Shutterfly 2014 Annual Report Download - page 43

converted in connection with such make-whole fundamental change. The increase in the conversion rate
will be determined based on the date on which the specified corporate transaction becomes effective and
the price paid (or deemed to be paid) per share of our common stock in such transaction. The increase in
the conversion rate for notes converted in connection with a make-whole fundamental change may not
adequately compensate holders for any lost value of their notes as a result of such transaction. Our
obligation to increase the conversion rate for notes converted in connection with a make-whole
fundamental change could be considered a penalty, in which case the enforceability thereof would be
subject to general principles of reasonableness and equitable remedies.
The conversion rate of the notes may not be adjusted for all dilutive events.
The conversion rate of the notes is subject to adjustment for certain events, including, but not limited
to, the issuance of certain stock dividends on our common stock, the issuance of certain rights or warrants,
subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and
certain issuer tender or exchange offers. However, the conversion rate will not be adjusted for other
events, such as a third-party tender or exchange offer or an issuance of common stock for cash that may
adversely affect the trading price of the notes or our common stock. An event that adversely affects the
value of the notes may occur, and that event may not result in an adjustment to the conversion rate.
Provisions in the indenture for the notes may deter or prevent a business combination that may be favorable to
holders of the notes.
If a fundamental change occurs prior to the maturity date of the notes, holders of the notes will have
the right, at their option, to require us to repurchase all or a portion of their notes. In addition, if a
make-whole fundamental change occurs prior to the maturity date of the notes, we will in some cases be
required to increase the conversion rate for a holder that elects to convert its notes in connection with such
fundamental change. Furthermore, the indenture for the notes prohibits us from engaging in certain
mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the
notes. These and other provisions in the indenture could deter or prevent a third party from acquiring us
even when the acquisition may be favorable to holders of the notes.
Some significant restructuring transactions may not constitute a fundamental change, in which case we would not
be obligated to offer to repurchase the notes.
Upon the occurrence of a fundamental change, holders have the right to require us to repurchase their
notes. However, the fundamental change provisions will not afford protection to holders of notes in the
event of other transactions that could adversely affect the notes. For example, transactions such as
leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a
fundamental change requiring us to repurchase the notes. In the event of any such transaction, the holders
would not have the right to require us to repurchase the notes, even though each of these transactions
could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any
credit ratings, thereby adversely affecting the holders of notes.
We have not registered the notes or the common stock issuable upon conversion, if any, which will limit holders’
ability to resell them.
The notes and the shares of common stock issuable upon conversion of the notes, if any, have not been
registered under the Securities Act of 1933, as amended, or the Securities Act, or any state securities laws.
Unless the notes and any shares of common stock issuable upon conversion of the notes have been
registered, they may not be transferred or resold except in a transaction exempt from or not subject to the
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