The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In connection with certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period.
The Company may not redeem the Notes prior to March 22, 2027. The Company may redeem for cash all or from time to time any portion of the Notes (subject to certain limitations), at its option, on or after March 22, 2027 and prior to December 15, 2028, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which it provides notice of redemption at a redemption price equal to 100% of the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. However, the Company may not redeem less than all of the outstanding Notes unless at least $100.0 million aggregate principal amount of Notes are outstanding and not called for redemption at the time the redemption notice is sent. No sinking fund is provided for the Notes.
If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
If an event of default, as defined in the Indenture, occurs and is continuing (other than specified events of bankruptcy, insolvency or reorganization with respect to the Company), the trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare 100% of the principal of and accrued and unpaid interest, if any, on all of the outstanding Notes to be due and payable. If an event of default relating to specified events of bankruptcy, insolvency or reorganization with respect to the Company occurs, 100% of the principal of and accrued and unpaid interest on all of the outstanding Notes will automatically become due and payable.
The description of the Indenture contained herein is qualified in its entirety by reference to the text of the Indenture filed as Exhibit 4.1 to this Current Report on Form 8-K and which is incorporated herein by reference.
Capped Call Transactions
In connection with the offering of the Notes, on February 27, 2024, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with one or more of the initial purchasers or other financial institutions and/or their affiliates (the “Option Counterparties”). In addition, on February 28, 2024, in connection with the initial purchasers’ full exercise of their option to purchase Option Notes, the Company entered into additional capped call transactions (the “Additional Capped Call Transactions,” and, together with the Base Capped Call Transactions, the “Capped Call Transactions”) with each of the Option Counterparties. The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the Capped Call Transactions will initially be $122.18 per share, which represents a premium of 100% over the last reported sale price of the Company’s common stock of $61.09 per share on February 27, 2024, and is subject to certain adjustments under the terms of the Capped Call Transactions.
The foregoing description of the Capped Call Transactions contained herein is qualified in its entirety by reference to the text of the form of capped call confirmation relating to the Capped Call Transactions filed as Exhibit 10.1 to this Current Report on Form 8-K and which is incorporated herein by reference.
In connection with the repurchase of the 2025 Notes, the Company unwound a corresponding portion of Capped Call Transactions that it executed in connection with the issuance of the 2025 Notes with the financial institution counterparties to such Capped Call Transactions and received proceeds of approximately $0.5 million.
