Shutterfly 2013 Annual Report Download - page 38

entered into in connection with the pricing of the notes. We cannot predict the size of future issuances or
the effect, if any, that they may have on the market price for our common stock. The issuance and sale of
substantial amounts of common stock, or the perception that such issuances and sales may occur, could
adversely affect the trading price of the notes and the market price of our common stock and impair our
ability to raise capital through the sale of additional equity securities.
Repurchases by us of our common stock may affect the value of the notes and our common stock.
We used $30.0 million of the net proceeds from the notes offering to repurchase shares of our common
stock from purchasers of notes in the offering in privately negotiated transactions effected through Morgan
Stanley & Co. LLC as our agent. We may from time to time repurchase additional shares of our common
stock pursuant to our stock repurchase program. These repurchases could increase, or prevent a decrease
in, the market price of our common stock or the notes.
Holders of notes will not be entitled to any rights with respect to our common stock, but they will be subject to all
changes made with respect to them to the extent our conversion obligation includes shares of our common stock.
Holders of notes will not be entitled to any rights with respect to our common stock (including,
without limitation, voting rights and rights to receive any dividends or other distributions on our common
stock) prior to the conversion date relating to such notes (if we elect to settle the relevant conversion by
delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional
share)) or the last trading day of the relevant observation period (if we elect to pay and deliver, as the case
may be, a combination of cash and shares of our common stock in respect of the relevant conversion), but
holders of notes will be subject to all changes affecting our common stock. For example, if an amendment
is proposed to our certificate of incorporation or bylaws requiring stockholder approval and the record
date for determining the stockholders of record entitled to vote on the amendment occurs prior to the
conversion date related to a holder’s conversion of its notes (if we have elected to settle the relevant
conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering
any fractional share)) or the last trading day of the relevant observation period (if we elect to pay and
deliver, as the case may be, a combination of cash and shares of our common stock in respect of the
relevant conversion), such holder will not be entitled to vote on the amendment, although such holder will
nevertheless be subject to any changes affecting our common stock.
The conditional conversion feature of the notes could result in holders receiving less than the value of our common
stock into which the notes would otherwise be convertible.
Holders of notes may convert their notes only if specified conditions are met. If the specific conditions
for conversion are not met, holders will not be able to convert their notes, and may not be able to receive
the value of the cash, common stock or a combination of cash and common stock, as applicable, into which
the notes would otherwise be convertible.
Upon conversion of the notes, holders may receive less valuable consideration than expected because the value of our
common stock may decline after holders exercise their conversion rights but before we settle our conversion
obligation.
Under the notes, a converting holder will be exposed to fluctuations in the value of our common stock
during the period from the date such holder surrenders notes for conversion until the date we settle our
conversion obligation. Upon conversion of the notes, we have the option to pay or deliver, as the case may
be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we
elect to satisfy our conversion obligation in cash or a combination of cash and shares of our common stock,
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