Amazon.com 2007 Annual Report Download - page 69

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
conversion price of $78.0275 per share. Total common stock issuable, as of December 31, 2007, upon conversion
of our outstanding 4.75% Convertible Subordinated Notes was 11.5 million shares, which is excluded from our
calculation of earnings per share as its effect is currently anti-dilutive. Interest on the 4.75% Convertible
Subordinated Notes is payable semi-annually in arrears in February and August of each year. The 4.75%
Convertible Subordinated Notes are unsecured and are subordinated to any existing and future senior
indebtedness as defined in the indenture governing the 4.75% Convertible Subordinated Notes. We have the right
to redeem the 4.75% Convertible Subordinated Notes, in whole or in part, by paying the principal plus a
redemption premium, plus any accrued and unpaid interest. The redemption premium was 0.950% of the
principal at December 31, 2007, and decreased to 0.475% on February 1, 2008 and will decrease to zero at
maturity in February 2009.
Upon the occurrence of a “fundamental change” prior to the maturity of the 4.75% Convertible
Subordinated Notes, each holder thereof has the right to require us to redeem all or any part of such holder’s
4.75% Convertible Subordinated Notes at a price equal to 100% of the principal amount of the notes being
redeemed, together with accrued interest. As defined in the indenture, a “fundamental change” is the occurrence
of certain types of transactions in which our stockholders do not receive publicly-traded securities.
The indenture governing the 4.75% Convertible Subordinated Notes contains certain affirmative covenants
for us, including making principal and interest payments when due, maintaining our corporate existence and
properties, and paying taxes and other claims in a timely manner. We were in compliance with these covenants
through December 31, 2007.
Based upon quoted market prices, the fair value of our 4.75% Convertible Subordinated Notes as of
December 31, 2007 and 2006 was $1.1 billion and $883 million.
6.875% PEACS
In February 2000, we completed an offering of €690 million of our 6.875% PEACS. The 6.875% PEACS
are convertible, at the holder’s option, into our common stock at a conversion price of €84.883 per share
($123.84, based on the exchange rates as of December 31, 2007). Total common stock issuable, as of
December 31, 2007, upon conversion of our outstanding 6.875% PEACS was 2.8 million shares, which is
excluded from our calculation of earnings per share as its effect is currently anti-dilutive. The U.S. Dollar
equivalent principal, interest, and conversion price fluctuate based on the Euro/U.S. Dollar exchange ratio.
Interest on the 6.875% PEACS is payable annually in arrears in February of each year. The 6.875% PEACS are
unsecured and are subordinated to any existing and future senior indebtedness. The 6.875% PEACS rank equally
with our outstanding 4.75% Convertible Subordinated Notes. We have the right to redeem the 6.875% PEACS,
in whole or in part, by paying the principal, plus any accrued and unpaid interest. No premium payment is
required for early redemption.
Upon the occurrence of a “fundamental change” prior to the maturity of the 6.875% PEACS, each holder
thereof has the right to require us to redeem all or any part of such holder’s 6.875% PEACS at a price equal to
100% of the principal amount of the notes being redeemed, together with accrued interest. As defined in the
indenture, a “fundamental change” is the occurrence of certain types of transactions in which our stockholders do
not receive publicly-traded securities.
The indenture governing the 6.875% PEACS contains certain affirmative covenants for us, including
making principal and interest payments when due, maintaining our corporate existence and properties, and
paying taxes and other claims in a timely manner. We were in compliance with these covenants through
December 31, 2007.
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