Adaptec 2001 Annual Report Download - page 47

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Given these general economic conditions and the reduced demand for our products that we
have experienced, we expect that our stock price will continue to be volatile.
In addition, fluctuations in our stock price and our price-to-earnings multiple may have made
our stock attractive to momentum, hedge or day-trading investors who often shift funds into
and out of stocks rapidly, exacerbating price fluctuations in either direction particularly when
view ed on a quarterly basis.
Securities class action litigation has often been instituted against a company following periods
of volatility and decline in the market price of their securities. If instituted against us,
regardless of the outcome, such litigation could result in substantial costs and diversion of our
management’s attention and resources and have a material adverse effect on our business,
financial condition and operating results. We could be required to pay substantial damages,
including punitive damages, if we were to lose such a lawsuit.
Provi si ons in our charter documents and Del aw are law and our adoption of a stock holder
rights pl an may delay or prevent acquisi tion of us, w hich could decrease the val ue of our
common stock.
Our certificate of incorporation and bylaw s and Delaware law contain provisions that could
make it harder for a third party to acquire us without the consent of our board of directors.
Delaware law also imposes some restrictions on mergers and other business combinations
betw een us and any holder of 15% or more of our outstanding common stock. In addition, our
board of directors has the right to issue preferred stock without stockholder approval, w hich
could be used to dilute the stock ownership of a potential hostile acquirer. Although we
believe these provisions of our certificate of incorporation and bylaw s and Delaw are law and
our stockholder rights plan will provide for an opportunity to receive a higher bid by requiring
potential acquirers to negotiate with our board of directors, these provisions apply even if the
offer may be considered beneficial by some stockholders.
Our board of directors adopted a stockholder rights plan, pursuant to w hich we declared and
paid a dividend of one right for each share of common stock held by stockholders of record as
of May 25, 2001. Unless redeemed by us prior to the time the rights are exercised, upon the
occurrence of certain events, the rights will entitle the holders to receive upon exercise thereof
shares of our preferred stock, or shares of an acquiring entity, having a value equal to twice the
then-current exercise price of the right. The issuance of the rights could have the effect of
delaying or preventing a change in control of us.