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Table of Contents
after the second anniversary of the date of issuance of the notes or at a rate exceeding 0.50% of the issue price of the notes. The Company will have no other
liabilities or monetary damages with respect to any registration default. If the holder has converted some or all of its notes into common stock, the holder will not
be entitled to receive any liquidated damages with respect to such common stock or’ the principal amount of the notes converted.
3.75% Convertible subordinated notes
In August 2001, the Company issued $275 million of convertible subordinated notes maturing on August 15, 2006.
During the third fiscal quarter of 2003, the Company repurchased $100 million principal amount of these notes for $96.7 million and expensed $1.6 million of
related unamortized debt issue costs, resulting in a net gain of $1.7 million. On January 6, 2004, the Company repurchased $106.9 million of these notes pursuant
to a tender offer, at par value. The Company expensed approximately $1.6 million of debt issue costs related to the repurchased notes. The remaining $68.1
million of these notes were redeemed by the Company on January 18, 2005 for a total of $70.2 million in cash, which included $1.1 million in accrued interest
and a $1.0 million call premium.
These notes bore interest at 3.75% payable semi-annually and were convertible into an aggregate of approximately 6.5 million shares of PMC’s common stock at
any time prior to maturity at a conversion price of approximately $42.43 per share.
NOTE 10. Commitments and Contingencies
Legal Matters:
SEC Informal Inquiry
On August 18, 2006, PMC received an informal confidential request from the SEC advising that the SEC commenced an informal inquiry into the Company’s
historical stock option-granting practices. The Company engaged outside counsel to represent it in the inquiry. On December 6, 2006, a meeting took place at the
SEC in San Francisco during which the Audit Committee and its special counsel summarized the results of its investigation into the Company’s historical
option-granting practices. In February 2007, the Company completed all the SEC’s requests for information related to its inquiry. On October 26, 2007, the SEC
staff formally notified the Company that its inquiry was terminated and that no enforcement action against the Company had been recommended to the SEC.
Stockholder Derivative Lawsuits
Three derivative actions have been filed against the Company, as a nominal defendant, and various current and former officers and/or directors: (1) Meissner v.
Bailey, et al., Santa Clara Superior Court Case No. 1-06-CV-071329 (filed September 18, 2006); (2) Beiser v. Bailey, et al., United States District Court for the
Northern District of California Case No. 5:06-CV-05330-RS (filed August 29, 2006); and (3) Barone v. Bailey, et al., United States District Court for the
Northern District of California Case No. 4:06-CV-06473-SBA (filed October 16, 2006). On
85
Source: PMC SIERRA INC, 10-K, February 22, 2008