 14,965            | 7,398             
|                                  | $40,143           | $31,009           



Note 3--ACCRUED LIABILITIES

Accrued liabilities consist of the following:

|(In thousands)              | December 30, 2000 | September 29, 2001
|--------------------------- | ----------------- | ------------------
|                            |                   |                   
|Wages and employee benefits | $7,610            | $4,144            
|Warranty, current portion   | 2,676             | 2,558             
|Other                       | 4,904             | 4,321             
|                            | $15,190           | $11,023           



Note 4-- PREFERRED STOCK

On April 16, 2001, the Company issued 1,500,000 shares of Series G preferred stock to a private investor for total proceeds of $3,000,000. The dividends accrue at a rate of 9% per annum on the original Series G issue price and are compounded if not paid. The original Series G issue price of the Series G preferred stock is $2.00 per share, subject to adjustment for stock splits, stock dividends and other similar changes to the Company's capital stock. Dividends must be paid in cash, except that they may be paid in shares of common stock, at a price of $2.00 per share, if the Company is prohibited from paying cash dividends under any agreement in place as of April 16, 2001. The Company's bank line of credit agreement with Congress Financial Corporation currently prohibits the payment of cash dividends. Series G preferred stock has a liquidation preference over common stock and conversion rights, at the option of the holder, into shares of common stock at a conversion price of $2.40 per share, subject to adjustment. The holder of the Series G preferred stock is entitled to vote with shares of common stock (and not as a separate class) on an as-converted basis at any annual or special meeting of the Company's stockholders; provided, however, that without the prior written unanimous consent of the Series G preferred stock, the Company may not take certain actions, including asset transfer or acquisition (which terms are defined in the Certificate of Designation). The Company has registered the shares of Series G preferred stock as well as the underlying shares of common stock issuable upon conversion, or payment of dividends when, as and if, declared by the board of directors on the Series G preferred stock. At September 29, 2001, $125,000 of preferred stock dividends related to this issuance had accumulated but had not been declared or paid.

Note 5--BASIC AND DILUTED EARNINGS PER SHARE

Options to purchase 3,059,000 and 6,939,000 shares of common stock were excluded from dilutive stock option calculations for the third quarter of 2000 and 2001, respectively, because their exercise prices were greater than the average fair market value of the Company's stock for the period and as such, they would be anti-dilutive. Excluded from dilutive stock option calculations for the first nine months of 2000 and 2001 were 3,605,000 and 5,521,000 options to purchase common stock, respectively. 
     Additionally, options to purchase 1,834,000 and 30,000 shares of common stock, respectively, were excluded from the computation of diluted earnings per share for the third quarter of 2000 and 2001, respectively, as these options are antidilutive as a result of the net loss incurred. Excluded from dilutive stock options calculations for the first nine months of 2000 and 2001 were 1,288,000 and 1,448,000 options to purchase common stock, respectively.

Since September 29, 2001, the Company has not issued any stock options.



In March 2001, the Company completed a reduction in its workforce in order to reduce expenses, minimize ongoing cash consumption and to simplify management structure. All areas of the Company were impacted by the workforce reduction. These reductions reduced the workforce by approximately 235 persons (211 domestically and 24 in Europe) and resulted in a severance charge to operations in the first quarter of 2001 of approximately $498,000. Of these costs, $223,000 were included in cost of sales, $179,000 were included in selling, general and administrative costs and $96,000 were included in research and development costs. All severance was paid during the first quarter of 2001 and no accruals remain. 
     During the third quarter of 2000, the Company incurred $3,899,000 in charges related to a restructuring, which will result in the closure of a wholly-owned subsidiary, Exabyte Magnetics GmbH ("EMG"). This restructuring was part of a plan adopted by the Board of Directors on July 24, 2000, which outsourced a number of manufacturing operations to Hitachi Digital Media Products Division of Hitachi, Ltd. ("Hitachi"). The restructuring decision resulted in: (1) an immediate end to the manufacture of M2Ô recording heads by EMG; (2) the termination of M2Ô scanner manufacturing by EMG during April 2001; and (3) the planned shut down of the remaining M1 scanner manufacturing by the end of 2003. No assets were transferred as a result of the decision to outsource M2TM scanner manufacturing to Hitachi and no technology was transferred. In addition, there were no write-offs taken or restructuring charges incurred in connection with the M2Ô scanner outsourcing to Hitachi. There has been no change in the method of accounting for transactions between EMG and the Company and all assets not impacted by the restructuring continue to be depreciated in a consistent manner.
     These third quarter 2000 restructuring charges include employee severance and related costs of $1,613,000, excess facilities costs of $718,000, the write-off of excess inventories of $879,000, the write-off of capital equipment of $389,000 and other costs of $300,000. Workforce reductions involved 93 employees, constituting all employees of EMG. All severance payments for these employees were contractually defined, fixed and communicated during the third quarter of 2000.
     Approximately $644,000 in restructuring costs were paid during the first nine months of 2001. Employment at EMG was reduced by 24 employees during the first nine months to 29 employees at September 29, 2001. Excess facilities exposure and other related costs were reduced by $235,000 with the signing of a new lease. Approximately $1,313,000 of accruals related to this restructuring remain at September 29, 2001.

The following table summarizes the activity to date related to the restructuring which occurred in the third quarter of 2000:

|(In thousands)                       | Severance
and
Related | Excess
Facilities | Inventory
Write-
Down | Fixed
Asset
Write-
Down | Other | Total 
|------------------------------------ | --------------------- | ----------------- | --------------------- | ----------------------- | ----- | ------
|Restructuring charges                | $1,613                | $718              | $879                  | $389                    | $300  | $3,899
|Asset write downs                    | --                    | --                | (879)                 | --                      | --    | (879) 
|Loss on sale of assets               | --                    | --                | --                    | (56)                    | --    | (56)  
|Cash payments                        | (360)                 | --                | --                    | --                      | (139) | (499) 
|Additional charges/
     adjustments | 74                    | 41                | --                    | (333)                   | (55)  | (273) 
|                                     |                       |                   |                       |                         |       |       
|Balance, December 30, 2000           | 1,327                 | 759               | --                    | --                      | 106   | 2,192 
|                                     |                       |                   |                       |                         |       |       
|Cash payments                        | (554)                 | (33)              | --                    | --                      | (57)  | (644) 
|Additional charges/
     adjustments | --                    | (186)             | --                    | --                      | (49)  | (235) 
|Balance, September 29, 2001          | $773                  | $540              | $--                   | $--                     | $--   | $1,313



Note 7 -- SEGMENT, GEOGRAPHIC AND SALES INFORMATION

Since 1998 all operations of the Company are considered one operating segment. Therefore, no segment disclosures have been presented. The Company will continue to review the internal reporting structure for future changes that could result in disclosure of additional segments.

The following table details revenues from external customers by geographic area:

|                   | Revenues From External Customers
|------------------ | --------------------------------
|                   | Three Months Ended              
|(In thousands)     | Sept. 30, 2000                  
|                   |                                 
|United States      | $43,355                         
|Europe/Middle East | 12,654                          
|Pacific Rim        | 3,130                           
|Other              | 961                             
|                   | $60,100                         

Foreign revenue is based on the country in which the customer is located.

The following table details long-lived asset information by geographic area:

|               | Long-lived Assets
|-------------- | -----------------
|(In thousands) | December 30,
2000
|               |                  
|United States  | $15,982          
|Scotland       | 3,060            
|Germany        | 576              
|Pacific Rim    | 331              
|Other          | 232              
|               | $20,181          

The following table details revenue by product line:

|                          | Revenue by Product Line
|------------------------- | -----------------------
|                          | Three Months Ended     
|(In thousands)            | Sept. 30, 2000         
|                          |                        
|Drives                    | $21,749                
|Libraries                 | 21,017                 
|Media                     | 15,628                 
|Service, spares and other | 3,497                  
|Sales allowances          | (1,791)                
|                          | $60,100                

The following tables summarize sales to major customers:

|                | Net Sales         
|--------------- | ------------------
|                | Three Months Ended
|(In thousands)  | Sept. 30, 2000    
|                |                   
|Ingram Micro    | $12,394           
|Tech Data       | 7,607             
|IBM             | 7,580             
|Digital Storage | 3,856             

|                | % of Total Net Sales
|--------------- | --------------------
|                | Three Months Ended  
|                | Sept. 30, 2000      
|                |                     
|Ingram Micro    | 20.6%               
|Tech Data       | 12.7                
|IBM             | 12.6                
|Digital Storage | 6.4                 

No other customers accounted for 10% or more of sales in any of these periods.

Note 8--AGREEMENT AND PLAN OF MERGER

On August 22, 2001, the Company, Ecrix Corporation, certain lenders and certain investors entered into an Agreement and Plan of Merger. Under this agreement, Exabyte will issue 10,000,000 shares of its common stock in exchange for all the outstanding common and preferred shares of Ecrix. In addition, as a part of the merger, certain Ecrix shareholders have agreed to purchase 9,650,000 shares of Series H preferred stock of Exabyte at a price of $1.00 per share and make bridge loans to the Company for up to $2,000,000. The bridge loans convert to Series H preferred stock at closing of the Merger and those shares plus accrued interest are part of the 9,650,000 shares. This merger will be accounted for by Exabyte using the purchase method of accounting for a business combination. If either party terminates the agreement under certain circumstances described in the agreement, it is required to pay a termination fee of $1,000,000. In addition, if the Company terminates the agreement, it has agreed to repay the promissory notes, which totaled $1,500,000 at September 29, 2001. An additional $500,000 in promissory notes were issued subsequent to September 29, 2001. A special shareholder vote regarding this matter is scheduled to occur November 9, 2001.

Note 9--GAIN FROM SALE OF INVESTMENT



Note 10--CONTINGENCIES AND COMMITMENTS

The Company is, from time to time, subject to certain claims, assertions or litigation by outside parties as part of its ongoing business operations. The outcomes of any such contingencies are not expected to have a material adverse impact on the financial condition, results of operations, or cash flows of the Company.

The Company entered into a development agreement with Hitachi Ltd. on March 1, 2001 for the development of certain M3Ô components and manufacture of engineering prototypes. Under this agreement, the Company has a maximum obligation of approximately $2,500,000 for development activities, $700,000 for prototype parts and $2,800,000 for tooling costs. Expenses of $622,000 and $1,422,000 have been incurred under this agreement for the third quarter and first nine months of 2001, respectively. Under this agreement, which is cancelable by either party by giving notice and, without cost or penalty, the Company will retain all technology rights for data storage applications. Neither party is obligated to pay royalties. Amounts are expensed based upon the performance of services by Hitachi or receipt of engineering prototypes.

Note 11 -- RECENT ACCOUNT PRONOUCEMENTS

In June of 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No.141, "Business Combinations" (FAS 141") and Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("FAS 142").

FAS 141 requires that all purchase business combinations must be accounted for using the purchase method. Under this method, the purchase price of an acquired business is allocated to the individual tangible and intangible assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition. If the purchase price exceeds the amounts assigned to assets acquired and liabilities assumed, the excess is recognized as goodwill. After initial recognition, goodwill and intangible assets acquired in the business combination must be accounted for under FAS 142. FAS 141 is effective for the Company for all business combinations initiated after June 30, 2001. The adoption of FAS 141 had no impact on the Company's consolidated results of operations.

FAS 142 requires that after a company allocates the purchase price in accordance with FAS 141, the assets acquired, liabilities assumed, and goodwill must be assigned to one or more reporting units based upon certain criteria outlined in FAS 142. In addition, goodwill will no longer be amortized. Instead, companies are required to test goodwill for impairment at the reporting unit level by (1) determining the fair values of the reporting units and comparing them with their carrying values and (2) if the fair value of a reporting unit is less than its carrying amount, measure the amount of impairment loss, if any, by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds its implied fair value, that excess should be recognized as an impairment loss. FAS 142 is effective for the Company on January 1, 2002. The Company is currently evaluating the impact of this standard on the Company's consolidated results of operations.

In October of 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which supercedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". FAS 144 retains the fundamental provisions of Statement 121 on losses. The statement establishes that long-lived assets to be disposed of other than by sale are to be considered held and used until the asset is disposed of. In addition, the statement requires that long-lived assets to be disposed of by sale should be classified as held for sale, regardless if the assets were previously held and used or newly acquired. Discontinued operations will no longer be measured on a net realizable value basis, and future operating losses are no longer recognized before they occur. FAS 144 is effective for the Company for fiscal year 2002, with early adoption encouraged. The Company believes that, once effective, this statement will not have a material impact on the Company's consolidated results of operations.



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.



OVERVIEW AND RECENT DEVELOPMENTS

We

Our tape drive products are based on 8mm and MammothTapeTM technologies and our automated tape library products are based upon 8mm, MammothTapeÔ , AITÔ , DLTtapeÔ and LTOÔ UltriumÔ technologies.

We market our products worldwide to resellers and original equipment manufacturers ("OEMs"). We also provide repair services directly to OEMs and to our resellers' customers.

Our reseller channel customers purchase products for resale and they may provide services to their customers, such as:

-   distribution;

-   financial terms and conditions;

-   pre-sales, sales and/or post-sales system upgrades; or

-   other value-added products and/or services.

Even though we have no obligation to do so, we support some reseller channel customers by providing marketing and technical support directly to them or their customers. As a result, we may incur certain additional costs for these sales. Other costs and risks associated with our reseller channel customers may include:

-   inventory price protections;

-   stock rotation obligations;

-   short term marketing promotions; and

-   customer and consumer rebates.

OEM customers incorporate our products as part of their own systems, which they then sell to their customers under their own brand name. We work closely with our OEM customers during early product development stages to help ensure our products will readily integrate into the OEM's systems.

The sales cycle for an OEM typically covers many months. During this time, the OEM may:

-   evaluate the technology;
       -   qualify the product specifications;
       -   verify our compliance with product specifications; 
       -   integrate the product into its system; and 
       -   publicly announce the integration. This step typically occurs
             toward the end of the sales cycle before volume shipments of
             our products are made to the OEM.

In March 2001, we entered into a development agreement with Hitachi Digital Media Products Division of Hitachi, Ltd. ("Hitachi"). Under this agreement, we have a maximum obligation of approximately $2,500,000 for development activities, $700,000 for prototype parts and $2,800,000 for tooling costs. Expenses of $1,223,000 have been incurred under this agreement through September 29, 2001.



RESULTS OF OPERATIONS

The following table sets forth our operating results as a percentage of sales for each period presented.

|                                        | Three Months Ended | Nine Months Ended
|--------------------------------------- | ------------------ | -----------------
|                                        | Sept.30,
2000      | Sept. 29,
2001   
|                                        |                    |                  
|Net sales                               | 100.0%             | 100.0%           
|Cost of goods sold                      | 81.4               | 72.4             
|                                        |                    |                  
|Gross profit                            | 18.6               | 27.6             
|Operating expenses:                     |                    |                  
|Selling, general and administrative     | 21.6               | 21.9             
|Research and development                | 15.4               | 16.0             
|                                        |                    |                  
|Loss from operations                    | (18.4)             | (10.3)           
|Other income (expense):                 |                    |                  
|Gain from sale of investment            | --                 | --               
|Interest income                         | 0.7                | 0.1              
|Interest expense                        | (0.1)              | (1.3)            
|Other                                   | (1.1)              | 0.2              
|                                        |                    |                  
|Loss before income taxes                | (18.9)             | (11.3)           
|Provision for income taxes              | 0.1                | 0.1              
|Equity interest in net loss of investee | --                 | --               
|                                        |                    |                  
|Net loss                                | (18.8)%            | (11.2)%          

NET SALES



PRODUCT MIX TABLES

|                                                   | Three Months Ended | Nine Months Ended
|-------------------------------------------------- | ------------------ | -----------------
|(In thousands)                                     | Sept.30,
2000      | Sept. 29,
2001   
|8mm drives:                                        |                    |                  
|EliantTM820, Mammoth- LT, Mammoth and M2TM           | $21,465            | $10,882          
|8mm libraries:                                     |                    |                  
|EZ17TM, EZ17A, 215M, 215A, 430M, 430A, X80 and X200 | 12,389             | 6,142            
|DLTtapeTM libraries:                                |                    |                  
|17D, 230D and 690D                                 | 2,266              | 1,314            
|LTOTM libraries:                                    |                    |                  
|110L and 221L                                      | 21                 | 1,739            
|Media                                              | 15,628             | 12,626           
|Service, spares and other                          | 3,497              | 2,620            
|End-of-life drives and libraries(x)                | 6,625              | (34)             
|Sales allowances                                   | (1,791)            | (1,021)          
|                                                   | $60,100            | $34,268          



|                                                   | Three Months Ended | Nine Months Ended
|-------------------------------------------------- | ------------------ | -----------------
|(As a percentage of net sales)                     | Sept.30,
2000      | Sept. 29,
2001   
|8mm drives:                                        |                    |                  
|EliantTM820, Mammoth- LT, Mammoth and M2TM           | 35.7%              | 31.8%            
|8mm libraries:                                     |                    |                  
|EZ17TM, EZ17A, 215M, 215A, 430M, 430A, X80 and X200 | 20.6               | 17.9             
|DLTtapeTM libraries:                                |                    |                  
|17D, 230D and 690D                                 | 3.8                | 3.8              
|LTOTM libraries:                                    |                    |                  
|110L and 221L                                      | 0.1                | 5.1              
|Media                                              | 26.0               | 36.8             
|Service, spares and other                          | 5.8                | 7.7              
|End-of-life drives and libraries(x)                | 11.0               | (0.1)            
|Sales allowances                                   | (3.0)              | (3.0)            
|                                                   | 100.0%             | 100.0%           

(x) Prior year percentages reflect current year classifications of end-of-life products.

Our net sales decreased by 43.0% to $34,268,000 in the third quarter of 2001 from $60,100,000 for the third quarter of 2000. We believe this decrease is primarily due to a general economic slowdown in the technology industry and delayed buying decisions related to the September 11, 2001 tragedy. In addition, we believe that our current financial condition has negatively impacted sales. In comparing net sales from the third quarter of 2001 to the third quarter of 2000, there were several significant differences:

-   Sales of older generation 8mm tape drives (EliantTM820, Mammoth-LT and Mammoth) decreased by $7,900,000 due to product life cycles. These decreases were primarily in the OEM channel.

-   Sales of M2Ô tape drives decreased by $2,682,000. We believe this decrease is due to the general slowdown of the economy.

-   Sales of certain 8mm tape libraries (EZ17, X80 and X200) decreased by$8,275,000. We believe this decrease is due to the general slowdown of the economy.

-   Sales of newer generation 8mm tape libraries (EZ17A, 215, 215A, 430 and 430A) increased by $2,028,000. This increase is due to the fact that these products did not begin shipping until late in 2000 and 2001, thus there were fewer sales in the third quarter of 2000.

-   Sales of LTOÔ UltriumÔ tape libraries (110L and 221L) increased by $1,718,000. This increase is due to the fact that these products did not begin shipping until late it the third quarter of 2000, thus there were fewer sales in the third quarter of 2000.

-   Sales of end-of-life drives and libraries decreased by $6,659,000. The majority of this decrease is due to our 220 library, which entered end-of-life status in the first quarter of 2001.

-   Sales of media decreased by $3,002,000. We believe this decrease is due to the general slowdown of the economy, and related to the decrease in sales of our MammothTapeÔ drive products.

Our net sales decreased by 23.8% to $122,732,000 in the first nine months of 2001 from $160,990,000 for the first nine months of 2000. We believe this decrease is primarily due to a general economic slowdown in the technology industry and delayed buying decisions related to the September 11, 2001 tragedy. In addition, we believe that our current financial condition has negatively impacted sales. In comparing net sales from the first nine months of 2001 to the first nine months of 2000, there were several significant differences:

-   Sales of older generation 8mm tape drives (EliantTM820, Mammoth-LT and Mammoth) decreased by $18,996,000 due to product life cycles. Decreases were primarily in the OEM channel.

-   Sales of M2Ô tape drives decreased by $5,997,000. We believe this decrease resulted from a combination of (1) initial stocking orders for the M2TM tape drives which occurred early in 2000; (2) media supply constraints in the first quarter of 2001 which limited availability to sell tape drives; and (3) a general slowdown of the economy.

-   Sales of certain 8mm tape libraries (EZ17, X80 and X200) decreased by $11,009,000. We believe this decrease is due to the general slowdown in the economy.

-   Sales of newer generation 8mm tape libraries (EZ17A, 215, 215A, 430 and 430A) increased by $7,677,000. This increase is due to the fact that these products did not begin shipping until late in 2000 and 2001, thus there were no sales in the first two quarters of 2000.

-   Sales of LTOÔ UltriumÔ tape libraries (110L and 221L) increased by $3,268,000. This increase is due to the fact that these products did not begin shipping until late in 2000, thus there were no sales in the first two quarters of 2000.

-   Sales of DLT libraries decreased by $3,461,000. We believe this is because these libraries incorporate older generation DLT 4000 and DLT 7000 tape drives.

-   Sales of end-of-life drives and libraries decreased by $15,623,000. The majority of this decrease is due to our 220 library, which entered end-of-life status in the first quarter of 2001.

-   Sales of media increased by $3,932,000 as a result of our ability to resolve media supply constraints and fill the backlog of outstanding orders which existed at December 30, 2000.

-   Sales allowances decreased by $4,084,000, which had a positive impact on net sales. The decrease is a result of decreased exposure to inventory stock rotation related to decreased sales volumes to qualifying reseller customers, a decrease in certain marketing related programs, and a decrease in rebate incentives.

The following table details our sales to different customer types as a percentage of total net sales for the periods presented:

CUSTOMER MIX TABLE

|                               | Three Months Ended | Nine Months Ended
|------------------------------ | ------------------ | -----------------
|(As a percentage of net sales) | Sept.30,
2000      | Sept. 29,
2001   
|Customer Type:                 |                    |                  
|Reseller                       | 66.6%              | 76.2%            
|OEM                            | 28.7               | 17.8             
|End-user and other             | 4.7                | 6.0              
|                               | 100.0%             | 100.0%           

Sales to reseller and end-user customers increased as a percentage of net sales in the third quarter and first nine months of 2001 from the third quarter and first nine months of 2000, while sales to OEM customers decreased. We believe this shift is a result of wider acceptance of our newer generation products through the reseller channel and slower acceptance of M2Ô technology in the OEM channels. Sales in Europe decreased by approximately $11,226,000 or 32.4% in the first nine months of 2001 from the first nine months of 2000, while North America sales decreased by $25,160,000 million or 22.1% in the same period.

The following table summarizes customers who accounted for 10% or more of our sales in the periods presented:

SALES TO MAJOR CUSTOMERS

|                               | Three Months Ended | Nine Months Ended
|------------------------------ | ------------------ | -----------------
|(As a percentage of net sales) | Sept.30,
2000      | Sept. 29,
2001   
|Customer:                      |                    |                  
|Ingram Micro                   | 20.6%              | 21.8%            
|Tech Data                      | 12.7               | 15.3             
|IBM                            | 12.6               | 8.7              
|Digital Storage                | 6.4                | 15.7             

No other customers accounted for 10% or more of sales in any of these periods. We cannot guarantee that sales to these or any other customers will continue to represent the same percentage of our revenues in future periods. Our customers also sell competing products and continually review new technologies, which causes our sales volumes to vary from period to period.

COST OF SALES AND GROSS MARGIN

Our cost of sales includes the actual cost of all materials, labor and overhead incurred in the manufacturing and service processes, as well as certain other related costs. Other related costs include primarily warranty accruals and inventory reserves. Our cost of sales for the third quarter of 2001 decreased to $24,798,000 from $48,892,000 for the same period in 2000. Excluding restructuring charges our cost of sales for the first nine months of 2000 was $46,179,000. Our gross margin percentage increased to 27.6% in the third quarter of 2001 from 18.6% for the same period in 2000. Excluding restructuring charges, our gross margin percentage for the third quarter of 2000 was 23.2%.

Gross margins for the third quarter of 2001 were favorably impacted by a higher proportion of sales going through our reseller channel versus our OEM channel and a higher relative proportion of media sales. Also contributing to this improvement were lower warranty costs and lower costs due to improved drive production yields.

Our cost of sales for the first nine months of 2001 decreased to $101,519,000 from $126,283,000 for the same period in 2000. Excluding restructuring charges, our cost of sales was $101,296,000 for the first nine months of 2001 and $123,570,000 for the first nine months of 2000. Our gross margin percentage decreased to 17.3% in the first nine months of 2001 from 21.6% for the same period in 2000. Excluding restructuring charges, our gross margin was 17.5% for the first nine months of 2001 and 23.2% for the first nine months of 2000. Gross profit for the first nine months of 2001 was negatively impacted by inventory reserves and rework charges related to our efforts to improve the quality and manufacturing yields of the M2TM drive product and high fixed costs relative to the level of net sales.

OPERATING EXPENSES

Selling, general and administrative expenses include salaries, sales commissions, advertising expenses and marketing programs. These expenses decreased to $7,493,000 in the third quarter of 2001 from $12,995,000 for the same period in 2000. These expenses decreased to $28,339,000 during the first nine months of 2001 from $40,232,000 for the same period in 2000. Without restructuring charges for the first nine months of 2001, these expenses were $28,160,000. The decrease in these costs is the result of our restructuring in the first quarter of 2001, as well as other general cost control efforts. Additionally, advertising expenses were higher in 2000 compared to 2001 as a result of the introduction of the M2TM drive and related automation products which occurred in the early part of 2000. During 2001, our product introductions were smaller in scale.
      Research and development expenses decreased to $5,492,000 in the third quarter of 2001 from $9,244,000 for the same period in 2000. Excluding restructuring charges, these expenses were $8,058,000 during the third quarter of 2000. These expenses decreased to $19,684,000 in the first nine months of 2001 from $28,970,000 for the same period in 2000. Excluding restructuring charges, these expenses were $19,588,000 for the first nine months of 2001 and $27,784,000 for the first nine months of 2000. This decrease is the result of our restructuring in the third quarter of 2000 and first quarter of 2001, as well as lower costs for ongoing engineering of the M2TM product in 2001 over 2000.

OTHER INCOME (EXPENSE), NET

Other income (expense), net consists primarily of gains from the sale of an investment, interest income and expenses, foreign currency remeasurement and transaction gains and losses and other miscellaneous items. Other expense for the third quarter of 2001 was $354,000 compared to expense of $323,000 for the same period in 2000. Other income for the first nine months of 2001 was $523,000 compared to income of $115,000 for thesame period in 2000. These changes are primarily the result of unfavorable changes in interest income and expense which are offset by favorable changes in remeasurement and transaction gains and losses. Interest income and expense were unfavorably impacted by liquidity constraints and the resulting borrowings under our line of credit, which increased interest expense during the third quarter and first nine months of 2001. During the third quarter and first nine months of 2000, we had no such interest expense, and had interest income due to invested cash balances. A gain on the sale of an investment of $1,719,000 has favorably impacted these expenses for the first nine months of 2001 (see "LIQUIDITY AND CAPITAL RESOURCES" below).

TAXES

During the second quarter of 1999, we recorded a deferred tax valuation allowance equal to 100% of total deferred tax assets. Management considered a number of factors, including our cumulative operating losses over the prior three years, short-term projected losses due to the impact of delays in the release of the M2TM product as well as certain offsetting positive factors. Management believes a 100% valuation allowance will be required until the Company returns to a consistent and predictable level of profitability.

LIQUIDITY AND CAPITAL RESOURCES



As of December 30, 2000, the Company owned 80,000 shares of Series B Preferred Stock and 83,000 shares of Series C Preferred Stock in HighGround Systems Inc. These shares had a net book value of $0 at December 30, 2000. In April 2001, Sun Microsystems purchased HighGround Systems Inc., and as a result, the Company received 96,000 shares of Sun Microsystems common stock. The Company sold 85,000 of these shares during the second quarter of 2001 and received cash proceeds and recorded a gain of $1,719,000.

In May 2000, we entered into a bank line of credit agreement with Congress Financial Corporation, a subsidiary of First Union Bank Corporation. This agreement expires in May 2003. Originally, this agreement allowed borrowings up to the lesser of 80% of eligible accounts receivable or $20.0 million. In February 2001, this agreement was amended to increase the borrowing limit to $25.0 million. This amendment also added 25% of eligible finished goods inventory to the borrowing base. Eligible accounts receivable excludes invoices greater than 60 days past due, some foreign receivables and other items identified in the agreement. Eligible finished goods inventory excludes slow moving inventory and other items identified in the agreement. Collateral for this agreement includes accounts receivable and inventory, as well as certain off balance sheet assets.

The line of credit prohibits the payment of dividends without prior bank approval and has a minimum tangible net worth covenant, and certain other covenants. The agreement contains certain acceleration clauses that may cause any outstanding balance to become immediately due in the event of default. The amount available to borrow under the line of credit varies each day based upon the levels of the underlying accounts receivable and inventories. As of September 29, 2001, the overall amount available to borrow was $15,136,000, we had $14,163,000 in borrowings outstanding and a remaining borrowing capacity of $973,000. At September 29, 2001, we were in compliance with all covenants.



-   sale of all or part of our operating and off-balance sheet assets;

-   restructuring of current operations;

-   additional equity infusions; or

-   strategic alliance, acquisition or merger.

Broadview was engaged to assist us in this process. As a result, we issued Series G preferred stock as described in Note 4 of Notes to Consolidated Financial Statements, and have entered into the merger agreement with Ecrix as described in Note 8. If we do not consummate the merger and do not execute our current business plan, it is possible that we would be unable to achieve our currently contemplated business objectives or have enough funds to support our operations, which could affect our ability to continue as a going concern.



RESTRUCTURING CHARGES

In March 2001, the Company completed a reduction in its workforce in order to reduce expenses, minimize ongoing cash consumption and to simplify its management structure. All areas of the Company were impacted by the workforce reduction. These reductions reduced the workforce by approximately 235 persons (211 domestically and 24 in Europe) and resulted in a severance charge to operations in the first quarter of 2001 of approximately $498,000. Of these costs, $223,000 were included in cost of sales, $179,000 were included in selling, general and administrative costs and $96,000 were included inresearch and development costs. All severance was paid during the first quarter of 2001, and no accruals remain.
     During the third quarter of 2000, we incurred $3,899,000 in charges related to a restructuring, which will ultimately result in the closure of our wholly owned subsidiary, EMG. This restructuring was part of a plan adopted by our Board of Directors on July 24, 2000, which outsourced a number of manufacturing operations to Hitachi in order to reduce our cost structure. The restructuring decision resulted in: (1) an immediate end to the manufacture of M2TM recording heads by EMG; (2) the termination of M2TM scanner manufacturing by EMG during April 2001; and (3) the planned shut down of the remaining M2TM scanner manufacturing by the end of 2003. No assets were transferred as a result of the decision to outsource M2TM scanner manufacturing to Hitachi and no technology was transferred. In addition, there were no write-offs taken or restructuring charges incurred in connection with the M2TM scanner outsourcing to Hitachi. There has been no change in the method of accounting for transactions between EMG and the Company and all assets not impacted by the restructuring continue to be depreciated in a consistent manner.
     These third quarter restructuring charges include employee severance and related costs of $1,613,000, excess facilities costs of $718,000, the write-off of excess inventories of $879,000, the write-off of capital equipment of $389,000 and other costs of $300,000. Workforce reductions involved 93 employees, constituting all employees of EMG. All severance payments for these employees were contractually defined, fixed and communicated during the third quarter of 2000.
     Approximately $644,000 in restructuring costs were paid during the first nine months of 2001. Employment at EMG was reduced by 24 employees during the first six months to 29 employees at September 29, 2001. Excess facilities exposure and other related costs were reduced by $235,000 with the signing of a new lease. Approximately $1,313,000 of accruals related to this restructuring remain at September 29, 2001. We further anticipate that most of the remaining amounts owed will be paid by the end of 2003.

The following table summarizes the activity to date related to the restructuring which occurred in the third quarter of 2000:

|(In thousands)                       | Severance
and
Related | Excess
Facilities | Inventory
Write-
Down | Fixed
Asset
Write-
Down | Other | Total 
|------------------------------------ | --------------------- | ----------------- | --------------------- | ----------------------- | ----- | ------
|Restructuring charges                | $1,613                | $718              | $879                  | $389                    | $300  | $3,899
|Asset write downs                    | --                    | --                | (879)                 | --                      | --    | (879) 
|Loss on sale of assets               | --                    | --                | --                    | (56)                    | --    | (56)  
|Cash payments                        | (360)                 | --                | --                    | --                      | (139) | (499) 
|Additional charges/
     adjustments | 74                    | 41                | --                    | (333)                   | (55)  | (273) 
|                                     |                       |                   |                       |                         |       |       
|Balance, December 30, 2000           | 1,327                 | 759               | --                    | --                      | 106   | 2,192 
|                                     |                       |                   |                       |                         |       |       
|Cash payments                        | (554)                 | (33)              | --                    | --                      | (57)  | (644) 
|Additional charges/
     adjustments | --                    | (186)             | --                    | --                      | (49)  | (235) 
|                                     |                       |                   |                       |                         |       |       
|Balance, September 29, 2001          | $773                  | $540              | $--                   | $--                     | $--   | $1,313



RECENT ACCOUNT PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 141, "Business Combinations" (FAS 141") and Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("FAS 142").

FAS 141 requires that all purchase business combinations must be accounted for using the purchase method. Under this method, the purchase price of an acquired business is allocated to the individual tangible and intangible assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition. If the purchase price exceeds the amounts assigned to assets acquired and liabilities assumed, the excess is recognized as goodwill. After initial recognition, goodwill and intangible assets acquired in the business combination must be accounted for under FAS 142. FAS 141 is effective for the Company for all business combinations initiated after June 30, 2001. The adoption of FAS 141 had no impact on the Company's consolidated results of operations.

FAS 142 requires that after a company allocates the purchase price in accordance with FAS 141, the assets acquired, liabilities assumed and goodwill must be assigned to one or more reporting units based upon certain criteria outlined in FAS 142. In addition, goodwill will no longer be amortized. Instead, companies are required to test goodwill for impairment at the reporting unit level by (1) determining the fair values of the reporting units and comparing them with their carrying values and (2) if the fair value of a reporting unit is less than its carrying amount, measure the amount of impairment loss, if any, by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds its implied fair value, that excess should be recognized as an impairment loss. FAS 142 is effective for the Company on January 1, 2002. The Company is currently evaluating the impact of this standard on the Company's consolidated results of operations.

In October of 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which supercedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". FAS 144 retains the fundamental provisions of Statement 121 on recognizing impairment losses. The statement establishes that long-lived assets to be disposed of other than by sale are to be considered held and used until the asset is disposed of. In addition, the statement requires that long-lived assets to be disposed of by sale should be classified as held for sale, regardless if the assets were previously held and used or newly acquired. Discontinued operations will no be longer measured on a net realizable value basis, and future operating losses are no longer recognized before they occur. FAS 144 is effective for the Company for fiscal year 2002, with early adoption encouraged. The Company believes that, once effective, this statement will not have a material impact on the Company's consolidated results of operations.

MARKET RISK

In the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates. Uncertainties that are either nonfinancial or nonquantifiable, such as political, economic, tax, other regulatory or credit risks are not included in our assessment of our market risks. Our exposure to fluctuations in the dollar/yen exchange rate is expected to increase as a result of outsourcing certain manufacturing to Hitachi.Our borrowings under our line of credit agreement expose us to changes in interest rates.



Item 3. Quantitative and Qualitative Disclosures About Market Risk





PART II.



Item 5. Other Information

RISK FACTORS



GENERAL INFORMATION ABOUT THESE RISK FACTORS



These risk factors contain important information about our business and you should read them carefully.

You should carefully consider the risks described below. If any of the following risks should actually occur, our business, prospects, financial condition or results of operations would likely suffer. In such case, the trading price of Exabyte common stock or other securities could fall, and you may lose all or part of your investment. We furnish you these risk factors to describe how you may be financially hurt by owning Exabyte securities rather than how you may be financially benefited by taking a short position in our securities or by taking any other position which results in profits upon a drop in the securities price. If you are in a short position you face different risks that are not contemplated in this document.

You should read these risk factors together.



We may not update these risk factors in a timely manner.



The risks of our combined company may be different than those of Ecrix or Exabyte independently.





RISKS RELATED TO THE PROPOSED MERGER



Exabyte and Ecrix may not realize any benefits from the merger.



-   distraction of management and other key personnel from the business of the
combined company;

-   integrating complex technology, product lines, services and development plans;
-   inability to demonstrate to customers and suppliers that the merger will not result in adverse changes in client service standards or business focus;

-   inability to retain and integrate key personnel;

-   disruptions in the combined sales forces that may result in a loss of current customers or the inability to close sales with potential customers;

-   expending time, money and attention on integration that would otherwise be spent on developing either company's own products and services.;

-   additional financial resources that may be needed to fund the combined operations; and

-   impairment of relationships with employees and customers as a result of changes in management.

Neither Exabyte nor Ecrix has experience in integrating operations on the scale represented by the merger, and we are not certain that Exabyte and Ecrix can be successfully integrated in a timely or efficient manner or at all or that any of the anticipated benefits of the merger will be realized. Failure to do so could have a material adverse effect on the business, financial condition and operating results of the combined company.

If the costs of the proposed merger exceed the benefits realized, the combined company may experience continued and increased losses.



The market price of Exabyte common stock may decline as a result of the merger.



-   the integration of Exabyte and Ecrix is unsuccessful or takes longer than expected;

-   the perceived benefits of the merger are not achieved as rapidly or to the extent anticipated by financial analysts or investors; or

-   the effect of the merger on the combined company's financial results is not consistent with the expectations of financial analysts or investors.

The price of Exabyte common stock is volatile and the value of Exabyte common stock to be issued in the merger will depend upon the market price at the time the merger is closed.



The proposed merger will substantially decrease the ownership of current Exabyte stockholders.



Sales of substantial amounts of Exabyte common stock after the merger could materially adversely affect the market price of Exabyte common stock.



The merger may result in a loss of Ecrix employees.



Uncertainty created by the merger may make it more difficult to attract and retain Exabyte and Ecrix employees.



The merger may result in a loss of customers.As a result of the merger some customers or potential customers may not continue to do business with Exabyte or Ecrix. In this case, the combined company may lose significant revenue that Exabyte or Ecrix might have otherwise received had the merger not occurred.

If the conditions to the merger are not met or waived, the merger will not occur and the intended benefits of the merger will not be realized.



Failure to complete the merger would harm Exabyte's future business and operations.



-   if Exabyte continues to incur substantial operating losses, it will need to immediately and successfully establish new sources of equity or debt financing, the availability of which is uncertain;

-   potential customers may defer purchases of Exabyte's products or services; and

-   employee turnover may increase.



Exabyte may be unable to sublease facilities currently used by Ecrix.



RISKS RELATED TO EXABYTE'S AND THE COMBINED COMPANY'S BUSINESS



1. RISKS RELATED TO ECRIX'S BUSINESS

1.1 Ecrix relies on relationships with a few large customers.



1.2 Ecrix is in the process of terminating its main supply contract and settling claims associated with the supply contract.





1.3 Ecrix may be unable to successfully transfer its drive manufacturing from Aiwa to Hitachi.

As discussed above, Ecrix is in the process of transferring its drive manufacturing from Aiwa to Hitachi. Currently, Ecrix is still in early negotiations with Hitachi over the terms and conditions of a manufacturing and supply agreement. If Ecrix is unable to secure commercially reasonable terms, financial condition, results of operations and business prospects of our combined companies following the acquisition would be harmed.

Ecrix may be unable to complete the transition between Aiwa and Hitachi, or may experience difficulties successfully transferring the technology from Aiwa to Hitachi. Additionally, the transition may not be completed in a timely manner. Should Ecrix encounter any difficulties in the transition, sales, revenue and customer acceptance could be adversely effected.

1.4  Ecrix may be unable to obtain key parts on a timely basis if suppliers cease manufacturing required parts.



1.5  Ecrix has incurred substantial losses and will need to either generate sufficient revenues or obtain financing.



2. CURRENTLY, OUR REVENUES ARE INADEQUATE TO SUPPORT OUR OPERATIONS.

2.1 We need additional funding to support our operations. Our inability to obtain additional funding may harm our ability to continue as a going concern.



-   losses in the first nine months of 2001 of $26,655,000; in 2000 of $41,268,000; in 1999 of $88,407,000; and an accumulated deficit at September 29, 2001 of $54,032,000;

-   expenditures for new products and products under development; and

-   other capital expenditures.



-   sale of all or part of our operating assets and off-balance sheet assets;

-   restructuring of current operations;

-   additional equity infusions; or

-   strategic alliance, acquisition or merger.







W



2.3 Compliance with financial loan covenants under Exabyte's loan agreement with Congress Financial Corporation or Ecrix's loan agreement with Silicon Valley Bank may affect our ability to borrow under those lines of credit and our own liquidity.



-   restrict certain financial and other activities;

-   requires us to maintain a minimum net worth; and

-   eliminates the borrowing line if we experience any material adverse change.





3. RISKS ASSOCIATED WITH OUR OPERATIONS AND FINANCIAL RESULTS.

3.1 Nasdaq could delist Exabyte common stock if we do not reestablish compliance with Nasdaq's minimum bid price or continue to comply with financial, corporate governance, and other standards for continued listing.



3.2 Our success depends on many factors, the most significant of which is our ability to successfully transition ourselves into a strong automation company.



-   our ability to successfully sell libraries independent of our MammothTapeTM tape drives;

-   availability of media;

-   introduction of competitive products;

-   acquiring sufficient market share;

-   customer acceptance and original equipment manufacturer ("OEM") adoptions;

-   compatibility with tape drives used by our customers; and

-   ability to service and support our library products.

3.3 Media sales represented 36% of our revenues in the first nine months of 2001. Any shortfall in media sales could harm our results of operations.



3.4 We have encountered difficulties manufacturing our M2TM tape drive because of its complex design, which has harmed our ability to produce and sell the product. Our inability to successfully resolve these issues may harm our operating results.



3.5 Our inability to obtain enough media from three suppliers has in the past and could in the future inhibit our production and sales of our tape drives and associated libraries.



-   Matsushita Electric Industrial Co. Ltd. ("MEI");

-   TDK Corporation ("TDK"); and

-   Sony Corporation ("Sony").





3.6 In addition to our ability to successfully transition to an automation company, we also believe that our success depends on our ability to produce and sell our M2TM tape drive and Ecrix's VXA®-2 drives.



-   increasing the throughput of our manufacturing;

-   satisfactorily addressing design issues;

-   customer acceptance of our tape drive formats;

-   supply capacity sufficient to meet customers' expectations;

-   customers transitioning from our earlier products to M2TM and VXA®-2;

-   OEM qualification and adoption; and

-   media availability.

3.7 We previously experienced problems introducing our Mammoth drive on time. If we experience similar problems with introducing future products, we could experience losses in market share and credibility, which would harm our operating results.





3.8 Managing our inventory levels is important to us because excess inventory reduces cash available to us for funding our operations, or may cause us to write off excess inventory which negatively impacts our operating results.





-   keeping inventory levels low;

-   managing unexpected increases in inventory due to stock rotation obligations or cancelled orders;

-   meeting changing product demands;

-   transitioning our product lines effectively; and

-   successfully introducing new products.



3.9 If companies introduce new technologies, such as optical disk, optical tape or DVD, into the data storage market, our tape products may become obsolete.





-   Optical Disk (including three dimensional Optical Disk)

-  Optical Tape

-   DVD

-   Holographic Storage

-   Magnetic Optics





3.10 If we do not continually enhance our tape technology to keep pace with our competitors, our products will not remain competitive.



-   customer and OEM adoption of MammothTapeTM and VXA® technology;

-   compatibility of tape drives to other data storage products;

-   data storage density;

-   data transfer rate;

-   customer confidence and familiarity;

-   product reliability; and

-   price.

3.11 We must accurately time the introduction and withdrawal of our products into and out of the data storage market because it affects our revenue and inventory levels.



3.12 We must continue to develop and introduce technologically compelling automated library products which automate competitive storage technologies, such as AITTM, LTOTM UltriumTM, or DLTtapeTM, or other future non-tape technologies, in order for us to maintain or improve our sales and revenues.



-   timely development;

-   customer acceptance;

-   supply capacity;

-   customer transition to these future products; and

-   OEM qualification and adoption; and media availability.

3.13 We experience many risks regarding our efforts to outsource tape drive manufacturing to Hitachi Digital Media Products Division of Hitachi, Ltd. and library manufacturing to Shinei International, including our inability to obtain enough product from these sole source suppliers, maintaining a duplicate manufacturing infrastructure during the transition phase, and timely implementing engineering product changes.

We currently outsource the manufacturing of some of our library products to Shinei and portions of our M2TM manufacturing process to Hitachi and we may transfer the manufacture of some of our other products to Hitachi in the future. We plan to complete the outsourcing of all our low-end libraries and the remaining portion of our M2TM tape drive manufacturing to the respective manufacturers by the first quarter of 2002.

Exabyte successfully outsourced the manufacturing of our first tape drive products to Sony. While we were successful with that outsourcing effort, we may be unsuccessful with our current outsourcing effort. For example, we were unsuccessful previously when we outsourced our worldwide repair services to Magnetic Data Technologies, LLC and have now brought that service function back in-house.

Hitachi or Shinei may be unable to timely implement product engineering changes.





We may be unable to obtain enough product.







If sales do not increase sufficiently to create efficient manufacturing processes, Hitachi or Shinei may terminate its manufacturing and supply agreement.

Our manufacturers rely in part on volume in order to create efficiencies in their manufacturing processes. If our sales do not increase to a volume level that enables our manufacturers to capitalize on these efficiencies, they may not be able to manufacture the product at a commercially viable cost to them, and could terminate their manufacturing and supply agreement with us. If we had to bring these manufacturing processes back to Exabyte or outsource them to another third party it would be prohibitively difficult for us to accomplish without significant impact to our customer relationships, revenue and results of operations.

We may need to maintain a duplicate manufacturing infrastructure during the transition period.During the transition period, we must maintain redundant manufacturing capability at our Boulder, Colorado facilities, the Hitachi facilities in Japan and the Shinei facilities in Singapore. There are several factors that would increase our expenses during the transition period, including:

-   maintaining a double infrastructure;

-   creating additional tooling;

-   adding additional technical personnel; and

-   creating additional inventory; and training Hitachi and Shinei technical and manufacturing personnel.



Our proprietary information may not be adequately protected.



3.14 We automated competitive DLT technology late and may experience market share loss if we cannot automate in a timely manner new competitive technology developed in the future.





3.16 Any inability to obtain components, such as scanners or recording heads, from our suppliers would affect our ability to manufacture our products.



3.17 Our dependencies on sole-source suppliers may cause a reduction in our level of control over delivery, quantity, quality and cost of the product.We rely heavily on sole-source suppliers (one supplier providing us with one or more components) to develop and/or manufacture critical components to use in our tape drives or libraries. If a sole-source supplier is unable to provide us with a sufficient supply of their components we may be unable to manufacture the drive or library. This could cause us to delay or cancel shipments, which would adversely affect our results of operations.

I

-   delivering components on schedule;

-   manufacturing a high number of components for delivery;

-   maintaining the highest possible quality when manufacturing the components; and

-   managing the costs of manufacturing the components.



3.18 We rely on third party manufacturers, which may weaken our intellectual property protection, create a reliance on the manufacturers to produce our products, or expose us to market risks associated with foreign manufacturers.









-   political instability;

-   currency controls and fluctuations;

-   tariffs, customs and other duties;

-   reduced intellectual property protections; and

-   import controls, trade barriers and other trade restrictions and regulations.Additionally, U.S. federal and state agency restrictions imposed by the Buy American Act or the Trade Agreement Act may apply to our products manufactured outside the United States.

3.19 We may be unable to increase our production to meet sudden, unexpected demands by OEM customers.



3.20 The storage backup market is very competitive and may cause us to decrease our product pricing or affect our product sales.



Price Erosion. Price erosion of our products has occurred in the past and is likely to occur again in the future.

Loss of Market Share. We have lost market share to competitors in the past. We may lose additional market share in the future.







3.21 We rely on the sales to a small number of customers for a large portion of our overall sales.



|Ingram Micro | 18%
|------------ | ---
|Tech Data    | 11%
|IBM          | 10%
|             | 39%











3.22 We rely on the information technology markets for workstations, mid-range computer systems and network systems to create demand for our products. Any slowing of these markets would adversely affect sales of our products.









3.23 Third parties may bring claims against us for monetary damages suffered as a result of our products failing to backup or restore data. These monetary damages could be significant.



3.24 We may lose our entire investment in CreekPath should they fail to succeed or if the market in which CreekPath participates cannot sustain CreekPath's growth.







-

-   CreekPath's success depends in part on developing strategic alliances with key Internet data centers and others;
-   Changing or new standards or technology may render CreekPath's services obsolete;
-   CreekPath's success depends on hiring qualified employees in sales and other areas; and

-   CreekPath anticipates consolidations of the SSP market which may cause a decline in fees.



3.25 The labor market in the high technology industry and Boulder, Colorado is competitive and we may have difficulty recruiting or keeping key, qualified employees.



Losing or failing to recruit a key employee could:

-   delay product development schedules;

-   interrupt team continuity;

-   result in losing proprietary information to competitors or other third parties;

-   increase our administrative costs; and

-   adversely affect our results of operations.



3.26 Factors such as variations in our quarterly results of operations, progress in addressing issues with producing our M2TM tape drives and competitive press announcements may cause our stock price to fluctuate.



-   overall economic and market conditions;

-   quarterly variations in operating results;

-   progress or lack of progress in developing our M2TM and follow-on tape drives;

-   announcements of technological innovations or new products by us or our competitors; and

-   CreekPath's performance and perceived valuation.





-   fluctuating conditions in the computer market;

-   liquidity issues;

-   disclosing our business prospects assessment; and

-   our competitors announcing new products.

3.27 Factors such as economic conditions, industry or market shifts, or product price erosion may cause our quarterly results of operations to fluctuate.





-   general economic conditions affecting our customers' orders;

-   delays in product or service introductions;

-   industry shifts; and;

-   product price erosion.

3.28 SEC and FASB interpretations may cause us to restate how we report our earnings.



-   revenue recognition;

-   accounting for stock options and stock-based compensation; and

-   accounting for derivatives or hedging instruments.





3.29 Foreign taxing authorities may assert that intercompany transactions between us and our subsidiaries were not in accordance with their tax laws, and they may try to assess material penalties against us for these alleged violations.



3.30 Even though we take many steps to protect our proprietary rights, such as filing patents and executing non-disclosure agreements, our proprietary rights may not be fully protected. Additionally, someone may infringe on our proprietary rights, or we may infringe on someone else's proprietary rights, which could lead to costly and potentially damaging litigation.



-   patents;

-   trademarks;

-   trade secret protections;

-   non-disclosure agreements; and

-   license agreements.









3.31 Any lawsuits by stockholders, which may allege claims such as we failed to adequately disclose material facts associated with our business, could lead to costly litigation or unfavorable settlement terms.

Many companies, directors, and officers in our industry have been subjected to class action and stockholder derivative suits filed in federal and state courts. These suits generally allege that the defendants failed to adequately disclose certain risks associated with their business. Our involvement in a class action or stockholder derivative suit could materially affect our results of operations, specifically because of large legal costs incurred defending such actions. Other factors affecting our results of operations include diverting management's attention from the business to the suit, or paying a judgment or settlement arising from the suit.

In 1993, we successfully defended a series of class action lawsuits at an immaterial cost. We believe there are no pending or threatened securities related actions against Exabyte at this time.

3.32 Obtaining some of our product components from foreign business, such as Hitachi and Shinei, exposes us to risks on the import of our components, such as fluctuating currency exchange rates, particularly an adverse exchange movement of the U.S. dollar versus the Japanese yen, foreign government exchange control regulations or U.S. tariffs and trade restriction.



-   fluctuating currency exchange rates;

-   Europe's conversion to the euro;

-   foreign government regulations;

-   foreign exchange control regulations;

-   import/export restrictions;

-   foreign economic instability;

-   political instability;

-   adverse exchange movement of the U.S. dollar versus the Japanese yen or other  currency; and

-   tariffs, trade barriers and other trade restrictions by the U.S. government on products   or components shipped from foreign sources.We sometimes enter into contractual arrangements which may expose us to foreign exchange rate risks.

3.33 Foreign exchange rate fluctuations may harm our international sales, which represent almost one-third of our total revenue.





3.34 Regulations by the U.S. and other governments may impact our ability to trade with certain parties and/or export or import goods and services.

Regulations by the U.S. or foreign governments may obligate us to obtain licenses, pay fees and/or taxes, or otherwise delay or increase the costs of international transactions. These regulations may include without limitation:

-  U.S. government sanctions that prohibit trade with certain parties that may include   our customers  and suppliers;
-  U.S. and other government restrictions on the export or import of certain technologies (including our products and materials necessary for our products), for reasons that may include national security foreign policy, short supply, environmental or other national or international concerns;

-  U.S. and other government tariffs (e.g., duties) or non-tariff barriers (e.g., quotas or  other restrictions) that may restrict or prohibit cross border transactions, including fund transfers and commodity exports and imports; and
-  U.S. and other government restrictions or taxes on currency transfers and currency conversion that may impact our ability to receive or make payments, make investments, etc.

3.35 Some of our subsidiaries operate in foreign countries. This could expose us to risks, such as adverse foreign exchange rate fluctuations or an inability to enforce our legal rights in those countries.





-   fluctuating currency exchange rates;

-   foreign government regulations;

-   difficulties in collecting international accounts receivable; and

-   difficulties in enforcing intellectual property rights.

3.36 We have taken measures to deter a hostile takeover or adverse change in control, including adopting a shareholder rights plan.





-   classifying the Board into three classes;

-   authorizing the Board to issue preferred stock without stockholder approval,

-   authorizing the Board to determine voting rights and other provisions of the preferred stock;
-   requiring stockholders actions take place at a meeting of stockholders and not by written consent;

-   requiring advance notice of stockholder proposals and director nominations;

-   providing that only the Board may increase the authorized number of directors; and

-   requiring that special stockholder meetings may be called only by the Chairman of the Board, President or majority of directors.





3.37 We rely on our IT systems to operate our businesses. There are significant costs associated with upgrading and maintaining our IT systems.



-   engineering design process;

-   manufacturing and services;

-   sales orders, shipping, customer information, technical support and other sales related processes;

-   financial activities, including general ledger and budget reporting; and general day-to-day activities.





Item 6. Exhibits and Reports on Form 8-K





|Exhibit | Description                                                                                                                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     | Restated Certificate of Incorporation (2)                                                                                                                                                                                    
|3.2     | Certificate of Determination of Preference of Series A Junior Participating Preferred Stock, as amended (3)                                                                                                                  
|3.3     | Certificate of Designation of Powers, Preferences, Rights, Qualifications, Limitations and Restrictions of Series G Convertible Preferred Stock of Exabyte Corporation (4)                                                   
|3.4     | By-laws of the Company (5)                                                                                                                                                                                                   
|3.5     | Amendment to the By-laws (4)                                                                                                                                                                                                 
|10.1    | Third Amendment to the Rights Agreement, dated August 22, 2001, between Exabyte and Fleet National Bank (f/k/a The First National Bank of Boston), as Rights Agent (1)                                                       
|10.2    | Third Amendment to Loan and Security Agreement, Waiver and Consent, between Exabyte and Congress Financial Corporation (Southwest), a subsidiary of First Union National Bank ("Congress Financial") dated August 22, 2001(1)
|10.3    | Loan and Security Agreement between Exabyte and certain lenders, dated August 22, 2001 (1)                                                                                                                                   
|10.4    | Form of Notes (1)                                                                                                                                                                                                            
|10.5    | Subordination and Intercreditor Agreement between Exabyte, Congress Financial, and other investors, dated August 22, 2001 (1)                                                                                                
|10.6    | Letter Agreement, dated as of September 20, 2001, among the Company and Juan A. Rodriguez regarding investment in the Company's Series H Convertible Preferred Stock (1)                                                     
|10.7    | Lease between Boulder Walnut LLC and the Company, dated 
October 1, 1999 (1)                                                                                                                                                 
|10.8    | Lease between Eastpark Associates, Ltd. And the Company, dated 
May 8, 1992 (1)                                                                                                                                              
|10.9    | Lease between Boulder (38th) LLC and the Company dated October 1, 1999 (1)                                                                                                                                                   
|10.10   | Lease Agreement between Eastpark Technology Center, Ltd. And the Company, dated December 9, 1991 (1)                                                                                                                         



(1)   Filed as an exhibit to the Company's Registration Statement on Form S-4 (Registration No. 333-69808) filed with the Securities and Exchange Commission on September 21, 2001, or Amendment Nos. 1 or 2 thereto (filed on October 5 and October 9, 2001, respectively) and incorporated herein by reference

(2)   Filed as an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-30941) filed with the Securities and Exchange Commission (the "SEC") on September 8, 1982 or Amendment Nos. 1 and 2 thereto (filed on October 12, 1989 and October 16, 1989, respectively) and incorporated herein by reference.

(3)   Filed as Exhibits to the Company's Amendment No. 2 to the Company's Registration Statement on Form 8-A, as filed with the SEC on February 15, 2001 and incorporated herein by reference.

(4)   Filed as an Exhibit to the Company's Annual Report on Form 10-K,  filed with the SEC on April 27, 2001, and incorporated herein by reference.

(5)   Filed as an Exhibit to the Company's Annual Report on 10-K, filed with the SEC on 
April 1, 1999, and incorporated herein by reference.

(b)     Reports on 8-K

| | On August 23, 2001, the Company filed a Current report on Form 8-K to disclose that on August 22, 2001, the Company entered into an Agreement and Plan of Merger with Ecrix Corporation pursuant to which Ecrix will merge into a wholly-owned subsidiary of Exabyte.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|     |                  |  |    | EXABYTE CORPORATION                                                                                                               
|---- | ---------------- |  | -- | ----------------------------------------------------------------------------------------------------------------------------------
|     |                  |  |    | Registrant                                                                                                                        
|     |                  |  |    |                                                                                                                                   
|     |                  |  |    |                                                                                                                                   
|     |                  |  |    |                                                                                                                                   
|Date | November 8, 2001 |  | By | /s/ Stephen F. Smith                                                                                                              
|     |                  |  |    | Stephen F. Smith Vice President, Chief Financial Officer, General Counsel & Secretary (Principal Financial and Accounting Officer)