Shutterfly 2013 Annual Report Download - page 94

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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, 2013,
the Company is in compliance with all of its covenants.
Amounts repaid under the Facility may be reborrowed. The revolving loan facility matures on the fifth
anniversary of its closing and is payable in full upon maturity. The Company intends to use the new Facility
from time to time for general corporate purposes, working capital and potential acquisitions.
The Company incurred $0.5 million of Credit Facility origination costs during the twelve months
ended December 31, 2013, related to the amendment and extension of the agreement. These costs have
been capitalized within prepaid expenses for the current portion and other assets for the non-current
portion. These fees are being amortized over the remaining term of the Credit Facility as a component of
interest expense.
Legal Matters
The Company routinely is involved in a number of judicial and administrative proceedings that are
incidental to their business. Although adverse decisions (or settlements) may occur in one or more of these
cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution
of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the
Company’s business, financial position or results of operations. Cases that previously were disclosed may
no longer be described because of rulings in the case, settlements, changes in our business or other
developments rendering them, in our judgment, no longer material to our business, financial position or
results of operations.
In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount
or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative
guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount,
or if a range, the Company accrues the low end of the range as a component of legal expense. The
Company monitors developments in these legal matters that could affect the estimate the Company had
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