Adaptec 2006 Annual Report Download - page 97

Table of Contents
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.
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 13. Stockholders’ Equity
Authorized capital stock of PMC. At December 31, 2006 and 2005, the Company had 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.
Stockholders’ Rights Plan. The Company adopted a stockholder rights plan in 2001, pursuant to which the Company declared a dividend of one share purchase
right for each outstanding share of common stock. If certain events occur, including if an investor tenders for or acquires more than 15% of the Company’s
outstanding common stock, stockholders (other than the acquirer) may exercise their rights and receive $650 worth of our common stock in exchange for $325
per right, or the Company may, at the Company’s option, issue one share of common stock in exchange for each right, or the Company may redeem the rights for
$0.001 per right.
NOTE 14. Employee Benefit Plans
Post-retirement Health Care Benefits. Our unfunded post retirement benefit plan, which was assumed in connection with the acquisition of the Storage
Semiconductor Business, provides retiree medical benefits to eligible United States employees who meet certain age and service requirements upon retirement
from the Company. These benefits are provided from the date of retirement until the employee qualifies for Medicare coverage. The amount of the retiree
medical benefit obligation assumed by the Company was $1.1 million at the time of the acquisition.
At December 31, 2006, the accumulated postretirement benefit obligation was $1.2 million, with no unrecognized gain/loss or unrecognized prior service cost.
The net period benefit cost was $0.1 million during 2006. No distributions were made from the plan during the period. The Company includes accrued benefit
costs for its post-retirement program in Accrued liabilities on the Company’s Consolidated Balance Sheet.
The health care accumulated postretirement benefit obligations were determined at December 31, 2006 using a discount rate of 7%, and a current year health care
trend of 10% decreasing to an ultimate trend rate of 5.0% in 2011.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠