Page 7 of 9 – SEC Filing
Preferred Stock
Private Placement
On January 7, 2018, the
Issuer entered into a Preferred Stock Purchase Agreement (the “Purchase
Agreement”) with Redmile Capital
Fund, LP, Redmile Capital Offshore Fund II, Ltd., Redmile Capital Offshore Fund
(ERISA), Ltd., Redmile Capital Offshore Fund, Ltd., Redmile Strategic Master
Fund, LP and MM LS Opportunities Master Fund, L.P. (collectively, the “Buyers”), pursuant to which
the Issuer had the right to sell to the Buyers, in private placements, from
time to time up to $250,000,000 in shares of the Issuer’s non-voting Class A
Preferred Stock (“Preferred Stock”) over a three-year period, subject to
certain limitations and conditions set forth in the Purchase Agreement. The
Preferred Stock is initially convertible into shares of Common Stock on a one-for-ten
basis. Redmile Group,
LLC is the investment manager/adviser to each of the Buyers and, in such
capacity, exercises sole voting and investment power over all of the shares
held by such vehicles and accounts and may be deemed to be the beneficial owner
of these shares. Jeremy C. Green serves as the managing member of Redmile
Group, LLC and also may be deemed to be the beneficial owner of these shares.
On January 12, 2018,
the Buyers
purchased an aggregate of 725,268 shares of
Class A-1 Preferred Stock pursuant to the Purchase Agreement at $137.88 per
share (the “Initial Purchase Price”). In addition, pursuant to the
Purchase Agreement, in the event a deemed liquidation occurs within 24 months
of the date of the Purchase Agreement, the Issuer agreed to issue the Buyers
(or their designees or assignees) a warrant to purchase an aggregate of 75,000
shares of Preferred Stock at a purchase price per share equal to the Initial Purchase
Price (the “Warrant”). The Purchase Agreement terminated on February 1,
2018 upon the closing of the Issuer’s underwritten public offering of
$250,000,000 aggregate principal amount of 2.50% convertible senior notes due
2025.
In connection with
the issuance and sale of Class A-1 Preferred Stock, on January 12, 2018, the
Issuer and the Buyers also entered into a registration rights agreement (the “Registration
Rights Agreement”). Pursuant to the Registration Rights Agreement, the
Issuer agreed to prepare and file under the Securities Act of 1933, as amended
(the “Securities Act”), a prospectus supplement under its current
registration statement on Form S-3 (SEC File No. 333-216199), and file, if
needed, one or more additional registration statements, as permissible and
necessary, for the resale of the shares of Common Stock issued or issuable upon
conversion of Preferred Stock issued or issuable pursuant to the Purchase
Agreement and the Warrant.
The Certificate of Designation,
filed with the office of the Secretary of State of the State of Delaware on
January 12, 2018, sets forth the rights, preferences, privileges, and
restrictions applicable to the Class A-1 Preferred Stock. Certain of the
material rights, preferences, privileges, and restrictions applicable to the
Class A-1 Preferred Stock are described below.
Conversion. Each share of the
Class A-1 Preferred Stock will initially be convertible into ten shares of Common
Stock. The conversion rate of the Class A-1 Preferred Stock is subject to
proportionate adjustments for stock splits, reverse stock splits and similar
events, but is not subject to price-based anti-dilution adjustments.
Dividends. Subject to certain
exceptions, holders of Class A-1 Preferred Stock are entitled to receive
dividends at a rate of 5% per annum of the Class A-1 Original Issue Price (as
defined below) from January 12, 2018 (the “Preferred Dividend”). The “Class
A-1 Original Issue Price” equals the Initial Purchase Price (subject to
adjustment in the event of stock splits, combinations or similar events).
Preferred Dividends accrue and accumulate semi-annually commencing on January
12, 2018 and are payable semi-annually in arrears on June 30 and December 31 of
each year commencing on June 30, 2018. The Issuer may elect to pay the
Preferred Dividend in cash or by issuance of additional fully paid and
nonassessable shares of Class A-1 Preferred Stock (the “PIK Shares”) in
an amount equal to (i) the aggregate dollar amount of the Preferred Dividend
payable with respect to the Class A-1 Preferred Stock, divided by (ii) the
Class A-1 Original Issue Price. In addition, holders of Class A-1 Preferred
Stock are entitled to receive dividends on such shares equal (on an
as-if-converted-to-common stock basis) to, and in the same form as, dividends
actually paid on shares of Common Stock.
Voting Rights. Except as required
by applicable law, the Class A-1 Preferred Stock shall have no voting rights.
However, as long as any shares of Class A-1 Preferred Stock are outstanding, the
Issuer shall not, without the affirmative vote of the holders of a majority of
the then outstanding shares of the Class A-1 Preferred Stock, (i) alter or
change adversely the powers, preferences or rights given to the Class A-1
Preferred Stock or alter or amend the Certificate of Designation, amend or
repeal any provision of, or add any provision to, the Amended and Restated
Certificate of Incorporation (the “Certificate of Incorporation”)
(except as provided in (ii) below) or bylaws of the Issuer, or file any
articles of amendment, certificate of designations, preferences, limitations
and relative rights of any series of preferred stock, if such action would
adversely alter or change the preferences, rights, privileges or powers of, or
restrictions provided for the benefit of the Class A-1 Preferred Stock in a
manner materially different than the effect on Common Stock, regardless of
whether any of the foregoing actions shall be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise, (ii)
issue further shares of Class A-1 Preferred Stock (other than PIK Shares) or
increase (other than as needed to issue PIK shares) or decrease (other than by
conversion) the number of authorized shares of Class A-1 Preferred Stock, or
(iii) enter into any agreement with respect to any of the foregoing.
Liquidation Rights. Upon any
liquidation, dissolution or winding-up of the Issuer, whether voluntary or
involuntary, or Deemed Liquidation (as defined below) the holders of Class A-1
Preferred Stock are entitled to receive out of the assets of the Issuer or
proceeds thereof, an amount equal to the greater of (1) the Class A-1 Original
Issue Price, plus all accrued but unpaid dividends thereon (the “Class A-1
Preference Amount”) or (2) the amount to which such holders would be
entitled to receive if such shares of Class A-1 Preferred Stock had been
converted to Common Stock immediately prior to such liquidation or Deemed
Liquidation. After the payment of the full liquidation preference of the Class
A-1 Preferred Stock, the remaining assets of the Issuer available for
distribution to its stockholders shall be distributed ratably to the holders of
the shares of Common Stock and Class A-1 Preferred Stock.
Beneficial Ownership
Limitation. The Issuer may not effect any conversion of the Class A-1 Preferred
Stock, and a holder does not have the right to convert any portion of the Class
A-1 Preferred Stock held by the holder, to the extent that, after giving effect
to the conversion set forth in a notice of conversion, such holder, together
with such holder’s affiliates, and any persons acting as a group together with
such holder or affiliates, would beneficially own in excess of the Beneficial
Ownership Limitation. The “Beneficial Ownership Limitation” is 9.99% of
the shares of Common Stock then issued and outstanding, which percentage may be
changed at a holder’s election upon 61 days’ notice to the Issuer.
Fundamental
Transaction. If, at any time while the Class A-1 Preferred Stock is outstanding, (i)
the Issuer, directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Issuer with or into another person, (ii) the
Issuer, directly or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition, of all or substantially all of its
assets in one or a series of related transactions, (iii) any direct or
indirect, purchase offer, tender offer or exchange offer (whether by the Issuer
or another person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other securities, cash
or property and has been accepted by the holders of 35% or more of the outstanding
Common Stock, (iv) the Issuer, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization
of Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property, or (v) the Issuer, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another person whereby such other
person acquires more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other person or other persons
making or party to, or associated or affiliated with the other persons making
or party to, such stock or share purchase agreement or other business
combination) (each a “Fundamental Transaction”), then as of the
effective date and time of the Fundamental Transaction, each outstanding share
of Class A-1 Preferred Stock shall be canceled without any further action on
the part of the Issuer or the holder, and in consideration for such
cancellation, each holder shall automatically receive, for each share of Common
Stock that would have been issuable had such cancelled shares of Class A-1
Preferred Stock been converted immediately prior to the occurrence of such
Fundamental Transaction, the same kind and amount of securities, cash and other
property receivable upon the effectiveness of such Fundamental Transaction as
it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of one share of Common Stock; provided, however that in the event
that the Fundamental Transaction is a Deemed Liquidation, each holder shall be
entitled to receive with respect to each outstanding share of Class A-1
Preferred Stock the greater of (1) the Class A-1 Preference Amount or (2) the
amount of cash, securities or other property to which such holder would be
entitled to receive in such Deemed Liquidation with respect to such shares if
such shares had been converted to Common Stock immediately prior to such Deemed
Liquidation. A “Deemed Liquidation” occurs if (A) the Issuer merges into
or consolidates with any other entity, or any entity merges into or
consolidates with the Issuer and, after giving effect to such transaction, the
stockholders of the Issuer immediately prior to such transaction own less than
50% of the aggregate voting power of the Issuer or the successor entity of such
transaction or (B) the Issuer sells, leases, licenses or transfers all or
substantially all of its assets to another person or entity and the
stockholders of the Issuer immediately prior to such transaction own less than
50% of the aggregate voting power of the acquiring entity immediately after the
transaction.
The foregoing summaries
of the Purchase Agreement, the Registration Rights Agreement and the
Certificate of Designation are not intended to be complete and are qualified in
their entirety by reference to the full texts of such documents, which are
filed as Exhibit 99.2, 99.3 and 99.4 to this Schedule 13D, respectively, and are
incorporated herein by reference.
Convertible Senior Notes
On February 1, 2018,
private investment vehicles and separately managed
accounts for which Redmile Group, LLC is the investment manager/adviser purchased
$25 million aggregate principal amount
of the Issuer’s 2.50% convertible senior notes due 2025 (the “2025 Notes”).
The Issuer issued the 2025 Notes under an indenture,
dated as of February 1, 2018 (the “Base Indenture”), between the Issuer
and U.S. Bank National Association, as trustee (the “Trustee”), as
supplemented by the First Supplemental Indenture, dated as of February 1, 2018
(the “Supplemental Indenture” and, together with the Base Indenture, the
“Indenture”), between the Issuer and the Trustee.
The 2025 Notes are senior unsecured obligations of the
Issuer and bear interest at a rate of 2.50% per year, payable semiannually in
arrears on February 1 and August 1 of each year, beginning on August 1, 2018.
The 2025 Notes will mature on February 1, 2025, unless earlier repurchased,
redeemed or converted. The 2025 Notes will be convertible into cash, shares of Common
Stock or a combination of cash and shares, at the Issuer’s election. The
conversion rate will initially be 49.3827 shares of Common Stock per $1,000
principal amount of 2025 Notes (equivalent to an initial conversion price of
approximately $20.25 per share of Common Stock). The conversion rate will be
subject to adjustment in some events but will not be adjusted for any accrued
and unpaid interest. In addition, following certain corporate events that occur
prior to the maturity date, the Issuer will increase the conversion rate for a
holder who elects to convert its 2025 Notes in connection with such a corporate
event in certain circumstances. Prior to the close of business on the business
day immediately preceding November 1, 2024, the 2025 Notes will be convertible
at the option of holders only upon the satisfaction of certain conditions.
Thereafter, holders of the 2025 Notes may convert their 2025 Notes at their
option at any time prior to the close of business on the second scheduled
trading day immediately preceding maturity on November 1, 2024.
The Issuer may redeem for cash all or any portion of
the 2025 Notes, at its option, on or after February 1, 2022 at a redemption
price equal to 100% of the principal amount of the 2025 Notes to be redeemed,
plus accrued and unpaid interest to, but excluding, the redemption date if the
last reported sale price of the Common Stock for at least 20 trading days
(whether or not consecutive) during the period of 30 consecutive trading days
ending on the trading day immediately prior to the date of the redemption
notice exceeds 130% of the applicable conversion price for the 2025 Notes on
each applicable trading day as determined by the Issuer. If the Issuer
undergoes a “fundamental change,” holders of the 2025 Notes may require the Issuer
to repurchase for cash all or any portion of their 2025 Notes at a fundamental
change repurchase price equal to 100% of the principal amount of the 2025 Notes
to be repurchased, plus accrued and unpaid interest to, but excluding, the
fundamental change repurchase date.
The Indenture contains customary events of default
including: (1) the Issuer’s default in any payment of interest on any of the
2025 Notes when due and payable and the default continues for a period of 30
days; (2) the Issuer’s default in the payment of principal of any of the 2025
Notes when due and payable at its stated maturity, upon any required
repurchase, upon optional redemption, upon declaration of acceleration or
otherwise; (3) the Issuer’s failure to comply with its obligation to convert
the 2025 Notes in accordance with the Indenture upon exercise of a holder’s
conversion right and such failure continues for five business days; (4) the Issuer’s
failure to give a fundamental change notice or notice of a specified corporate
transaction, in each case when due; (5) the Issuer’s failure to comply with its
obligations under the Indenture with respect to consolidation, merger or sale
of assets of the Issuer; (6) the Issuer’s failure, for a period of 60 days
after written notice from the Trustee or the holders of at least 25% in
principal amount of the 2025 Notes then outstanding, to comply with any of the Issuer’s
other agreements contained in the 2025 Notes or Indenture; (7) a default by the
Issuer or any of its subsidiaries with respect to any mortgage, agreement or
other instrument under which there may be outstanding, or by which there may be
secured or evidenced, any indebtedness for money borrowed in excess of $20.0
million in the aggregate of the Issuer and/or any such subsidiary (i) resulting
in such indebtedness becoming or being declared due and payable prior to its
stated maturity date or (ii) constituting a failure to pay the principal or
interest of any such debt when due and payable (after the expiration of all applicable
grace periods) at its stated maturity, upon required repurchase, upon
declaration of acceleration or otherwise, and such acceleration shall not have
been rescinded or annulled or such failure to pay or default shall not have
been cured or waived, or such indebtedness is not paid or discharged, as the
case may be, within 60 days after written notice to the Issuer by the Trustee
or to the Issuer and the Trustee by holders of at least 25% in aggregate
principal amount of 2025 Notes then outstanding; and (8) certain events of
bankruptcy, insolvency or reorganization with respect to the Issuer or any of
its significant subsidiaries.
If certain bankruptcy and insolvency-related events of
defaults involving the Issuer occur, the principal of, and accrued and unpaid
interest on, all of the then outstanding 2025 Notes shall automatically become
due and payable. If any other event of default occurs and is continuing, the
Trustee by notice to the Issuer, or the holders of at least 25% in principal
amount of the outstanding 2025 Notes, by notice to the Issuer and the Trustee,
may declare the principal of, and accrued and unpaid interest on, all of the
then outstanding 2025 Notes to be due and payable. Notwithstanding the
foregoing, the Indenture provides that, to the extent the Issuer elects, the
sole remedy for an event of default relating to certain failures by the Issuer
to comply with Section 314(a)(1) of the Trust Indenture Act or comply with
certain reporting covenants in the Indenture will, for the first 365 days after
such event of default, consist exclusively of the right to receive additional
interest on the 2025 Notes.
The Indenture provides that the Issuer shall not
consolidate with or merge with or into, or sell, convey, transfer or lease all
or substantially all of its properties and assets to, another person, unless
(i) the resulting, surviving or transferee person (if not the Issuer) is a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia, and such corporation
(if not the Issuer) expressly assumes by supplemental indenture all of the Issuer’s
obligations under the 2025 Notes and the Indenture; and (ii) immediately after
giving effect to such transaction, no default or event of default has occurred
and is continuing under the Indenture.
The foregoing summaries
of the Base Indenture
and the Supplemental Indenture are not
intended to be complete and are qualified in their entirety by reference to the
full texts of such documents, which are filed as Exhibit 99.5, and 99.6 to this
Schedule 13D, respectively, and are incorporated herein by reference.
Except as described above, no contracts,
arrangements, understandings, or relationships (legal or otherwise) exist
between any Reporting Person and any person
with respect to any securities of the Issuer, including, but not limited to,
transfer or voting of any of the securities, finder’s fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
divisions of profits or loss, or the giving or withholding of proxies. Except
as described above, none of the Reporting
Persons is a party to any arrangement whereby securities of the Issuer are
pledged or are otherwise subject to a contingency the occurrence of which would
give another person voting power or investment power over such securities.
