Radio Shack 2009 Annual Report Download - page 41

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amount, if any, (the “excess conversion value”) may be paid in cash or in stock, at our option. Holders
may convert their 2013 Convertible Notes into common stock on the net settlement basis described
above at any time from May 1, 2013, until the close of business on July 29, 2013, or if, and only if, one of
the following conditions has been met:
• During any calendar quarter, and only during such calendar quarter, in which the closing price of
our common stock for at least 20 trading days in the period of 30 consecutive trading days ending
on the last trading day of the preceding calendar quarter exceeds 130% of the conversion price
per share of common stock in effect on the last day of such preceding calendar quarter
• During the five consecutive business days immediately after any 10 consecutive trading day
period in which the average trading price per $1,000 principal amount of 2013 Convertible Notes
was less than 98% of the product of the closing price of the common stock on such date and the
conversion rate on such date
• We make specified distributions to holders of our common stock or specified corporate
transactions occur
The 2013 Convertible Notes were not convertible at the holders' option at any time during 2009.
Holders who convert their 2013 Convertible Notes in connection with a change in control may be entitled
to a make-whole premium in the form of an increase in the conversion rate. In addition, upon a change in
control, liquidation, dissolution or delisting, the holders of the 2013 Convertible Notes may require us to
repurchase for cash all or any portion of their 2013 Convertible Notes for 100% of the principal amount of
the notes plus accrued and unpaid interest, if any. As of December 31, 2009, none of the conditions
allowing holders of the 2013 Convertible Notes to convert or requiring us to repurchase the 2013
Convertible Notes had been met.
Concurrent with the issuance of the 2013 Convertible Notes, we entered into note hedge transactions
with Citigroup and Bank of America whereby we have the option to purchase up to 15.5 million shares of
our common stock at a price of $24.25 per share (the “Convertible Note Hedges”), and we sold warrants
to the same financial institutions whereby they have the option to purchase up to 15.5 million shares of
our common stock at a per share price of $36.60 (the “Warrants”). The Convertible Note Hedges and
Warrants were structured to reduce the potential future share dilution associated with the conversion of
the 2013 Convertible Notes. The Convertible Note Hedges and Warrants are separate contracts with the
two financial institutions, are not part of the terms of the 2013 Convertible Notes, and do not affect the
rights of holders under the 2013 Convertible Notes. A holder of the 2013 Convertible Notes does not have
any rights with respect to the Convertible Note Hedges or Warrants.
The net proceeds retained by RadioShack as a result of the issuance of the 2013 Convertible Notes, the
purchase of the Convertible Note Hedges, and the proceeds received from the issuance of the Warrants
were approximately $319.2 million. We completed these transactions to secure a source of liquidity in
preparation for our $300 million credit facility expiring in June of 2009. On September 11, 2008, we
terminated this credit facility.
For a more detailed description of the 2013 Convertible Notes, Convertible Note Hedges and Warrants,
please see Note 5 – “Indebtedness and Borrowing Facilities” and Note 6 – “Stockholders’ Equity” in the
Notes to Consolidated Financial Statements.
Long-Term Notes: On May 11, 2001, we issued $350 million of 10-year 7.375% notes in a private
offering to qualified institutional buyers under SEC Rule 144A. In August 2001, under the terms of an
exchange offering filed with the SEC, we exchanged substantially all of these notes for a similar amount
of publicly registered notes. The exchange resulted in substantially all of the notes becoming registered
with the SEC and did not result in additional debt being issued. The annual interest rate on the notes is
7.375% per annum with interest payable on November 15 and May 15 of each year. The notes contain
certain non-financial covenants and mature on May 15, 2011.