Item 1.01 Entry into a Material Definitive Agreement.
On January 29, 2019, CONMED Corporation (“CONMED”) completed a private unregistered offering of $345 million aggregate principal amount of its 2.625% Convertible Notes due 2024 (the “Notes”), which amount includes the full exercise of the initial purchasers’ option to purchase additional Notes.
CONMED intends to use approximately $21 million of the net proceeds from the offering of the Notes to pay the cost of certain convertible note hedge transactions, taking into account the proceeds to CONMED of certain warrant transactions, and intends to use the remaining net proceeds from the offering of the Notes, together with borrowings under its new credit facilities and its cash on hand, to finance the acquisition (the “Buffalo Filter Acquisition”) of Buffalo Filter LLC and Palmerton Holdings, Inc. There can be no assurance that the Buffalo Filter Acquisition will be consummated. If the Buffalo Filter Acquisition is not consummated, CONMED intends to use the remaining net proceeds from the Notes offering for general corporate purposes.
Indenture
On January 29, 2019, CONMED entered into an Indenture (the “Indenture”), dated as of January 29, 2019, with MUFG Union Bank, N.A., as trustee (the “Trustee”), relating to the issuance of the Notes.
The Notes bear interest at a rate of 2.625% per year, payable semi-annually in arrears on February 1 and August 1 of each year, commencing August 1, 2019. The Notes will mature on February 1, 2024, unless earlier repurchased or converted.
Subject to the terms of the Indenture, the Notes may be converted at an initial conversion rate of 11.2608 shares of common stock, par value $0.01 per share, of CONMED (“Common Stock”) per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $88.80 per share of Common Stock). Holders of the Notes may convert their Notes at their option at any time on or after November 1, 2023 through the second scheduled trading day preceding the maturity date. Holders of the Notes will also have the right to convert the Notes prior to November 1, 2023, but only upon the occurrence of specified events described in the Indenture. The conversion rate is subject to anti-dilution adjustments if certain events occur.
If certain corporate events (each defined in the Indenture as a “Make-Whole Fundamental Change”) occur prior to the maturity date of the Notes, and a holder elects to convert its Notes in connection with such corporate event, CONMED will, under certain circumstances, increase the conversion rate for the Notes so surrendered for conversion by a number of additional shares of Common Stock as specified in the Indenture. No adjustment to the conversion rate will be made if the price paid or deemed to be paid per share of Common Stock in such corporate event is either less than $69.65 or exceeds $175.00.
If a specified “Fundamental Change” (as defined in the Indenture) occurs prior to the maturity date of the Notes, under certain circumstances each holder may require CONMED to repurchase all or part of its Notes at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest to, but not including, the repurchase date.
Under the Indenture, the Notes may be accelerated upon the occurrence of certain customary events of default. In the case of an event of default with respect to the Notes arising from specified events of bankruptcy or insolvency of CONMED, 100% of the principal of and accrued and unpaid interest on the Notes will automatically become due and payable. If any other event of default with respect to the Notes under the Indenture occurs or is continuing, the Trustee or holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare the principal amount of the Notes to be immediately due and payable.
The description of the Indenture is a summary and is qualified in its entirety by reference to the complete text of the Indenture, a copy of which is filed as Exhibit 4.1 hereto and is incorporated herein by reference.
Convertible Note Hedge and Warrant Transactions
In connection with the offering of the Notes, CONMED entered into convertible note hedge transactions with (i) Barclays Bank PLC, (ii) Bank of America, N.A., (iii) Wells Fargo Bank, National Association and (iv) J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (each, an “option counterparty”). The convertible note hedge transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of shares of Common Stock underlying the Notes. Concurrently with entering into the convertible note hedge transactions, CONMED also entered into warrant transactions with each option counterparty whereby CONMED sold to such option counterparty warrants to purchase, subject to customary anti-dilution adjustments, the same number of shares of Common Stock.
