Shutterfly 2014 Annual Report Download - page 107

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Note 12 — Convertible Senior Notes
0.25% Convertible Senior Notes Due May 15, 2018
In May 2013, the Company issued $300.0 million aggregate principal amount of 0.25% convertible
senior notes (the ‘‘Notes’’) due May 15, 2018, unless earlier purchased by the Company or converted.
Interest is payable semiannually in arrears on May 15 and November 15 of each year, commencing on
November 15, 2013.
The Notes are governed by an Indenture between the Company, as issuer, and Wells Fargo Bank,
National Association, as trustee. The Notes are unsecured and rank senior in right of payment to the
Company’s future indebtedness that is expressly subordinated in right of payment to the Notes and rank
equal in right of payment to the Company’s existing and future liabilities that are not so subordinated and
are effectively subordinated in right of payment to any of the Company’s cash equal to the principal
amount of the Notes, and secured indebtedness to the extent of the value of the assets securing such
indebtedness and are structurally subordinated to all existing and future indebtedness and liabilities
incurred by the Company’s subsidiaries.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s
common stock or a combination of cash and shares of common stock, at the Company’s election.
The initial conversion rate is 15.5847 shares of common stock per $1,000 principal amount of Notes.
The initial conversion price is $64.17 per share of common stock. Throughout the term of the Notes, the
conversion rate may be adjusted upon the occurrence of certain events. Holders of the Notes will not
receive any cash payment representing accrued and unpaid interest upon conversion of a Note. Accrued
but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished
or forfeited. Holders may convert their Notes only under the following circumstances:
• during any calendar quarter commencing after the calendar quarter ending on September 30,
2013 (and only during such calendar quarter), if the last reported sale price of the Company’s
common stock for at least 20 trading days (whether or not consecutive) during a period
of 30 consecutive trading days ending on the last trading day of the immediately preceding
calendar quarter is greater than or equal to 130% of the conversion price on each applicable
trading day;
• during the five business day period after any ten consecutive trading day period (the ‘‘Notes
Measurement Period’’) in which the ‘‘trading price’’ (as the term is defined in the Indenture)
per $1,000 principal amount of notes for each trading day of such Notes Measurement Period
was less than 98% of the product of the last reported sale price of the Company’s common
stock on such trading day and the conversion rate on each such trading day;
• upon the occurrence of specified corporate events; or
• at any time on or after December 15, 2017 until the close of business on the second scheduled
trading immediately preceding the maturity date.
As of December 31, 2014, the Notes are not yet convertible.
In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity
components. The carrying amount of the liability component was calculated by measuring the fair value of
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