Adaptec 2008 Annual Report Download - page 44

On October 26, 2005, we issued $225 million aggregate principal amount of 2.25% senior convertible notes
due 2025 (the “Notes”) and have recorded these Notes as long-term debt. Issuance costs of $6.8 million have
been deferred and are being amortized over seven years. During 2008, we repurchased $156.7 million principal
amount of our Notes for $138.3 million and expensed $3.2 million related to unamortized debt issue costs and
transaction costs resulting in a net gain of $15.2 million. At December 28, 2008, $68.3 million of these Notes
remained outstanding and $1.1 million of unamortized debt issue costs were included in investments and other
assets.
The notes rank equal in right of payment with our other unsecured senior indebtedness and mature on
October 15, 2025 unless earlier redeemed by us at our option, or converted or put to us at the option of the
holders. Interest is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on
April 15, 2006. We may redeem all or a portion of the notes at par on and after October 20, 2012. The holders
may require that we repurchase notes on October 15, 2012, 2015 and 2020 respectively.
Holders may convert the notes into the right to receive the conversion value (i) when our stock price
exceeds 120% of the approximately $8.80 per share initial conversion price for a specified period, (ii) in certain
change in control transactions, and (iii) when the trading price of the notes does not exceed a minimum price
level. For each $1,000 principal amount of notes, the conversion value represents the amount equal to 113.6687
shares multiplied by the per share price of our common stock at the time of conversion. If the conversion value
exceeds $1,000 per $1,000 in principal of notes, we will pay $1,000 in cash and may pay the amount exceeding
$1,000 in cash, stock or a combination of cash and stock, at our election.
We entered into a Registration Rights Agreement with the holders of the Notes, under which we are
required to keep the shelf registration statement effective until the earlier of (i) the sale pursuant to the shelf
registration statement of all of the Notes and/or shares of common stock issuable upon conversion of the Notes,
and (ii) the expiration of the holding period applicable to such securities held by non-affiliates under Rule 144(k)
under the Securities Act, or any successor provision, subject to certain permitted exceptions.
We will be required to pay liquidated damages, subject to some limitations, to the holders of the Notes if we
fail to comply with our obligations to register the notes and the common stock issuable upon conversion of the
notes or the registration statement does not become effective within the specified time periods. In no event will
liquidated damages accrue 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. We 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.
Purchase obligations are comprised of commitments to purchase design tools and software for use in
product development. Included in the purchase commitments above is $18.1 million in design software tools,
which will be spent between 2009 and 2010. We have not included open purchase orders for inventory or other
expenses issued in the normal course of business in the purchase obligations shown above. We estimate these
other commitments to be approximately $11.3 million at December 28, 2008 for inventory and other expenses
that will be received in the coming 90 days and that will require settlement 30 days thereafter.
We have a line of credit with a bank that allows us to borrow up to $0.8 million provided we maintain
eligible investments with the bank equal to the amount drawn on the line of credit. At December 28, 2008 we had
committed $0.8 million under letters of credit as security for office leases.
We expect to use approximately $17.1 million of cash in 2009 for capital expenditures including purchases
of intellectual property. Based on our current operating prospects, we believe that existing sources of liquidity
will be sufficient to satisfy our projected operating, working capital, capital expenditure, purchase obligations,
and remaining restructuring requirements through the end of 2009.
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