Adaptec 2008 Annual Report Download - page 76

During 2006, the Company recorded a $3.2 million impairment loss on its investment in a private company,
which was its carrying value. This was offset by a $0.1 million gain on sale of another investment. In addition,
the Company sold its investment in Ikanos Communications Inc. in 2006 for proceeds of $5.1 million and
recorded a gain of $3.1 million, included in Loss on investments on the Consolidated Statement of Operations.
The Company monitors the value of its investments for impairment and records an impairment charge to
reflect any decline in value below its cost basis, if that decline is considered to be other than temporary. The
assessment of impairment in carrying value is based on the market value trends of similar public companies, the
current business performance of the entities in which we have invested, and if available, the estimated future
market potential of the companies and venture funds.
NOTE 9. Lines of credit
At December 28, 2008, the Company had available a revolving line of credit with a bank under which the
Company may borrow up to $0.8 million with interest at the bank’s alternate base rate (annual rate of 3.75% at
December 28, 2008) as long as the Company maintains eligible investments with the bank in an amount equal to
its drawings. This agreement will expire in July 2009. At December 28, 2008, $0.8 million cash was deposited
with the bank to offset the amount committed under letters of credit used as security for a facility lease.
NOTE 10. Long-term debt
2.25% Senior convertible notes
On October 26, 2005, the Company issued $225 million aggregate principal amount of 2.25% senior
convertible notes due 2025 (“Notes”). The Company has recorded these Notes as long-term debt and issuance
costs of $6.8 million have been deferred and will be amortized over seven years, which is the Company’s earliest
call date. This approximates the effective interest method.
The notes rank equal in right of payment with our other unsecured senior indebtedness and mature on
October 15, 2025 unless earlier redeemed by the Company at its option, or converted or put to the Company 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. The Company may redeem all or a portion of the Notes at par on and after
October 20, 2012. The holders may require that the Company repurchase the Notes on October 15, 2012, 2015
and 2020 respectively.
Holders may convert the Notes into the right to receive the conversion value (i) when the Company’s 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 the Company’s common stock at the time of conversion. If
the conversion value exceeds $1,000 per $1,000 in principal of Notes, the Company 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 the Company’s
election.
The Company entered into a Registration Rights Agreement with the holders of the Notes, under which the
Company is 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.
The Company will be required to pay liquidated damages, subject to some limitations, to the holders of the
Notes if the Company fails to comply with its obligations to register the Notes and the common stock issuable
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