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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

Portions of the registrant's definitive proxy statement for the 2003 Annual Meeting are incorporated by reference into Part III of this report. The registrant's definitive proxy statement will be filed with the SEC on or before April 21, 2003.

In addition to the historical information contained in this document, this report contains forward-looking statements that involve future risks and uncertainties. We may achieve different results than those anticipated in these forward-looking statements. The actual results that we achieve may differ materially from any forward-looking statements due to such risks and uncertainties. Words such as "believes," "anticipates," "expects," "intends," "plans" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. You should carefully consider the risks described below, and other factors as may be identified from time to time in our filings with the Securities and Exchange Commission or in our press releases. If any of these 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 securit ies could fall, and you may lose all or part of your investment.

Exabyte intends to periodically update and describe these and future risks in reports filed with the Securities and Exchange Commission. However, you should not assume that we will always update them in a timely manner. We are not undertaking any obligation to update these risks to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

In November 2001, we completed a business combination with Ecrix Corporation. Prior to that transaction, Exabyte and Ecrix were independent companies. Because the transaction resulted in Ecrix becoming a wholly-owned subsidiary of Exabyte, Ecrix's financial results for the period from November 9, 2001 to December 29, 2001 are included in Exabyte's consolidated financial statements and results of operations for fiscal year 2001.

Exabyte Corporation designs, manufactures and markets a range of VXA® and MammothTape™ tape drives as well as VXA®, MammothTape™ and LTO™ (Ultrium™) automated tape libraries. We also provide our own brand of recording media and provide worldwide service and customer support to our customers and end users. We were incorporated in June 1985 under the laws of the State of Delaware.

We focus on the information storage and retrieval tape drive and library market for workstations, midrange computer systems and networks, primarily for data backup and archival applications. Computer manufacturers and resellers require a variety of storage products which vary in price, performance, capacity and form-factor characteristics as their needs for data backup and archival storage increase. Additionally, end users require reliable data backup and archival applications. Our strategy is to offer a number of products to address a broad range of these requirements.

On August 22, 2001 we entered into an Agreement and Plan of Merger with Ecrix Corporation ("Ecrix"), Bronco Acquisition, Inc. (our wholly owned subsidiary formed for the purpose of completing this transaction), certain lenders and certain investors. On November 9, 2001, our stockholders approved this acquisition and we closed the business combination. At the closing of the transaction, Ecrix became a wholly-owned subsidiary of Exabyte and the combined companies have been doing business as Exabyte Corporation since that date. Ecrix Corporation was founded in April 1996 in Boulder, Colorado to commercialize a new family of low-cost, high-capacity, high-performance data storage tape drive products. It began shipping products in May 1999, with general availability in September 1999. Ecrix's tape storage products are based on a technology called VXA® which incorporates variable speed, overscanning technology and discrete packet format. This VXA® architecture incorporates new, patentable technologies th at result in improvements in tape drive reliability and cost-effectiveness.

There were several important changes in our business during fiscal year 2002. Many of them previously have been disclosed in the reports we file from time to time with the SEC on Forms 10-Q and 8-K. However, following is a discussion of certain important events that happened during 2002. Additional information about these and other 2002 events may also be found in our prior filings as well as included elsewhere in this report on Form 10-K.

Our common stock was listed on the Nasdaq National Market. On February 26, 2003, our stock was moved to the Nasdaq SmallCap Market because we failed to meet the minimum bid price requirement necessary to stay listed on the Nasdaq National Market. In September 2002, we received a notice from Nasdaq that we had failed to meet the $1 minimum bid price requirement for continued listing on the Nasdaq National Market. By December 2002, we had not met the minimum bid price requirement, and we received notice from Nasdaq that we would be delisted from the National Market. We appealed this decision and attended a hearing in January 2003. On February 21, 2003, we received Nasdaq's final determination, which included allowing us to apply to the SmallCap Market in order to take advantage of the additional time SmallCap participants have to meet the minimum bid price requirement, a 180 day grace period. As of March 11, 2003, the closing bid price of our common stock was below $1 for 180 trading days. As part of Nasdaq's decision, we had the opportunity to request an additional 180 trading days to meet the minimum bid price requirement, which we did. On March 20, 2003 we received notification that Nasdaq was not granting our request for an additional 180 trading days to meet the minimum bid price requirement because we did not meet the SmallCap core listing requirements. As such, Nasdaq delisted our stock as of March 24, 2003. Our common stock is now traded on the OTC Bulletin Board. We believe that this delisting will further reduce the value of our common stock and its liquidity.

As of December 31, 2002, we are not in compliance with certain financial covenants under our line of credit agreement with Silicon Valley Bank. As a result, we have entered into a forbearance agreement whereby the bank has agreed to forbear from exercising is remedies upon default. The forbearance agreement expires on March 31, 2003 and limits borrowings on the line to $16,000,000. We are also negotiating amended terms to our existing line of credit agreement with Silicon Valley Bank. For more information about this line of credit, see "Liquidity and Capital Resources" under "Exabyte Management's Discussion and Analysis of Financial Condition and Results of Operations" below.

We have recently entered into deferred payment agreements with four of our five largest vendors, and are attempting to secure such an agreement with a fifth vendor. Please see "Information Regarding Our Manufacturing Processes and Partners" below for more information about these agreements.

In January 2002, Mr. William L. Marriner resigned as President, Chief Executive Officer, Chairman of the Board and director of Exabyte. The Board appointed Mr. Juan A. Rodriguez as interim President and Chief Executive Officer and Mr. A. Laurence Jones as non-executive Chairman of the Board while it searched for a new CEO. In June 2002, the Board appointed Mr. Tom W. Ward as President and Chief Executive Officer and Mr. Rodriguez as Chairman of the Board.

We market our products exclusively through resellers, distributors and original equipment manufacturer ("OEM") partners around the world. Our products address the need for reliable, high-performance and affordable data storage in the fastest growing segments of the computer industry - Windows NT, UNIX, MacOS and Linux application and database servers, workstations and computer networks.

We concentrate on the midrange application and database server market, manufacturing tape backup and network storage solutions for small, medium and large businesses. We provide cost-effective solutions incorporating VXA®, MammothTape™ and LTO™ (Ultrium™) technologies.

Throughout the past decade, our products have found widespread use in attended and unattended network backup, automated storage management, near-online storage, archiving, data collection, software distribution and interchange.

We sometimes base our market decisions on forecast reports, which we believe are accurate. If the reports turn out to be inaccurate, it may create insufficient or excessive inventories and disproportionate overhead expenses. Particularly, short order lead-times of reseller sales limit our ability to forecast.

Our tape drives are designed to back up or archive computer data. The primary factors distinguishing our tape drive products from one another are data capacity and transfer rate. Data capacity refers to the total amount of data that can be stored on a single media cartridge. Transfer rate refers to the speed at which data may be transferred to or from the tape drive.

Our tape drives offer data capacities ranging from 20GB to 160GB and transfer rates ranging from 3MB per second to 30MB per second (assuming data compression ratios as stated below).

Sales of tape drive products, including end-of-life drives, represented the following percentages of net revenue:

Following the acquisition of Ecrix in November 2001, we added VXA® technology to our existing MammothTape™ line of products. The following is a discussion on the two types of technologies that we currently produce.

We believe that the VXA® design provides our customers with a low cost, competitive alternative to competing products when compared on the basis of performance, functionality and reliability. The price point and features incorporated in our VXA® technology position it in the DDS (DAT) replacement market.

Our VXA® technology is best understood by contrasting VXA® technology with other existing tape drive technology. The technology used in other tape drives (including our own MammothTape™ tape drives) incorporates a technique known as "streaming." Streaming requires that the system supplying to or accepting data from the tape drive be able to maintain a data stream at or above that specified in the drive's data transfer rate. In streaming drives, data is recorded on tape in "tracks" which must be read from end-to-end in a single pass of a read head. Tape passes over a read head and the read head reads data from the tape. Streaming tape technologies require track-following to maintain proper head-to-track alignment while the tape track is read in its entirety at a fixed tape speed. The drive mechanism and media tolerances must be tightly controlled to maintain a precise alignment between the path of the head and the data tracks written on the tape or data errors can result.

While streaming tape drives are designed to operate efficiently at a constant tape speed and data transfer rate, the host system may not send or receive at the specific fixed rate the tape drive expects. This is because very often data is transmitted in "bursts," resulting in fluctuating transfer rates. Whenever the flow of data is interrupted, the drive stops the tape, backs up, accelerates to the appropriate speed, and then continues the data transfer in the same orientation as before. This process is known as "Backhitching." Backhitching tends to increase the wear and tear on both the media and the drive and slows down the performance of the system.

VXA® incorporates three innovations in tape drive data storage: Discrete Packet Format™, Variable Speed Operation ™and OverScan™ operation.

Discrete Packet Format™. Discrete Packet Format™ organizes each track of the VXA® tape into small digital data packets. Rather than read a track from end-to-end in one pass, Discrete Packet Format™ allows each packet to be read independently and at different times and reassembled later in a data buffer. This data arrangement allows tapes to be read in any sequence.

Variable Speed Operation™. Variable Speed Operation™ enables a drive to adjust the tape drive speed to the host computer's data throughput, eliminating Backhitching and associated delays and wear on media caused by data-rate-matching problems. Variable Speed Operation™ optimizes backup and restore times without compromising data integrity or tape drive reliability.

OverScan™ operation. OverScan™ operation eliminates the drive's dependence on critical alignment geometry between the tape path and the recording head. The area scanned by the heads is greater than the recorded area ensuring that all data packets are read at least once even when the track is not aligned or distorted. This results in a reduction in the number of errors during data retrieval and interchange. OverScan™ operation also makes the drive and alignment systems simpler and easier to manufacture.

In 1996, we began revenue shipments of our Mammoth product to customers. We based it on a new technology platform - a redesigned helical-scan tape drive. Understanding the need for higher reliability, we designed the Mammoth tape drive specifically for the rigors of backup and data storage in the server market.

This technology platform, known as MammothTape™ technology, is an integrated system encompassing both tape drive design and advanced metal evaporated ("AME") media. All aspects of the technology work together to optimize recording performance and to ensure the integrity of vital data.

The MammothTape™ platform designs are extremely complex, which may result in lower than anticipated manufacturing yields, field reliability issues and increased inventory levels. We experienced such issues with the introduction of our original MammothTape™ drive and were able to successfully address them. We experienced similar issues with the introduction of the M2™ tape drive in 1999. We have made significant progress in addressing these issues as they relate to the M2™ product, and make every effort to assure that we address such issues as quickly as possible. However, we cannot assure that we will completely resolve any of these issues or, if resolved, they will be done in a timely manner.

We believe that the success of our VXA® and M2™ tape drives impacts our success as a company. Various factors determine the success of our tape drives, including:

     -   OEM qualification and adoption;

     -   media availability;

     -   satisfactorily addressing design issues;

     -   customer acceptance of our tape drive formats; and

     -   our ability to develop and introduce future tape drive products.

To the extent we cannot successfully address any of these or other developmental issues, our current and future sales could be negatively impacted, and our competitive and financial positions, as well as our results of operations would be harmed.

Our inability to successfully effect any of these factors could negatively impact our competitive position, which would have a material adverse impact on our results of operations and our financial condition.

In addition to our tape drives, we design, develop, manufacture, sell and support automated tape drive libraries. These libraries incorporate one or more tape drives and multiple media cartridges to provide much higher data capacities than using a single drive and, with more than one drive, higher data transfer rates.

We offer library products incorporating VXA®, MammothTape™ and LTO™ (Ultrium™) tape drives. Our libraries are designed to be scalable, allowing us to develop different sized libraries based on the same model, with room inside each box for expansion. This capability enables our designs to accommodate increases in customers' data storage needs and allows our end users to protect their library investment.

We engineer our library products to satisfy the reliability, service-ability and management requirements of storage networking. They combine the reliability of our robotics with features such as optional Ethernet ports, hot-pluggable tape drive carriers designed to be serviced during library operation, optional bar code scanners and removable magazines.

Sales of library products, including end-of-life, represented the following percentages of net revenues:

We believe that the success of our library products impacts our success as a company. Our ability to succeed in this market will depend upon a number of factors, including:

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

     -   availability of media;

     -   introduction of competitive products;

     -   acquiring sufficient market share;

     -   customer acceptance and OEM adoptions; and

     -   compatibility with tape drives used by our customers.

Our inability to successfully effect any of these factors could negatively impact our competitive position, which would have a material adverse impact on our results of operations and our financial condition.

Below is a table showing our current and future product offerings. We cannot assure that any of the current or announced products or services listed below will be successfully developed, made commercially available on a timely basis or achieve market acceptance. We encounter a number of risks in producing and selling our products and services.

As shown in the above table, we provide various types of media cartridges, as well as cleaning cartridges and data cartridge holders, for our tape drive products. The high-quality media, produced by multiple third parties, is available in different lengths to handle various data storage requirements.

Sales of media and media related products represented the following percentages of net revenue, excluding sales allowances:

Media sales represent a significant portion of our total revenues. To the extent media sales decline and are not replaced with additional revenue from our other products or services, our financial results, including our gross margin and revenues, may be adversely affected. We depend on a continuous supply of Advanced Metal Evaporative ("AME") media to use with our VXA® and MammothTape™ products. We cannot sell our products, or grow our product lines without a sufficient supply of AME media. Currently, we obtain AME media from three suppliers:

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

     -   TDK Corporation ("TDK"); and

     -   Sony Corporation ("Sony").

Formulated specifically for our VXA® and MammothTape™ tape drives, AME tape (also called VXATape® for use with VXA® tape drives) offers expanded recording capacity and low abrasivity, which reduces mechanical wear. AME magnetic material is vertically aligned. This unique orientation and the absence of binder components on the media gives AME higher capacity and superior signal strength. AME's specially formulated backcoating dramatically reduces the buildup of static electricity and debris, greatly reducing the chance of read/write errors.

AME media with SmartClean™ technology is only available for use with M2™ tape drives and includes a section of cleaning tape at the beginning of each data cartridge. We specifically designed this cleaning tape to remove chemical films that can build up on recording heads. These films are caused by organic compounds and cannot be removed by other cleaning methods. The M2™ drive keeps statistics on its own operation and activates the SmartClean™ technology when the drive needs cleaning. With normal use, extra cleaning cartridges are needed less frequently.

We offer a full range of warranty and post-warranty support services for our library, tape drive, and media products. We deliver these services through a worldwide network of service center partners and authorized service providers and support our OEM and reseller customers, as well as end users, in the deployment, operation and maintenance of our products. We also sell spare parts to OEMs and end users.

Revenue from services, spares and support programs represented the following percentages of net revenue:

We market our products worldwide through OEMs, distributors and resellers, and provide services directly to OEMs and to the customers of our distributors and resellers. We typically sell our new products initially to distributors and resellers who are quicker to evaluate, integrate, and adopt new technology. OEM sales generally increase (relative to reseller sales) as the new product successfully completes the necessary qualification process. Over the last several years, our sales have been principally to distribution and reseller customers as compared to OEM customers. We believe we need to increase the number of our OEM customers as well as the volume of products we sell to them in order to be successful.

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 last step typically occurs toward the end of the sales cycle before volume shipments of our products are made to the OEM.

Product sales to OEMs represented the following percentages of net revenue:

Our product sales depend heavily on OEM qualification, adoption and integration. Some of our distributor, reseller and smaller OEM customers delay their orders until key OEMs adopt and integrate our products. Our competitive position and results of operations may be significantly harmed if a key OEM failed to adopt and integrate our products.

We have announced adoption of our products by several OEM customers, but our success depends on additional OEMs adopting our products, particularly the VXA-2® tape drive, as well as existing OEMs increasing their purchases of current products.

Our distributor and reseller customers purchase products for resale. Reseller customers may provide various 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, we support some of these customers by providing marketing and technical support directly to them or their consumers. As a result, we may incur certain additional costs for these sales. Other costs and risks associated with our reseller and distributor customers may include:

     -     inventory price protections;

     -     stock rotation obligations;

     -     short term marketing promotions; and

     -     customer and end user rebates.

The distribution and reseller business is also characterized by relatively short order lead times which limit our ability to forecast sales to these customers. Contractually, our distributor and reseller customers may return a portion of their Exabyte product inventory as part of their stock rotation rights, but must also issue a simultaneous offsetting purchase order.

Sales to distributors and resellers represented the following percentages of net revenue:

In the past, we have experienced delays in receiving purchase orders and, on occasion, anticipated orders have either not materialized or been rescheduled because of changes in customer requirements. These types of changes from our key customers may cause our revenue to change significantly from quarter to quarter. If the change involves higher-margin products, then the impact is greater on the results of operations.

We do not sell our products directly to federal, state and local governments. We support our reseller customers that sell directly to the government with various government-directed programs and other sales and marketing services. We believe that the government business generally represents approximately 30% of our total revenues. Even though our sales to the government are indirect, our revenues have previously been adversely impacted by sales to the government that did not materialize for various reasons. Should it happen in the future, our revenues and results of operations would likely be harmed.

We market our products overseas directly to international OEMs and resellers. We also serve OEMs and end users through our international resellers. International resellers, which have rights to sell our products in a country or group of countries, serve each of our international markets. Direct international sales will probably continue to represent a significant portion of our revenue for the foreseeable future. In addition, many of our domestic customers ship a significant portion of our products to their overseas customers.

Direct international sales accounted for the following percentages of net revenue:

Currently, a very small percentage of our international sales are denominated in foreign currencies and are affected by foreign exchange rate fluctuations. This could impact our results of operations. Changes in the foreign exchange rates may adversely affect the volume of sales denominated in U.S. dollars to overseas customers. Our sales are also subject to risks common to export activities, including government regulation or seizure of property, tariffs, and import restrictions, which are discussed in more detail in the section "Information Regarding Foreign Exchange and Import Restrictions" below.

A partial list of our customers includes Apple Computer, Arrow Electronics, Bull, Digital Storage Inc., Fujitsu Siemens Computers, Hewlett Packard, IBM, Ingram Micro, Tech Data, and Toshiba. We have customers who are also competitors, such as IBM with their LTO™ (Ultrium™) tape drive. We have several customers whose sales account for 10% or more of our net revenue. The chart below sets forth the percentages of sales for customers that exceeded 10% of annual sales over the past three years:

We do not require minimum purchase obligations from our customers. They may cancel or reschedule orders at any time, prior to shipment, without significant penalty. Losing one or more key customers would adversely affect our results of operations. Additionally, a key customer canceling orders or decreasing the volume in orders would adversely affect our results of operations.

The data storage market is extremely competitive and subject to rapid technological change. We believe that competition in the data storage market will continue to increase, particularly because manufacturers of all types of storage technologies compete for a limited number of customers. We also believe that our customers consider the following main competitive factors in making their purchase decisions:

     -     storage capacity;

     -     data transfer rate;

     -     price/performance;

     -     innovation;

     -     product quality and reliability;

     -     timing of new product introductions;

     -     volume availability;

     -     customer support; and

     -     the company's financial strength.

Many companies engage in researching, developing and commercially-organizing data storage products (including computer manufacturers, such as IBM and Hewlett-Packard, which incorporate their own storage products into their systems). Many of our current and potential competitors have significantly greater financial, technical, and marketing resources than us. We cannot assure that they will not devote those resources to the aggressive marketing of helical scan, mini cartridge, half-inch cartridge, optical or other storage product technologies. These technologies may be equivalent or superior to our own technologies, or may render some of our products non-competitive or obsolete. In order to compete under these pressures, we must adapt our technologies to these changes in an efficient, cost-effective manner.

Competition can also result in price erosion. Price erosion of our products has occurred in the past and is likely to occur again in the future. We have lost market share to competitors in the past. We may lose additional market share in the future.

Technology typically changes and advances quickly in the high technology industry. In order to successfully compete in this industry, our future products must apply and extend our current technology, as well as keep pace with new technology developments. The rapid development of tape drive technologies directly impacts our ability to compete. Other factors which impact our ability to compete include:

     -   customer and OEM adoption of VXA® and MammothTape™ technology;

     -   integration of our VXA® and MammothTape™ technologies into a compelling tape drive platform;

     -   compatibility of tape drives to other data storage products;

     -   data storage density;

     -   data transfer rate;

     -   customer confidence and familiarity;

     -   product reliability; and

     -   price.

If we do not continually enhance our tape technology to keep pace with our competitors, our products will not remain competitive. If any new technology offers users the same or greater benefits than tape, tape technology could become obsolete. In order to compete under market pressures, we must be able to adapt our technologies to changes in an efficient, cost-effective manner. Our inability to adapt would severely harm our competitive position and our results of operations. The success of any future products depends on:

     -   timely development;

     -   customer acceptance;

     -   supply capacity;

     -   customer transition to these future products;

     -   OEM qualification and adoption; and

     -   media availability.

Although tape has historically been the preferred medium for data storage backup, companies are developing new technologies for this market. Some of the new technologies are:

     -   Optical Disk

     -   Optical Tape

     -   DVD

     -   Holographic Storage

     -   Magneto-optics

We may also experience competition from new storage architectures, such as SANs, network attached storage and virtual storage.

Our VXA® and M2™ tape drives face significant competition from current and announced tape drive products manufactured by Quantum, Hewlett Packard, Seagate, Sony and the LTO™ Consortium. The specifications of some of these drives show greater data capacities and transfer rates than our tape drive products. We believe that our VXA® tape drives are a low cost, competitive alternative to competing products when compared on the basis of performance, functionality and reliability. In turn, we offer LTO™ (Ultrium™) technology through our library products.

Our library products face competition from companies such as Advanced Digital Information Corporation ("ADIC"), Quantum Corporation/ATL, Overland Data, StorageTek and QualStar. Significant competition may also develop from companies offering erasable and non-erasable optical disks, as well as other technologies.

We are currently outsourcing much of our manufacturing process, including most of our tape drives and library products, and all of our media. Those products that we still manufacture ourselves have reached their end-of-life cycle. As a result, we anticipate that we will no longer manufacture any products ourselves by mid-2003.

Outsourcing our manufacturing to a third party takes many months and involves many details. Due to the time and expense involved, and the inability to easily move the manufacturing to another party, we heavily depend on our existing third party manufacturers for our products.

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. In addition, the cost to us for terminating one of these supply agreements could be significant, which would have a materially adverse impact on our results of operations and financial condition.

If any of our manufacturing partners cannot meet our product demand, or cannot or will not implement product changes on a timely basis, we would be unable to fill customer orders and our results of operations and financial condition would be materially and adversely impacted. Additionally, should any of our manufacturing partners be unable to produce the product at a commercially reasonable cost to us, our margins would be negatively impacted, which would result in material harm to our results of operations and financial condition. Our dependence on third party manufacturers can also adversely affect our ability to negotiate the terms of our future business relationships with these parties.

If our outsourcing efforts are unsuccessful for any reason, bringing the manufacturing process back to Exabyte or outsourcing to another third party manufacturer could negatively impact our ability to fill customer orders and could harm our results of operations.

We obtain components for our products from sole-source suppliers. We have executed master purchase agreements with some of our sole-source suppliers and conduct business with the rest of our suppliers on a purchase order basis. We rely heavily on our suppliers to produce the components for our products, or the products themselves. Reliance on sole-source suppliers can result in possible shortages or discontinuance of key components.

In addition, by relying on sole-source suppliers, we may see a reduction in our level of control over many items, including:

     -   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.

We believe that every component, large and small, is important to manufacture our products. A shortage of any component would directly affect our ability to produce the product. Some of the components are developed and manufactured to our specifications, which further limits our ability to quickly find another supplier if we experience a supply shortage. There are long lead-times associated with the availability of many components that make obtaining them sometimes difficult.

We are currently experiencing liquidity constraints which affect the amount of cash available to pay our vendors and suppliers pursuant to our contractual obligations. This constraint has in the past and will likely in the future cause our vendors to restrict shipments of key components necessary to build and sell our products. We attempted to address this problem with our largest vendors by entering into deferred payment agreements with four of our five largest vendors. We continue to negotiate a similar arrangement with a fifth major supplier and have entered into a letter of credit arrangement with this supplier to assure product shipment to us while we negotiate the terms of the deferred payment agreement. We cannot assure that we will successfully enter into such an arrangement, or that the terms of the arrangement will be beneficial to us. These agreements have been structured in a way that allows us to continue to receive shipments from these vendors while paying down the amounts we owe each of the m. The subjects covered by these agreements are similar. Each sets forth a repayment schedule that outlines how and when we will repay the amount we owe each vendor, as well as specific payment terms for payments on purchases made subsequent to the agreement. Although we believe that these agreements adequately address the liquidity issue with our largest vendors, we cannot assure that these vendors will not withhold shipments from us in the future.

Any inability to obtain key components in a timely manner, regardless of the reason, will restrict our ability to ship products and, as a result, harm our revenues and results of operations and financial condition.

We, our suppliers, and our third party manufacturers may be limited in our ability to meet a sudden significant increase in demand due to limitations in manufacturing capacity and long lead times to acquire certain parts. If our suppliers and third party manufacturers are not able to meet the increased demand, our inability to fulfill our customers' orders could adversely affect our results of operations.

Hitachi Ubiquitous Company ("Hitachi") supplies us with VXA®-1, VXA®-2 and M2™ tape drives. We outsourced the manufacturing of the M2™ tape drive to Hitachi over the 2001-2002 period, and transferred the manufacturing of the VXA® drives to them following the acquisition of Ecrix in 2001 and completed that transfer in 2002.

The supply of our M2™ tape drives is governed by a manufacturing and supply agreement. Although we believe we have adequate protection for the continuous supply of the products, our intellectual property, and other important matters, we cannot assure that Hitachi will abide by the terms of the agreement or that the terms provide us with adequate protection.

We do not have an executed agreement for the manufacture and supply of the VXA® tape drives. However, we believe we are close to executing that agreement and are currently doing business in accordance with the material terms of this draft agreement. We cannot assure that we will finalize the terms of this agreement, which could subject us to several risks, including an inability to obtain VXA® drives or lack of adequate remedy for failure to supply us with drives. Further, we cannot assure that all of the terms of any finalized agreement will be favorable to us, or will sufficiently protect our interests.

We have entered into discussions with Hitachi for the joint development of future tape drive products. We cannot assure that any such joint development will occur or succeed. Further, we cannot assure that we will enter into an agreement for this development, or that the terms of any agreement will be favorable to us or sufficiently protect our interests, which could impact the development of our future drives.

Many of the risks associated with our other suppliers apply to our relationship with Hitachi. Specifically, regardless of whether we have the proper agreements in place for the manufacture and supply of tape drives, we cannot assure that Hitachi will continue to supply us products or that they will be available at appropriate supply levels or competitive prices. Our inability to obtain products at a commercially reasonable cost would cause a significant delay or even termination of the production of some of our tape drive products, and would materially and adversely harm our competitive position and our results of operations.

Should Hitachi terminate its relationship with us for any reason, we would be forced to bring manufacturing operations back to Exabyte or outsource to another third party, which would be prohibitively difficult for us to accomplish without significant impact to our customer relationships, revenue and results of operations.

Our VXA®-1 tape drive was previously manufactured by AIWA Co. Ltd. ("AIWA"). As part of the transfer of that manufacturing relationship, we entered into a technology transfer and license agreement with AIWA, whereby AIWA granted us a non-exclusive license to utilize certain AIWA related VXA® technologies related to design and production of the VXA®-1 and VXA®-2 tape drives for a royalty based on the invoice price to us of each VXA®-1 and VXA®-2 drive we purchase from another manufacturer. To the extent that AIWA decides to no longer license this technology to us, we will be unable to produce these drives without considerable time and engineering effort. Even with this development effort, we can not assure that we would be able to duplicate this technology. Additionally, the license agreement with AIWA does not indemnify us for infringement of this technology on someone else's proprietary rights.

Shinei International, a Solectron company ("Shinei"), supplies us with many of our libraries, including all of our LTO libraries. We outsourced this manufacturing to them in 2001 and completed the effort in 2002. We currently do business with Shinei under several agreements. The purchase agreement provides for the supply of these libraries to us. We also have a supplier managed inventory agreement that governs how Shinei delivers the libraries to our Hubs (see "Hubbing and Logistic Services Relationships" below). Although we believe we have adequate protection for the continuous supply of these products, our intellectual property, and other important matters, we cannot assure that Shinei will abide by the terms of the agreement or that the terms provide us with adequate protection.

Many of the risks associated with our other suppliers, including Hitachi, also apply to our relationship with Shinei. Specifically, we cannot assure that Shinei will continue to supply us products or that they will be available at appropriate supply levels or competitive prices. Our inability to obtain products at a commercially reasonable cost would cause a significant delay or even termination of the production of some of our tape drive products, and would materially and adversely harm our competitive position and our results of operations.

Our agreements with Shinei provide for termination by either party upon adequate notice or the occurrence of certain events. Should Shinei terminate its relationship with us for any reason, we would be forced to bring manufacturing operations back to Exabyte or outsource to another third party, which would be prohibitively difficult for us to accomplish without significant impact to our customer relationships, revenue and results of operations.

We currently have relationships with various hubbing and logistic services partners ("Hubs") around the world. Our largest Hub is located in California. These Hubs generally receive product from us or directly from our manufacturers and store it until they receive orders from us to ship the product to a particular destination. These types of relationships benefit us in that we do not have to maintain, staff and pay for a large warehouse facility. Also, we do not retain title for some of the products, which limits our liability in the case of loss. However, there are also some risks involved in maintaining a relationship with Hubs. We maintain title to some product while it sits in a Hub warehouse. This exposes us to liability for loss of product. We may also experience a reduction in control over inventory levels and product quality during storage. Additionally, the Hubs may not clear customs for us, which could leave us exposed to import and export liabilities (see " Information Regarding Foreign Exchange And Import Restrictions" below). Also, although our shipping instructions generally call for the product to be pulled from their warehouse stock and shipped to the customer on the same day, we do not have direct control over this process, which could impact our revenues and results of operations if the Hubs do not ship in accordance with our instructions.

The market for data storage devices is highly competitive. We believe that this competition will increase as new technology increases speed and reliability of storage products while at the same time reduces the cost of those products. With this in mind, we have concentrated our research and development on enhancing existing products and developing new products that will improve the performance and cost of current tape drives we offer. Our research and development expenses were approximately $36.5 million, $25.2 million, and $23.7 million in 2000, 2001 and 2002, respectively.

We rely on a combination of patents, copyright and trade secret protections, non-disclosure agreements, and licensing arrangements to establish and protect our proprietary rights. As of March 7, 2003, we held a total of 100 patents and 33 pending applications in the United States, of which 10 were issued in 2002, all relating to technologies and other aspects of our tape drive and automated tape library products. However, we believe that, because of the rapid pace of technological change in the tape storage industry, factors such as knowledge, ability and experience of our employees, new product introductions and frequent product enhancements are often more significant than patent and trade secret protection.

Although we file patent applications for our products when appropriate, patents may not result from these applications, or they may not be broad enough to protect our technology. Someone may also challenge, invalidate or circumvent our patents. Sometimes other companies and individuals assert that our patents infringe their proprietary rights. Occasionally, third parties ask us to indemnify them from infringement claims. We intend to defend ourselves against infringement claims. Defending these infringement claims may result in long and costly litigation, and could potentially invalidate a patent. We may attempt to secure a license from third parties to protect our technology but cannot assure that we would succeed. This may adversely affect our ability to use such technology and, as a result, our results of operations. Some foreign laws may not fully protect our intellectual property rights.

We designed our own mechanized deck assembly incorporated in our MammothTape™ products. Because we did not obtain the design of this deck from a third party, we do not benefit from supplier indemnification should an infringement claim arise. Manufacturing and/or selling our MammothTape™ drives may infringe on someone else's proprietary rights, even though we believe we have taken appropriate measures to avoid it.

Much of our third party manufacturing utilizes proprietary technology. To protect our proprietary information, we may extend licenses to our third party manufacturers. However, we cannot assure that our third party manufacturers will adhere to the limitations or confidentiality restrictions of their license.

Additionally, we have granted manufacturing licenses to certain customers which allow them to manufacture and sell our products should specific events occur, such as our inability to perform our supply obligations. This practice may impair our ability to establish, maintain or achieve adequate product design standards or product quality levels.

We enter into joint development agreements with third parties for the development of product components. Under these agreements, the third parties generally have joint ownership of certain technologies related to the component being developed. This could increase our reliance on these manufacturers or may require us to obtain a license from them. We may be unable to obtain a license on terms acceptable to us, if at all.

Many of these types of contracts are with manufacturers outside the United States. In addition to typical market risks associated with utilizing third party manufacturers, contracting with foreign manufacturers subjects us to additional exposures, including:

     -   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.

Backlog consists of purchase orders for which a delivery schedule within six months has been specified by the customer. Our total backlog as of December 29, 2001 and December 28, 2002 totaled approximately $7.8 million and $9.3 million, respectively. Our customers typically are not obligated to purchase minimum quantities of our products. Lead times for the release of purchase orders depend upon the scheduling practices of each customer. We believe that, based upon past order histories, the rate of new orders will vary significantly from month to month. Customers may cancel or reschedule orders without penalty. In addition, our actual shipments depend upon our production capacity and component availability. For these reasons, our backlog as of any particular date may not be indicative of our actual sales for any succeeding fiscal period.

We strive to maintain appropriate levels of inventory. Excessive amounts of inventory reduces our cash available for operations and may cause us to write-off a significant amount as excess or obsolete. Inadequate inventory levels may make it difficult for us to meet customer product demand, resulting in lost revenues.

We face many challenges in effectively managing our inventory, which may materially affect our results of operations if we do not manage them properly. These challenges include:

     -   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.

Particularly, introducing new products may negatively affect our product inventory value by requiring us to write down or make allowances for inventory devaluation, which may materially affect our results of operations. In the past we have experienced special charges and write downs which harmed our results of operations. In the future we may again incur special charges or make allowances for an inventory devaluation that will materially affect our results of operations and financial condition.

We must accurately time the introduction and end-of-life of our products into and out of the data storage market because it affects our revenue and inventory levels. Accurately timing the release of new products is important to the sales of existing products. Prematurely taking an existing product into an end-of-life cycle could result in revenue loss from that product, and delaying the withdrawal of a product could result in excess product inventory and subsequent inventory write-downs. We continually evaluate our product life cycles. Any timing mistakes or inability to successfully introduce a new product could adversely affect our results of operations.

We manufacture (or have manufactured for us) many of our key components and products overseas in countries such as Japan, Germany, China, Singapore, Indonesia and Malaysia, which could impact our operating results. Because we depend on foreign sourcing for our key components, products and subassemblies, our results of operations may be materially affected by:

     -   fluctuating currency exchange rates;

     -   foreign government regulations;

     -   foreign exchange control regulations;

     -   import/export restrictions;

     -   foreign economic instability;

     -   political instability; and

    -    tariffs, trade barriers and other trade restrictions by the U.S. government on products or components shipped from foreign sources.

Our international involvement is also subject to other risks common to foreign operations, including government regulations, foreign exchange or import restrictions or tariffs imposed by the U.S. Government on products or components shipped from another country. Additionally, the sale of our products to domestic federal or state agencies may be limited by the Buy America Act or the Trade Agreement Act to the extent that we incorporate components produced overseas into our products.

Our functional currency and the functional currency of our subsidiaries is the U.S. dollar. However, our subsidiaries located in The Netherlands, Japan and Singapore also enter into transactions in their respective local currencies. As a result, any amounts payable to a subsidiary or owed by a subsidiary are subject to the foreign exchange rate applicable between the U.S. dollar and the local currency and could materially and adversely affect our results of operations. These subsidiaries also operate under their respective local law. This may complicate enforcing our legal rights in these countries.

Several factors may increase our subsidiary costs and affect our results of operations, including:

     -   fluctuating currency exchange rates;

     -   foreign government regulations;

     -   difficulties in collecting international accounts receivable; and

     -   difficulties in enforcing intellectual property rights.

Tax regulations in the United States and those foreign countries where we operate require transactions between us and our subsidiaries to take place in an arm's-length manner. The IRS and its foreign counterparts have increased their focus on this issue in recent years. Penalties arising from misapplying these laws are material. Consequently, we have performed numerous formal transfer pricing studies to ensure the documentation supporting our intercompany dealings is adequate. The IRS has audited our tax records through 1997 and had not proposed any adjustments in the way we structure our arm's-length transactions. However, foreign taxing authorities could examine these same transactions and assert that we have not complied with their tax laws relating to intercompany transfer pricing. As a result, we could be required to pay potentially significant taxes and penalties, as a result of our past or future intercompany transactions.

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.

As of March 13, 2003, we had 349 full-time and part-time employees worldwide, consisting of:

Our employees are not represented by a labor union.

In January 2002, we announced a corporate restructuring that resulted in the closing of our service and final assembly facility in Scotland and our service depots in Canada and Australia, as well as a reduction in our workforce of approximately 180 persons worldwide, comprised of regular full-time employees. In July 2002, we again announced further reductions resulting in elimination of approximately 100 full- and part-time employees. In the first quarter of 2003, we terminated another 52 full- and part-time employees. Although each reduction in force implemented over the past year has been designed to reduce costs, the latest reduction was designed specifically to help bring our current cost and personnel structure in line with current revenues. We believe that the Company is now appropriately structured, but we cannot assure that we will not reduce our workforce again in the future. Continued losses could cause us to enact further reductions in our workforce.

With a slowdown in the labor market, the competition for key employees is somewhat lessened. Despite this slowdown, our success continues to depend significantly upon our ability to attract, retain and motivate key engineering, marketing, sales, manufacturing, support and executive personnel. We compete for qualified employees with other high technology companies and other employers in Colorado. Competition for key employees is based upon, among other factors, base salary, stock-based compensation, ownership investment and high turnover rates in technology and other companies generally. As a result, we may lose or fail to recruit needed employees. Losing or failing to recruit a key employee could:

We will make available free of charge through our website, http://www.exabyte.com, this annual report, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to such reports, as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission.

The executive officers of the Company and their ages as of March 28, 2003, are as follows:

Mr. Juan A. Rodriguez, age 62, has served as a director and Chief Technologist of Exabyte since November 2001, was its interim President and Chief Executive Officer from January 2002 until June 2002, and has served as its Chairman of the Board and Chief Technologist since June 2002. Mr. Rodriguez co-founded Ecrix Corporation in 1996 and was its Chairman of the Board and Chief Executive Officer since 1996. Mr. Rodriguez co-founded Storage Technology Corporation in 1969 after several years as an IBM tape technology engineer. While at Storage Technology Corporation, he served in vice presidential and general manager roles over Engineering, Hard Disk Operations and Optical Disk Operations. In 1985, Mr. Rodriguez co-founded Exabyte Corporation, where he held the positions of chairman, president and CEO. Mr. Rodriguez is a professor for the University of Colorado Bankers College of Engineering and Applied Science.

Mr. Tom Ward, age 46, joined Exabyte as its President, Chief Executive Officer and a director in June 2002. Mr. Ward founded Data Storage Marketing, a distributor of storage products, in 1987 and sold the company to General Electric in 1997. Mr. Ward founded Canicom in 1997, a call center company, which he sold to Protocol Communications, an integrated direct marketing company, in 2000, assuming the position of Chief Operating Officer until June 2001. Mr. Ward began his career with Storage Technology Corporation serving in several roles in engineering and marketing. He later joined MiniScribe as Director of Sales for High Performance Products.

Mr. Craig G. Lamborn, age 49, has served as Vice President, Chief Financial Officer since November 2001, when he was appointed in connection with the acquisition of Ecrix. Prior to that, he served as Ecrix's Vice President of Finance and CFO since 1998. Before joining Ecrix, Mr. Lamborn spent seven years as CFO of Kentek Information Systems, a manufacturer of high speed printers. Prior to Kentek, Mr. Lamborn held financial positions with McData Corporation and Union Pacific Corporation. Mr. Lamborn is a certified public accountant.

Executive officers serve at the discretion of the Board of Directors. There are no family relationships among any of the directors and officers.

Our corporate offices, including our research and development and manufacturing facilities, are located in Boulder, Colorado, in leased buildings aggregating approximately 276,738 square feet, which includes 55,726 square feet of space in two buildings formerly occupied by Ecrix, which are currently unoccupied. The lease terms on these facilities expire on various dates ranging from 2004 to 2006. Although we do not currently anticipate expanding our operations, we believe that we have enough space available if further expansion becomes necessary. The following chart identifies the location and type of each Exabyte property:

We are subject to incidental litigation risks in the ordinary course of our business. We are not currently the subject of any material pending legal proceeding.

Not Applicable.

Exabyte's common stock has been traded in the over-the-counter market and has been quoted in the National Market System of the Nasdaq Stock Market ("Nasdaq") under the symbol EXBT from our initial public offering on October 19, 1989 until February 26, 2003, at which time it began trading on the Nasdaq SmallCap Market. For the calendar quarters indicated, the following table shows the high and low bid prices of our common stock as reported on Nasdaq.

On March 20, 2003, we had 567 holders of record of our common stock. The reported closing price of the common stock was $0.20. We have never paid cash dividends on our common stock. We presently intend to retain any earnings for use in our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We are prohibited under the terms of our line of credit agreement with Silicon Valley Bank from declaring or setting aside any cash dividends.

As an inducement to have Tom Ward serve as our President and Chief Executive Officer, we agreed to grant stock options to Mr. Ward pursuant to a Nonstatutory Stock Option Agreement, dated June 3, 2002 between Exabyte and Mr. Ward (the "Plan"). The Plan is independent of our existing Stock Option Plans and was approved by stockholders at a meeting on July 30, 2002. The terms of the Plan were also approved by our Compensation Committee.

Under the Plan, as of the commencement of Mr. Ward's employment with us, he was granted an option to purchase 3,000,000 shares of our common stock. The option has an exercise price equal to the common stock's closing price on the Nasdaq National Market on the date of the stockholder approval of the Plan. This option contains our normal vesting terms, providing for vesting during Mr. Ward's employment at the rate of 2% per month, except that any remaining unvested options will be deemed to be fully vested as of December 30, 2005.

Also, in accordance with the Plan, Mr. Ward received an additional option to purchase 4,000,000 shares of our common stock with a vesting schedule which accelerates based upon the market price for our common stock. The additional option was granted with an exercise price equal to the common stock's closing price on the Nasdaq National Market on the date of the stockholder approval of the Plan. This option will vest as follows:

        --   All shares will be deemed to be fully vested as of June 5, 2007, provided that Mr. Ward is
                     employed as the President and Chief Executive Officer of Exabyte at such time;

        --   Mr. Ward will qualify for an accelerated vesting schedule (for such additional options) as
                     follows, provided he is employed as the President and Chief Executive Officer of Exabyte at
                     the time of any such acceleration event:

               -   1,000,000 shares at such time as our stock price closes at or above $2.00 for 30
                           consecutive trading days;

               -   1,000,000 shares at such time as our stock price closes at or above $4.00 for 30
                           consecutive trading days;

               -   1,000,000 shares at such time as our stock price closes at or above $5.00 for 30
                           consecutive trading days; and

               -   1,000,000 shares at such time as our stock price closes at or above $6.00 for 30
                           consecutive trading days.

All stock prices and option strike prices will be appropriately adjusted for stock splits, a stock dividend, a merger or similar events. Unless terminated earlier as provided in the Plan, both of Mr. Ward's options will expire on June 2, 2012. Options granted under the Plan will terminate 90 days after termination of employment with Exabyte for any reason except in limited circumstances, including disability or death, in which case the term of the options continues for an additional period of time. Mr. Ward's employment with Exabyte may be terminated by Exabyte or him at any time for any reason.

The issuance of options was exempt from registration under the Securities Act of 1933 as a non-public offering pursuant to Section 4(2) of the Act. We based our reliance on this exemption on the facts of the transaction, including that the issuance and offering of the options was made only to a person who became our President, who in negotiating his employment with us had access to information about Exabyte and who has indicated that he will hold the securities for investment without a view to distribution.

The above summary descriptions of these documents are qualified in their entirety by reference to such documents which have been filed with the Securities and Exchange Commission.

The selected financial data set forth below with respect to our consolidated statements of operations for the fiscal years ended January 2, 1999, January 1, 2000, December 30, 2000, December 29, 2001 and December 28, 2002 and with respect to the consolidated balance sheets as of January 2, 1999, January 1, 2000, December 30, 2000, December 29, 2001 and December 28, 2002 are derived from audited consolidated financial statements. The consolidated financial statements as of December 29, 2001 and December 28, 2002, and for the three years ended December 28, 2002 are included elsewhere in this report on Form 10-K and the selected financial data shown below are qualified by reference to such financial statements. There were 52 weeks in 1998, 1999, 2000, 2001 and 2002.

(In thousands, except per share data)

(1)  The Company recorded restructuring charges in 1999, 2000, 2001 and 2002, totaling $2,446,000, $3,899,000, $498,000 and $4,791,000, respectively. See Note 8 of Notes to Consolidated Financial Statements.

(2)  The Company recorded a full valuation allowance on all existing deferred tax assets in 1999. See Note 9 of Notes to Consolidated Financial Statements.

(3)  See Note 1 of Notes to Consolidated Financial Statements for an explanation of the determination of shares used in computing net loss per share.

The following tables set forth unaudited operating results for each quarter of fiscal 2001 and 2002. This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments consisting only of normal recurring adjustments, necessary for a fair presentation thereof. These unaudited quarterly results should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K. The operating results for any quarter are not necessarily indicative of results for any future period.

(In thousands, except per share data)