Shutterfly 2014 Annual Report Download - page 98

Indemnifications
In the normal course of business, the Company enters into contracts and agreements that contain a
variety of representations and warranties and provide for general indemnifications. The Company’s
exposure under these agreements is unknown because it involves future claims that may be made against
the Company, but have not yet been made. To date, the Company has not paid any claims or been required
to defend any action related to its indemnification obligations. However, the Company may record charges
in the future as a result of these indemnification obligations.
Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary
course of its business activities. The Company accrues contingent liabilities when it is probable that future
expenditures will be made and such expenditures can be reasonably estimated.
Syndicated Credit Facility
On November 22, 2011, the Company entered into a credit agreement (‘‘Credit Agreement’’) with
J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, Fifth Third Bank, Silicon Valley Bank, US Bank
and Citibank, N.A. (‘‘the Banks’’). JPMorgan Chase Bank, N.A. acted as administrative agent in the Credit
Agreement. The Credit Agreement is for five years and provides for a $125.0 million senior secured
revolving credit facility (the ‘‘credit facility’’) and if requested by the Company, the Banks may increase the
credit facility by $75.0 million subject to certain conditions. In December 2013, the Company requested
and received the entire incremental amount for a total credit facility of $200.0 million. As part of the
expansion, Bank of America, N.A. and Morgan Stanley Bank, N.A. joined the syndicate. From inception
through December 31, 2014, the Company has not drawn on the credit facility.
At the Company’s option, loans under the Facility will bear stated interest based on the Base Rate or
Adjusted LIBO Rate, in each case plus the Applicable Rate (respectively, as defined in the Credit
Agreement). The Base Rate will be, for any day, the highest of (a) 1/2 of 1% per annum above the Federal
Funds Effective Rate (as defined in the Credit Agreement), (b) JPMorgan Chase Bank’s prime rate and
(c) the Adjusted LIBO Rate for a term of one month plus 1.00%. Eurodollar borrowings may be for one,
two, three or six months (or such period that is 12 months or less, requested by Intersil and consented to by
all the Lenders) and will be at an annual rate equal to the period-applicable Eurodollar Rate plus the
Applicable Rate. The Applicable Rate for all revolving loans is based on a pricing grid ranging from
0.500% to 1.25% per annum for Base Rate loans and 1.50% to 2.250% for Adjusted LIBO Rate loans
based on the Company’s Leverage Ratio (as defined in the Credit Agreement).
On May 10, 2013, the Company amended the Credit Agreement by and among the Company and the
Banks to (i) permit the issuance of the Notes and the related Note Hedge and Warrant, (ii) amend certain
of the restrictive covenants set forth in the Credit Agreement, (iii) increase the Leverage Ratio (as defined
the Credit Agreement) to be maintained by the Company to be at or below 3.50 to 1.00, and (iv) add a
covenant requiring that the Company not permit its Senior Secured Leverage Ratio (as defined in the
Credit Agreement) to exceed 1.60 to 1.00. Unchanged from the initial credit agreement, the Credit
Agreement contains customary representations and warranties, affirmative and negative covenants, and
events of default. Also, the Company may not permit the ratio of its Consolidated EBITDA for any period
of four consecutive fiscal quarters to its interest and rental expense and the amount of scheduled principal
payments on long-term debt, for the same period, to be less than 2.50 to 1.00. As of December 31, 2014,
the Company is in compliance with all of its covenants.
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