Adaptec 2004 Annual Report Download - page 49

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. In addition, we could incur substantial punitive and other damages relating to this litigation.
Provisions in Delaware law, our charter documents and our stockholder rights plan may delay or prevent another entity from
acquiring us without the consent of our Board of Directors.
We adopted a stockholder rights plan in 2001, pursuant to which we 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 our
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 we may, at our option, issue one share of common stock in exchange for each right, or we may
redeem the rights for $0.001 per right. The issuance of the rights could have the effect of delaying or preventing a change in control of
us.
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. Delaware law imposes some restrictions on mergers and other business
combinations between us and any holder of 15% or more of our outstanding common stock.
Although we believe these provisions of our charter documents, 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.
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 available−for−sale.
Investments in instruments with both fixed and floating rates carry a degree of interest rate risk.
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