| Item 1.01 | Entry into a Material Definitive Agreement. |
Exchange Agreements
On June 2, 2022, American Eagle Outfitters, Inc. (the “Company”) entered into separate privately negotiated exchange agreements (the “Exchange Agreements” and each, an “Exchange Agreement”) with certain holders (the “Noteholders”) of its 3.75% Convertible Senior Notes due 2025 (the “2025 Notes”). The Exchange Agreements provide for the Company to deliver and pay, at the closing of the transactions thereunder and in the aggregate, (a) approximately 34.7 million shares of Company common stock, par value $0.01 per share (the “Common Stock”) and (b) approximately $136.1 million in cash, collectively, including accrued interest, in exchange for approximately $342 million principal amount of the 2025 Notes (the “Exchange Transactions”), in each case, pursuant to the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”). Following the completion of the Exchange Transactions, approximately $70 million in aggregate principal amount of the 2025 Notes will remain outstanding.
The Company will not receive any cash proceeds from the Exchange Transactions. The Exchange Agreements provide for the Company to deliver and pay, as applicable, the shares of Company Common Stock and cash described above, and the Company will receive and cancel the exchanged 2025 Notes. The Company will fund the cash portion of the amounts payable under the Exchange Transactions with borrowings under that certain Amended and Restated Credit Agreement, dated as of January 29, 2019, among the Company, the lenders from time to time party thereto and PNC Bank, N.A., as administrative agent, as amended, and with existing cash and cash equivalents.
The Exchange Transactions are being conducted as a private placement and the shares of Common Stock to be issued in the Exchange Transactions will be issued pursuant to the exemption from the registration requirements of the Securities Act. Each counterparty in the Exchange Transactions has represented that it is (i) an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act and (ii) a “qualified institutional buyer” within the meaning of Rule 144A promulgated under the Securities Act.
The foregoing description of the Exchange Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Exchange Agreements, a copy of which is filed with this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.
Accelerated Stock Repurchase Agreement
On June 3, 2022, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”), pursuant to its previously announced share repurchase program, with JPMorgan Chase Bank, National Association (“JPMorgan”) to repurchase approximately $200 million of the Company’s common stock.
Under the ASR Agreement, the Company will make an aggregate payment of $200 million to JPMorgan and will receive an aggregate initial delivery of approximately 13.4 million shares of Common Stock on June 3, 2022, representing approximately 80% of the total shares that are expected to be repurchased under the ASR. The exact number of shares the Company ultimately will repurchase under the ASR Agreement will be based generally on the average of the daily volume-weighted average price per share of the Common Stock during the repurchase period, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. At settlement, under certain circumstances, JPMorgan may be required to deliver additional shares of Common Stock to the Company, or under certain circumstances, the Company may be required either to deliver shares of Common Stock or to make a cash payment to JPMorgan. Final settlement of the transactions under the ASR Agreement is expected to occur by the end of the third quarter of 2022.
