Item 1.01 Entry into a Material Definitive Agreement
Underwriting Agreement
On June 5, 2019, Q2 Holdings, Inc. (the “Company,” “we,” “us” or “our”) entered into an underwriting agreement (the “Underwriting Agreement”) with J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Stifel, Nicolaus & Company, Incorporated, acting as representatives of the several underwriters named therein (collectively, the “Underwriters”) and a selling stockholder named therein, relating to the public offering (the “Equity Offering”) by the Company of 2,517,986 shares of its common stock and by a selling stockholder of 120,000 shares of common stock (collectively, the “Firm Shares”). After underwriting discounts and commissions and estimated offering expenses, the Company expects to receive net proceeds from the offering of the Firm Shares of approximately $167.4 million. Pursuant to the Underwriting Agreement, the Underwriters have a30-day option to purchase from the Company up to an additional 395,698 shares of its common stock (the “Option Shares” and together with the Firm Shares, the “Shares”) at the public offering price less the underwriting discounts and commissions.
The Shares will be sold pursuant to an automatically effective shelf registration statement on FormS-3 that the Company filed with the Securities and Exchange Commission (the “SEC”) on June 4, 2019 (FileNo. 333-231947). A prospectus supplement relating to the Equity Offering has been filed with the Securities and Exchange Commission (the “SEC”). The closing of the Equity Offering is expected to take place on June 10, 2019, subject to customary closing conditions.
A copy of the Underwriting Agreement is attached as Exhibit 1.1 hereto and is incorporated herein by reference. The foregoing description of the Underwriting Agreement does not purport to be complete and is qualified in its entirety by reference to such exhibit.
The legal opinion, including the related consent, of DLA Piper LLP (US) relating to the legality of the Shares being sold is filed as Exhibit 5.1 to this Current Report on Form8-K and is incorporated herein and into the Registration Statement by reference.
Purchase Agreement
On June 5, we entered into a purchase agreement (the “Purchase Agreement”) with Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, Stifel, Nicolaus & Company, Incorporated and BMO Capital Markets Corp., as representatives of the several initial purchasers named therein (collectively, the “Initial Purchasers”), to issue $275 million in aggregate principal amount of 0.75% Convertible Senior Notes due 2026 (the “Notes”) in a private placement (the “Notes Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Notes will be issued to the Initial Purchasers pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act. In addition, the Company granted the Initial Purchasersa 13-day option to purchase up to an additional $41.25 million aggregate principal amount of the Notes on the same terms and conditions.
The Purchase Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the Initial Purchasers against certain liabilities.
The description of the Purchase Agreement contained herein is qualified in its entirety by reference to the Purchase Agreement which is attached as Exhibit 10.1 to this Current Report onForm 8-K and is incorporated herein by reference.
Capped Call Transactions
In connection with the Notes Offering, on June 5, 2019, the Company entered into privately negotiated capped call transactions with option counterparties, including certain of the Initial Purchasers or their affiliates (the “Capped Calls”). The Capped Calls each have an initial strike price of $88.6124 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $139 per share. The Capped Calls cover, subject to anti-dilution adjustments, approximately 3.1 million shares of common stock of the Company. The Capped Calls are expected to offset the potential dilution to the common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the Notes, as the case may be, in the event the market price per share of common stock is greater than the strike price of the Capped Call, with such offset subject to a cap. If, however, the market price per share of the common stock exceeds the cap price of the Capped Calls, there would be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that the then-market price per share of the Common Stock exceeds the cap price. The Company expects to use approximately $35.4 million from the net proceeds from the issuance and sale of the Notes to purchase the Capped Calls.
The description of the Capped Calls contained herein is qualified in its entirety by reference to the Form of Capped Call Confirmation attached as Exhibit 10.2 to this Current Report on Form8-K and is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 is incorporated herein by reference.
