Priceline 2010 Annual Report Download - page 175

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paid $13.3 million in debt financing costs associated with the 2015 Notes for the year ended December 31, 2010.
The 2015 Notes are convertible, subject to certain conditions, into the Company’s common stock at a conversion
price of approximately $303.06 per share. The 2015 Notes are convertible, at the option of the holder, prior to
March 15, 2015 upon the occurrence of specified events, including, but not limited to a change in control, or if the
closing sales price of the Company’s common stock for at least 20 consecutive trading days in the period of the 30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than
150% of the applicable conversion price in effect for the notes on the last trading day of the immediately preceding
quarter. In the event that all or substantially all of the Company’s common stock is acquired on or prior to the
maturity of the 2015 Notes in a transaction in which the consideration paid to holders of the Company’s common
stock consists of all or substantially all cash, the Company would be required to make additional payments in the
form of additional shares of common stock to the holders of the 2015 Notes in aggregate value ranging from $0 to
approximately $132.7 million depending upon the date of the transaction and the then current stock price of the
Company. As of December 15, 2014, holders will have the right to convert all or any portion of the 2015 Notes.
The 2015 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to
repurchase the 2015 Notes for cash in certain circumstances. Interest on the 2015 Notes is payable on March 15 and
September 15 of each year.
In 2006, the Company issued in a private placement $172.5 million aggregate principal amount of
Convertible Senior Notes due September 30, 2011, with an interest rate of 0.50% (the “2011 Notes”), and $172.5
million aggregate principal amount of Convertible Senior Notes due September 30, 2013, with an interest rate of
0.75% (the “2013 Notes”). The 2011 Notes and the 2013 Notes were convertible, subject to certain conditions, into
the Company’s common stock at a conversion price of approximately $40.38 per share. The 2011 Notes and the
2013 Notes were convertible, at the option of the holder, prior to June 30, 2011 in the case of the 2011 Notes, and
prior to June 30, 2013 in the case of the 2013 Notes, upon the occurrence of specified events, including, but not
limited to a change in control, or if the closing sale price of the Company’s common stock for at least 20
consecutive trading days in the period of the 30 consecutive trading days ending on the last trading day of the
immediately preceding calendar quarter was more than 120% of the applicable conversion price in effect for the
notes on the last trading day of the immediately preceding quarter. Neither the 2011 Notes nor the 2013 Notes could
be redeemed by the Company prior to maturity.
In 2006, the Company entered into hedge transactions relating to potential dilution of the Company’s
common stock upon conversion of the 2011 Notes and the 2013 Notes (the “Conversion Spread Hedges”). Under
the Conversion Spread Hedges, the Company is entitled to purchase from Goldman Sachs and Merrill Lynch
approximately 8.5 million shares of the Company’s common stock (4.27 million shares underlying each of the 2011
Notes and the 2013 Notes) at a strike price of $40.38 per share (subject to adjustment in certain circumstances) in
2011 and 2013, and the counterparties are entitled to purchase from the Company approximately 8.5 million shares
of the Company’s common stock at a strike price of $50.47 per share (subject to adjustment in certain
circumstances) in 2011 and 2013. The Conversion Spread Hedges increase the effective conversion price of the
2011 Notes and the 2013 Notes to $50.47 per share from the Company’s perspective and were designed to reduce
the potential dilution upon conversion of the 2011 Notes and the 2013 Notes. If the market value per share of the
Company’s common stock at maturity is above $40.38, the Conversion Spread Hedges entitle the Company to
receive from the counterparties net shares of the Company’s common stock based on the excess of the then current
market price of the Company’s common stock over the strike price of the hedge (up to $50.47). The Conversion
Spread Hedges are separate transactions entered into by the Company with the counterparties and were not part of
the terms of the Notes. The Conversion Spread Hedges were designed to be exercisable at dates coinciding with the
scheduled maturities of the 2011 Notes and 2013 Notes. The Conversion Spread Hedges did not immediately hedge
against the associated dilution from conversions of the Notes prior to their stated maturities. Therefore, upon early
conversion of the 2011 Notes or the 2013 Notes, the Company has delivered any related conversion premium in
shares of common stock or a combination of cash and shares. However, the hedging counterparties were not
obligated to deliver the Company shares or cash that would offset the dilution associated with the early conversion
activity. Because of this timing difference, the number of shares, if any, that the Company receives from its
Conversion Spread Hedges can differ materially from the number of shares that it was required to deliver to holders
of the Notes upon their early conversion. The actual number of shares to be received will depend upon the
Company’s stock price on the date the Conversion Spread Hedges are exercisable, which coincides with the
scheduled maturity of the 2013 Notes. During the year ended December 31, 2010, the Company and the
counterparties agreed to terminate the Conversion Spread Hedges associated with 4.27 million shares underlying the
2011 Notes. The Company recorded the $43 million received as an increase to additional paid-in capital.