Adaptec 2003 Annual Report Download - page 75

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strategic interest to the Company. From time to time these funds request additional capital for private placements. The Company has
committed to invest an additional $19.2 million (2002 − $38.1 million) in these funds, which may be requested by the fund managers
at any time over the next six years.
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 9. Special Shares
At December 31, 2003 and 2002, the Company maintained a reserve of 2,921,000 and 3,196,000 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.
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 10. Stockholders’ Equity
Authorized capital stock of PMC. At December 31, 2003 and 2002, 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.
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