| Item 1.01 | Entry into a Material Definitive Agreement. |
Purchase Agreement
On September 10, 2019, Harmonic Inc. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with Barclays Capital Inc., as representative of the several initial purchasers named therein (the “Initial Purchasers”), to issue and sell $105 million aggregate principal amount of its 2.00% Convertible Senior Notes due 2024 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Notes were 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. The Company also granted the Initial Purchasers an option to purchase up to an additional $10.5 million aggregate principal amount of the Notes. The Initial Purchasers exercised their option in full on September 11, 2019.
The Company estimates that the net proceeds from the sale of the Notes will be approximately $111.2 million, after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses payable by the Company.
The Company used substantially all of the net proceeds from the sale of the Notes to repurchase approximately $82.5 million principal amount of its 4.00% Convertible Senior Notes due 2020 (the “2020 notes”) in privately negotiated transactions concurrently with the Notes offering. The Company intends to use the remaining net proceeds from the sale of the Notes to cover offering expenses and any further remaining net proceeds for other general corporate purposes.
The Purchase Agreement contains customary representations, warranties and covenants by the Company together with customary closing conditions. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the Initial Purchasers against certain liabilities.
The Purchase Agreement is filed as Exhibit 10.1 to this Current Report on Form8-K and is incorporated by reference herein. The summary of the foregoing transaction is qualified in its entirety by reference to the text of the Purchase Agreement.
Indenture
On September 13, 2019, the Company entered into an Indenture (the “Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), pursuant to which the Company issued $115.5 million aggregate principal amount of Notes. The Notes will bear interest at 2.00% per annum, payable semiannually on March 1 and September 1 of each year, beginning on March 1, 2020. The Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the Notes are not freely tradeable as required by the Indenture. The Notes will mature on September 1, 2024, unless earlier repurchased by the Company, redeemed by the Company or converted pursuant to their terms.
The initial conversion rate of the Notes is 115.5001 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $8.66 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture) or an issuance of a notice of redemption, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change or notice of redemption.
Prior to the close of business on the business day immediately preceding June 1, 2024, the Notes will be convertible only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on December 31, 2019, and only during such fiscal quarter, if the last reported sale price of the Common Stock for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after June 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, and subject to certain conditions, either cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election.
