Amazon.com 2000 Annual Report Download - page 60

At December 31, 2000, the swap agreement represented an obligation with a fair value of $11 million. The
fair value was determined as the present value of net future cash payments and receipts, adjusted for the
Company’s ability to cancel the agreement and the likelihood of such cancellation. The fair value takes into
consideration current foreign currency exchange rates, market interest rates and the current market price of our
common stock. The fair value of the forward purchase agreements, as of December 31, 2000, was $1 million.
Based upon quoted market prices, the fair value of the PEACS, as of December 31, 2000, was $248 million.
Convertible Subordinated Notes
On February 3, 1999, the Company completed an offering of $1.25 billion of 4.75% Convertible
Subordinated Notes due 2009 (the Convertible Subordinated Notes). The Convertible Subordinated Notes are
convertible into the Company’s common stock at the holders’ option at a conversion price of $78.0275 per
share, subject to adjustment in certain events. Interest on the Convertible Subordinated Notes is payable semi-
annually in arrears on February 1 and August 1 of each year, and commenced August 1, 1999. The Convertible
Subordinated Notes are unsecured and are subordinated to all existing and future Senior Indebtedness as
defined in the indenture governing the Convertible Subordinated Notes (the Convertible Subordinated Notes
Indenture). Subject to certain conditions, the Convertible Subordinated Notes may be redeemed at the option of
the Company prior to February 6, 2002, in whole or in part, at the redemption price of $1,000 per note, plus
accrued and unpaid interest, if the closing price for the Company’s common stock has exceeded 150% of the
conversion price for at least 20 trading days within a period of 30 consecutive trading days ending on the
trading day prior to the date of mailing of the notice of redemption. Upon any redemption made prior to
February 6, 2002, the Company will also make an additional cash payment with respect to the Convertible
Subordinated Notes called for redemption in an amount equal to $212.60 per $1,000 note redeemed, less the
amount of any interest actually paid on such Convertible Subordinated Notes prior to the call for redemption.
At any time on and after February 6, 2002, the Company may redeem the notes, in whole or in part, at the
redemption prices set forth in the Convertible Subordinated Notes Indenture.
Upon the occurrence of a ‘‘fundamental change’’ (as defined in the Convertible Subordinated Notes
Indenture) prior to the maturity of the Convertible Subordinated Notes, each holder thereof shall have the right
to require Amazon.com to redeem all or any part of such holder’s Convertible Subordinated Notes at a price
equal to 100% of the principal amount of the notes being redeemed, together with accrued interest.
Based upon quoted market prices, the fair value of the Convertible Subordinated Notes as of
December 31, 2000 and December 31, 1999 was $471 million and $1.42 billion, respectively.
Senior Discount Notes
In May 1998, the Company completed the offering of approximately $326 million of 10% Senior Discount
Notes due May 1, 2008 (the Senior Discount Notes). Pursuant to a registration statement on Form S-4 in
September 1998, the Company completed an exchange offer of 10% Senior Discount Notes due 2008 (the
Exchange Notes), which are registered under the Securities Act of 1933, as amended, for all outstanding Senior
Discount Notes. The Exchange Notes have identical terms in all material respects to the terms of the original
Senior Discount Notes, except that the Exchange Notes generally are freely transferable (the Exchange Notes
are referred to throughout these notes to consolidated financial statements interchangeably with the Senior
Discount Notes). The Exchange Notes were issued under the indenture governing the original Senior Discount
Notes (the Indenture). The Senior Discount Notes were sold at a substantial discount from their principal
amount at maturity of $530 million. Prior to November 1, 2003, no cash interest payments are required;
instead, interest will accrete during this period to the aggregate principal amount at maturity. From and after
May 1, 2003, the Senior Discount Notes will bear interest at a rate of 10% per annum payable in cash on each
May 1 and November 1. The Senior Discount Notes are redeemable, at the option of the Company, in whole or
AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
52