Adaptec 2002 Annual Report Download - page 43

Provisions in our charter documents and Delaware law and our adoption of a stockholder rights plan may delay
or prevent acquisition of us, which could decrease the value of our common stock.
Our certificate of incorporation and bylaws 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 between 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, which could be used to dilute the stock ownership of a potential hostile acquirer.
Although we believe these provisions of our certificate of incorporation and bylaws and Delaware 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 which 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.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The following discussion regarding our risk management activities contains "forward−looking statements" that
involve risks and uncertainties. Actual results may differ materially from those projected in the
forward−looking statements.
Cash Equivalents, Short−term Investments and Investments in Bonds and
Notes:
We regularly maintain a short and long term investment portfolio of various types of government and
corporate debt instruments. Our investments are made in accordance with an investment policy approved by our
Board of Directors. Maturities of these instruments are less than two and one half years, with the majority
being within one year. To minimize credit risk, we diversify our investments and select minimum ratings of
P−1 or A by Moody's, or A−1 or A by Standard and Poor's, or equivalent. We classify these securities as
held−to−maturity or available−for−sale depending on our investment intention. Held−to−maturity investments
are held at amortized cost, while available−for−sale investments are held at fair market value.
Available−for−sale securities represented approximately 17% of our investment portfolio as of December 31,
2002.
Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest
rate risk. Fixed rate securities may have their fair market value adversely impacted because of a rise in
interest rates, while floating rate securities may produce less income than expected if interest rates fall.
Due in part to these factors, our future investment income may fall short of expectations because of changes
in interest rates or we may suffer losses in principal if we were to sell securities that have declined in
market value because of changes in interest rates.
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