Adaptec 2001 Annual Report Download - page 76

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settlements will, individually or in the aggregate, have a material adverse effect on the
Company's financial position, results of operations or cash flow s.
NOTE 9. Speci al Shares
At December 31, 2001 and 2000, the Company maintained a reserve of 3,373,000 and 3,746,000
shares, respectively, of PMC-Sierra common stock to be issued to holders of PMC-Sierra, Ltd.
(LTD) special shares.
The special shares of LTD, the Company’s principal Canadian subsidiary, are redeemable or
exchangeable for PMC common stock. Special shares do not vote on matters presented to the
Company’s stockholders, but in all other respects represent the economic and functional
equivalent of PM C common stock for which they can be redeemed or exchanged at the option
of the holders. The special shares have class voting rights with respect to transactions that
affect the rights of the special shares as a class and for certain extraordinary corporate
transactions involving LTD. If LTD files for bankruptcy, is liquidated or dissolved, the special
shares receive as a preference the number of shares of PM C common stock issuable on
conversion plus a nominal amount per share plus unpaid dividends, or at the holder's option
convert into LTD ordinary shares, w hich are the functional equivalent of voting common stock.
If the Company files for bankruptcy, is liquidated or dissolved, special shares of LTD receive
the cash equivalent of the value of PM C common stock into which the special shares could be
converted, plus unpaid dividends, or at the holder’s option convert into LTD ordinary shares.
If the Company materially breaches its obligations to special shareholders of LTD (primarily to
permit conversion of special shares into PM C common stock), the special shareholders may
convert their shares into LTD ordinary shares.
These special shares of LTD are classified outside of stockholders’ equity until such shares are
exchanged for PMC common stock. Upon exchange, amounts will be transferred from the LTD
special shares account to the Company’s common stock and additional paid-in capital on the
consolidated balance sheet.
NOTE 10. Stock holders’ Equi ty
Authorized capital stock of PMC. At December 31, 1998, the Company had an authorized capital
of 105,000,000 shares, 100,000,000 of which were designated “ Common Stock” , $0.001 par value,
and 5,000,000 of which were designated “ Preferred Stock” , $0.001 par value.
During 2000 and 1999 the Company’s stockholders elected to add an additional 700,000,000 and
100,000,000 authorized shares of common stock, respectively, to the 100,000,000 shares of
common stock authorized at the end of 1998. The Company currently has an authorized
capital of 905,000,000 shares, 900,000,000 of which are designated “ Common Stock” , $0.001 par
value, and 5,000,000 of which are designated “ Preferred Stock” , $0.001 par value.
Stock Splits. In April 1999, the Company’s Board of Directors approved a two-for-one split of the
Company’s common stock in the form of a stock dividend that was applicable to shareholders
of record on April 30, 1999, and effective on May 14, 1999.