| Item 1.01. | Entry into a Material Definitive Agreement. |
Indenture and Notes
On November 22, 2021, Stem, Inc. (the “Company”) sold to Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC and Barclays Capital Inc, as initial purchasers (the “Initial Purchasers”), and the Initial Purchasers purchased from the Company, $460 million aggregate principal amount of the Company’s 0.50% Green Convertible Senior Notes due 2028 (the “Notes”), pursuant to a purchase agreement dated as of November 17, 2021, by and between the Company and the Initial Purchasers (the “Purchase Agreement”).
The Notes were offered in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), to the Initial Purchasers for initial resale to qualified institutional buyers pursuant to an exemption from registration provided by Rule 144A promulgated under the Securities Act. The offer and sale of the Notes and the common stock of the Company, $0.0001 par value per share (the “common stock”) issuable upon conversion, if any, have not been registered under the Securities Act or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. The issuance of common stock upon conversion is expected to be exempt from registration pursuant to Section 3(a)(9) of the Securities Act. This Current Report on Form 8-K does not constitute an offer to sell nor the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
In connection with the issuance of the Notes, the Company entered into an Indenture, dated November 22, 2021 (the “Indenture”), with U.S. Bank National Association, as trustee (the “Trustee”). The terms of the Notes are governed by the Indenture. The Notes will accrue interest payable semi-annually in arrears and will mature on December 1, 2028, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date.
In addition, holders may convert their Notes, in multiples of $1,000 principal amount, in certain circumstances at their option during any calendar quarter commencing after the calendar quarter ending on March 31, 2022, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the Notes, and from and including June 1, 2028, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the Notes without regard to such circumstances. The initial conversion rate for the Notes is 34.1965 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $29.24 per share of common stock, subject to adjustment upon the occurrence of certain specified events as set forth in the Indenture. Upon conversion, the Company may choose to pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock.
In addition, the Notes will be redeemable, in whole or in part, for cash at the Company’s option at any time, and from time to time, on or after December 5, 2025 and before the 45th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time.
The Indenture provides for certain events upon which the conversion rate will be increased, but in no event will the conversion rate per $1,000 principal amount of notes exceed 45.3103 shares of common stock, subject to adjustments as provided in the Indenture.
The Indenture also contains customary events of default.
