Radio Shack 2011 Annual Report Download - page 37

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29
2019 Notes: On May 3, 2011, we sold $325 million
aggregate principal amount of 6.75% senior unsecured
notes due May 15, 2019 in a private offering to qualified
institutional buyers exempt from registration pursuant to
Rule 144A and Regulation S promulgated under the
Securities Act of 1933, as amended (such notes, together
with any notes issued in the exchange offer we
subsequently registered with the SEC for such notes (the
“Exchange Offer”), being referred to as the “2019 Notes”).
In September 2011, substantially all of the privately placed
notes were exchanged for notes in an equal principal
amount that we issued pursuant to the Exchange Offer.
Accordingly, the exchange resulted in the issuance of
substantially all of the 2019 Notes in a transaction
registered with the SEC, but it did not result in the
incurrence of any additional debt.
The obligation to pay principal and interest on the 2019
Notes is jointly and severally guaranteed on a full and
unconditional basis by all of the guarantors under the 2016
Credit Facility. On the issue date, the 2019 Notes were
guaranteed by all of our wholly-owned domestic
subsidiaries except Tandy Life Insurance Company. The
2019 Notes pay interest at a fixed rate of 6.75% per year.
Interest is payable semiannually, in arrears, on May 15 and
November 15. The 2019 Notes were sold to the initial
purchasers at a discount of $2.5 million for aggregate
consideration of $322.5 million and resulted in net proceeds
to the Company of $315.4 million after the payment of $7.1
million in issuance costs. The effective annualized interest
rate of the 2019 Notes after giving effect to the original
issuance discount is 6.875%.
The 2019 Notes and the guarantees are the Company’s
and the guarantors’ general unsecured senior obligations
and, therefore, will be subordinated to all of the Company’s
and the guarantors’ existing and future secured debt to the
extent of the assets securing that debt. In addition, the
2019 Notes will be effectively subordinated to all of the
liabilities of our subsidiaries that are not guaranteeing the
2019 Notes, to the extent of the assets of those
subsidiaries.
The 2019 Notes contain covenants that could, in certain
circumstances, limit our ability to issue additional debt,
repurchase shares of our common stock, make certain
other restricted payments, make investments, or enter into
certain other transactions. At December 31, 2011, we were
in compliance with these covenants.
2013 Convertible Notes: In August 2008, we sold the
2013 Convertible Notes in a private offering. Each $1,000
of principal of the 2013 Convertible Notes was initially
convertible, under certain circumstances, into 41.2414
shares of our common stock (or a total of approximately
15.5 million shares), which is the equivalent of $24.25 per
share, subject to adjustment upon the occurrence of
specified events set forth under terms of the 2013
Convertible Notes. Upon conversion, we would pay the
holder the cash value of the applicable number of shares of
our common stock, up to the principal amount of the note.
Amounts in excess of the principal 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 2011 or 2010. In 2011,
we paid an annual dividend of $0.50 per share. This was a
$0.25 per share increase as compared to the annual
dividend we paid at the time we issued the 2013
Convertible Notes. This dividend increase triggered an anti-
dilutive provision relating to the convertible notes that
changed the conversion rate of the notes (“Convertible
Note Anti-Dilutive Provision”). As a result, at December 31,
2011, each $1,000 of principal of the 2013 Convertible
Notes was convertible, under the circumstances previously
discussed, into 42.0746 shares of our common stock, which
is the equivalent of $23.77 per share. Accordingly,
conversion of all of the 2013 Convertible Notes would result
in the issuance of approximately 15.8 million shares of our
common stock.
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