Adaptec 2005 Annual Report Download - page 93

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Table of Contents
Minimum future rental payments under operating leases are as follows:
Year Ending December 31 (in thousands)
2007 $11,742
2008 12,583
2009 7,604
2010 4,682
2011 and thereafter 98
Total minimum future rental payments under operating leases $36,709
Supply agreements. The Company has supply agreements with both Chartered and TSMC that were renewed during 2006. These renewed agreements are in
effect until December 31, 2008. The Company made deposits to secure access to wafer fabrication capacity of $5.1 million at December 31, 2006 and 2005.
Under these agreements, the foundries must supply certain quantities of wafers per year. Neither of these agreements have minimum unit volume requirements
but the Company is obliged under one of the agreements to purchase a minimum percentage of the Company’s total annual wafer requirements provided that the
foundry is able to continue to offer competitive technology, pricing, quality and delivery. The agreements may be terminated if either party does not comply with
the terms.
Contingencies. In the normal course of business, the Company receives and makes inquiries with regard to possible patent infringements. Where deemed
advisable, the Company may seek or extend licenses or negotiate settlements. Outcomes of such negotiations may not be determinable at any point in time;
however, management does not believe that such licenses or settlements will, individually or in the aggregate, have a material adverse effect on the Company’s
financial position, results of operations or cash flows.
NOTE 11. Special Shares
At December 30, 2007 and December 31, 2006, the Company maintained a reserve of 2,065,000 and 2,099,000 shares, respectively, of PMC 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 PMC 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 PMC 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, which 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 PMC 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 PMC common stock), the special shareholders may convert their shares into LTD ordinary shares.
87
Source: PMC SIERRA INC, 10-K, February 22, 2008