Radio Shack 2012 Annual Report Download - page 57

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The 2017 Term Loan is secured on a second priority basis
by the same assets that secure the 2016 Credit Facility and
on a first priority basis by substantially all of our other
assets.
Voluntary and mandatory prepayments of the 2017 Term
Loan in amounts in excess of $10 million per year are
subject to prepayment premiums of 5% in year one, 4% in
year two, 3% in year three, and 2% in year four. The 2017
Term Loan contains customary affirmative and negative
covenants and events of default that are substantially
similar to those contained in the 2016 Credit Facility.
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 (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 our five-
year, $450 million revolving credit agreement. At December
31, 2012, 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 do not guarantee 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, 2012, we were
in compliance with these covenants.
2013 Convertible Notes: In August 2008 we sold $375
million aggregate principal amount of 2.50% convertible
senior notes due August 1, 2013, (the “2013 Convertible
Notes”) in a private offering to qualified institutional buyers.
The 2013 Convertible Notes were issued at par and interest
is payable semiannually, in arrears, on February 1 and
August 1.
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 2012 or 2011. 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,