EMC 2007 Annual Report Download - page 77

EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
E. Convertible Debt
In November 2006, we issued our 2011 Notes and 2013 Notes for total gross proceeds of $3.45 billion. The Notes are senior unsecured obligations and
rank equally with all other existing and future senior unsecured debt. Holders may convert their Notes at their option on any day prior to the close of business
on the scheduled trading day immediately preceding (i) September 1, 2011, with respect to the 2011 Notes, and (ii) September 1, 2013, with respect to the
2013 Notes, in each case only under the following circumstances: (1) during the five business-day period after any five consecutive trading-day period (the
"measurement period") in which the price per Note of the applicable series for each day of that measurement period was less than 98% of the product of the
last reported sale price of our common stock and the conversion rate on each such day; (2) during any calendar quarter, if the last reported sale price of our
common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar
quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; or (3) upon the
occurrence of certain events specified in the Notes. Additionally, the Notes will become convertible during the last three months prior to the respective
maturities of the 2011 Notes and the 2013 Notes.
Upon conversion, we will pay cash up to the principal amount of the Notes converted. With respect to any conversion value in excess of the principal
amount of the Notes converted, we have the option to settle the excess with cash, shares of our common stock, or a combination of cash and shares of our
common stock based on a daily conversion value, determined in accordance with the indenture, calculated on a proportionate basis for each day of the
relevant 20-day observation period. The initial conversion rate for the Notes will be 62.1978 shares of our common stock per one thousand principal amount
of Notes, which represents a 27.5 percent conversion premium and is equivalent to a conversion price of approximately $16.08 per share of our common
stock. The conversion price is subject to adjustment for some events as set forth in the indenture. In addition, if a "fundamental change" (as defined in the
indenture) occurs prior to the maturity date, we will in some cases increase the conversion rate for a holder of Notes that elects to convert its Notes in
connection with such fundamental change.
Subject to certain exceptions, if we undergo a "designated event" (as defined in the indenture) including a "fundamental change," holders of the Notes
will have the option to require us to repurchase all or any portion of their Notes. The designated event repurchase price will be 100% of the principal amount
of the Notes to be purchased plus any accrued interest up to but excluding the relevant repurchase date. We will pay cash for all Notes so repurchased. We
may not redeem the Notes prior to maturity.
In connection with the sale of the Notes, we entered into a registration rights agreement (the "Registration Rights Agreement"). Pursuant to the
Registration Rights Agreement, on February 2, 2007, we filed a shelf registration statement with the SEC covering the resale of the Notes and our common
stock issuable upon conversion of the Notes. We also have agreed to use our commercially reasonable efforts to keep the shelf registration statement effective
until the earliest of (i) the date when all securities covered by the registration statement have been sold; (ii) the expiration of the applicable holding period
with respect to the Notes and our common stock issuable upon conversion of the Notes under Rule 144(k) under the Securities Act of 1933, or any successor
provision; and (iii) the date that is two years after the effective date of the registration statement. We may suspend the use of the registration statement to
resell Notes or shares of our common stock issued upon conversion of Notes for reasons relating to pending corporate developments, public filings or other
events.
Subject to certain limitations, we will be required to pay the holders of the Notes special interest on the Notes if we fail to keep such registration
statement effective during specified time periods. The Notes pay interest in cash at a rate of 1.75% semi-annually in arrears on December 1 and June 1 of each
year, beginning on June 1, 2007. Aggregate debt issuance costs of approximately $58.9 million are being amortized to interest expense over the respective
terms of the Notes. If the debt becomes convertible prior to the end of the term of the Notes, we will expense the remaining unamortized expense associated
with the debt issue costs.
A total of $2.2 billion of the net proceeds from the issuance of the Notes was used to repay the outstanding indebtedness under our six-month unsecured
credit facility which was used to finance the acquisition of RSA. Additionally, $945.8 million of the net proceeds were used to repurchase 75.0 million shares
of our common stock.
In connection with the sale of the Notes, we entered into separate Purchased Options (the "Purchased Options") with respect to our common stock. The
Purchased Options allow us to receive shares of our common stock and/or cash related to the excess
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