Subject to certain exceptions, holders may require the Company to repurchase, for cash, all or part of their Convertible Notes upon a “Fundamental Change” (as defined in the Indenture) at a price equal to 100% of the principal amount of the Convertible Notes being repurchased plus any accrued and unpaid interest, if any, up to, but excluding, the “Fundamental Change Repurchase Date” (as defined in the Indenture). In addition, upon a “Make-Whole Fundamental Change” (as defined in the Indenture) prior to the maturity date of the Convertible Notes, the Company will, in some cases, increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such Make-Whole Fundamental Change. The Company may not redeem the Convertible Notes prior to August 15, 2025 and on or before the 30th scheduled trading day immediately before the maturity date.
The Indenture contains certain events of default after which the Convertible Notes may be due and payable immediately. Such events of default include, without limitation, the following: (1) a default in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any Convertible Note; (2) a default for 30 days in the payment when due of interest on any Convertible Note; (3) the Company’s failure to deliver, when required by the Indenture, a fundamental change notice or other notices pursuant to the Indenture; (4) a default in the Company’s obligation to convert a Convertible Note in accordance with the Indenture upon the exercise of the conversion right with respect thereto, if such default is not cured within two business days after its occurrence; (5) a default in the Company’s obligations described in the Indenture with respect to consolidation, merger and sale of assets of the Company; (6) a default in any of the Company’s obligations or agreements under the Indenture or the Convertible Notes (other than a default set forth in the preceding (1), (2), (3), (4) or (5)) where such default is not cured or waived within 60 days after notice to the Company by the Trustee, or to the Company and the Trustee by holders of at least 25% of the aggregate principal amount of Convertible Notes then outstanding, which notice must specify such default, demand that it be remedied and state that such notice is a “notice of default”; (7) a default by the Company or any of the Company’s subsidiaries with respect to any one or more mortgages, agreements or other instruments under which there is outstanding, or by which there is secured or evidenced, any indebtedness for money borrowed of at least $50.0 million (or its foreign currency equivalent) in the aggregate of the Company or any of the Company’s subsidiaries, whether such indebtedness exists as of the date the Company first issues the Convertible Notes or is thereafter created, where such default: (x) constitutes a failure to pay the principal of, or premium or interest on, any of such indebtedness when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, in each case after the expiration of any applicable grace period; or (y) results in such indebtedness becoming or being declared due and payable before its stated maturity, in each case where such default is not cured or waived within 30 days after notice to the Company by the Trustee or to the Company and the Trustee by holders of at least 25% of the aggregate principal amount of Convertible Notes then outstanding; and (8) certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of the Company’s “significant subsidiaries”, as defined in the Indenture.
The foregoing description of the Indenture and Convertible Notes is qualified in its entirety by reference to the text of the Indenture and the Form of Convertible Note, copies of which are attached as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Capped Call Transactions
On August 15, 2022, in connection with the pricing of the Notes, the Company entered into capped call transactions (the “Base Capped Call Transactions”) with each of Bank of America, N.A., Mizuho Markets Americas LLC, Bank of Montreal, Royal Bank of Canada and Wells Fargo Bank, National Association (collectively, the “Capped Call Counterparties”). On August 16, 2022, in connection with the Initial Purchasers’ exercise of the Notes Option, the Company entered into additional capped call transactions with the Capped Call Counterparties (together with the Base Capped Call Transactions, the “Capped Call Transactions”). The Capped Call Transactions are expected generally to reduce potential dilution to holders of our common stock on any conversion of the Convertible Notes or at our election (subject to certain conditions) offset any cash payments we are required to make in excess of the principal amount of such converted Convertible Notes, as the case may be, with such reduction or offset subject to a cap. The cap price of the Capped Call Transactions is initially $75.4075 per share of common stock, representing a premium of 75% above the last reported sale price of $43.09 per share of common stock on August 15, 2022, and is subject to certain adjustments under the terms of the Capped Call Transactions.
