2K Sports 2009 Annual Report Download - page 59

semi-annually on June 1 and December 1 of each year, commencing on December 1, 2009. The
Convertible Notes mature on June 1, 2014, unless earlier redeemed or repurchased by the Company or
converted.
The Convertible Notes are convertible at an initial conversion rate of 93.6768 shares of our common stock
per $1,000 principal amount of Convertible Notes (representing an initial conversion price of
approximately $10.675 per share of common stock for a total of approximately 12,927,000 underlying
conversion shares) subject to adjustment in certain circumstances. Holders may convert the Convertible
Notes at their option prior to the close of business on the business day immediately preceding December 1,
2013 only under the following circumstances: (1) during any fiscal quarter commencing after July 31, 2009,
if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive)
during a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter
is greater than or equal to 130% of the applicable conversion price on each applicable trading day;
(2) during the five business day period after any 10 consecutive trading day period (the ‘‘measurement
period’’) in which the trading price per $1,000 principal amount of Convertible Notes for each day of that
measurement period was less than 98% of the product of the last reported sale price of our common stock
and the applicable conversion rate on each such day; (3) if we call the Convertible Notes for redemption, at
any time prior to the close of business on the third scheduled trading day prior to the redemption date; or
(4) upon the occurrence of specified corporate events. On and after December 1, 2013 until the close of
business on the third scheduled trading day immediately preceding the maturity date, holders may convert
their Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, the
Convertible Notes may be settled, at our election, in cash, shares of our common stock, or a combination
of cash and shares of the Company’s common stock.
At any time on or after June 5, 2012, the Company may redeem all of the outstanding Convertible Notes
for cash, but only if the last reported sale of our common stock for 20 or more trading days in a period of
30 consecutive trading days ending on the trading day prior to the date we provide notice of redemption to
holders of the Convertible Notes exceeds 150% of the conversion price in effect on each such trading day.
The redemption price will equal 100% of the principal amount of the Convertible Notes to be redeemed,
plus all accrued and unpaid interest (including additional interest, if any) to, but excluding, the redemption
date. The indenture governing the Convertible Notes contains customary terms and covenants and events
of default. As of October 31, 2009, we were in compliance with all covenants and requirements outlined in
the indenture governing the Convertible Notes.
In connection with the offering of the Convertible Notes, we entered into convertible note hedge
transactions, which are expected to reduce the potential dilution to our common stock upon conversion of
the Convertible Notes. The convertible note hedge transactions allow the Company to receive shares of its
common stock related to the excess conversion value that it would convey to the holders of the Convertible
Notes upon conversion. The transactions include options to purchase approximately 12,927,000 shares of
common stock at $10.675 per share, expiring on June 1, 2014, for a total cost of approximately
$43.6 million, which decreased additional paid-in capital.
Separately, the Company entered into a warrant transaction with a strike price of $14.945. The warrants
will be net share settled and will cover approximately 12,927,000 shares of the Company’s common stock
and expire on August 30, 2014, for total proceeds of approximately $26.3 million, which was recorded to
additional paid-in capital.
In July 2007, we entered into a credit agreement which provides for borrowings of up to $140.0 million and
is secured by substantially all of our assets and the equity of our subsidiaries (the ‘‘Credit Agreement’’).
The Credit Agreement expires on July 3, 2012. Revolving loans under the Credit Agreement bear interest
at our election of (a) 2.00% to 2.50% above a certain base rate with a minimum 6.00% base rate (8.00% at
October 31, 2009 and October 31, 2008), or (b) 3.25% to 3.75% above the LIBOR Rate with a minimum
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