Adaptec 2009 Annual Report Download - page 81

Annual Report
NOTE 11. SPECIAL SHARES
At December 27, 2009 and December 28, 2008, the Company maintained a reserve of 1,570,000 and
2,045,000, 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 12. STOCKHOLDERS’ EQUITY
Authorized Capital Stock of PMC
At December 27, 2009 and December 28, 2008, 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.
Stockholders’ Rights Plan.
The Company adopted a stockholder rights plan in 2001, pursuant to which the Company 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 the Company’s 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 the Company may, at the Company’s option, issue one share of common stock in
exchange for each right, or the Company may redeem the rights for $0.001 per right.
NOTE 13. EMPLOYEE BENEFIT PLANS
Post-Retirement Health Care Benefits
Our unfunded post retirement benefit plan, which was assumed in connection with the acquisition of the
Storage Semiconductor Business, provides retiree medical benefits to eligible United States employees who meet
certain age and service requirements upon retirement from the Company. These benefits are provided from the
date of retirement until the employee qualifies for Medicare coverage. The amount of the retiree medical benefit
obligation assumed by the Company was $1.1 million at the time of the acquisition.
At December 27, 2009, the accumulated postretirement benefit obligation was $1.4 million, with no
unrecognized gain/loss or unrecognized prior service cost. The net period benefit cost was $0.3 million during
2009. No distributions were made from the plan during the period. The Company includes accrued benefit costs
for its post-retirement program in Accrued liabilities on the Company’s consolidated balance sheet.
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