Adaptec 2006 Annual Report Download - page 93

Table of Contents
investments with the bank in an amount equal to its drawings. This agreement will expire in July 2007 . At December 31, 2006, $0.8 million cash was deposited
with the bank to offset the amount committed under letters of credit used as security for a facility lease.
NOTE 10. Long-term debt
2.25% Senior convertible notes
On October 26, 2005, the Company issued $225 million aggregate principal amount of 2.25% senior convertible notes due 2025. The Company has recorded
these Notes as long-term debt and issuance costs of $6.8 million have been deferred and will be amortized over seven years, which is the Company’s earliest call
date. This approximates the effective interest method.
The notes rank equal in right of payment with our other unsecured senior indebtedness and mature on October 15, 2025 unless earlier redeemed by the Company
at its option, or converted or put to the Company at the option of the holders. Interest is payable semi-annually in arrears on April 15 and October 15 of each
year, commencing on April 15, 2006. The Company may redeem all or a portion of the notes at par on and after October 20, 2012. The holders may require that
the Company repurchase notes on October 15, 2012, 2015 and 2020 respectively.
Holders may convert the notes into the right to receive the conversion value (i) when the Company’s stock price exceeds 120% of the approximately $8.80 per
share initial conversion price for a specified period, (ii) in certain change in control transactions, and (iii) when the trading price of the notes does not exceed a
minimum price level. For each $1,000 principal amount of notes, the conversion value represents the amount equal to 113.6687 shares multiplied by the per share
price of the Company’s common stock at the time of conversion. If the conversion value exceeds $1,000 per $1,000 in principal of notes, the Company will pay
$1,000 in cash and may pay the amount exceeding $1,000 in cash, stock or a combination of cash and stock, at the Company’s election.
The Company entered into a Registration Rights Agreement with the holders of the notes, under which the Company is required to keep the shelf registration
statement effective until the earlier of (i) the sale pursuant to the shelf registration statement of all of the notes and/or shares of common stock issuable upon
conversion of the notes, and (ii) the expiration of the holding period applicable to such securities held by non-affiliates under Rule 144(k) under the Securities
Act, or any successor provision, subject to certain permitted exceptions.
The Company will be required to pay liquidated damages, subject to some limitations, to the holders of the notes if the Company fails to comply with its
obligations to register the notes and the common stock issuable upon conversion of the notes or the registration statement does not become effective within the
specified time periods. In no event will liquidated damages accrue after the second anniversary of the date of issuance of the notes or at a rate exceeding 0.50%
of the issue price of the notes. The Company will have no other liabilities or monetary damages with respect to any registration default. If the holder has
converted some or all of its notes into common stock, the holder will not be entitled to receive any liquidated damages with respect to such common stock or’ the
principal amount of the notes converted.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠