Q2 HOLDINGS, INC. (NYSE:QTWO) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
On June 5, Q2 Holdings, Inc. (the Company, we, us or our) entered into a purchase agreement with Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, Stifel, Nicolaus & Company, Incorporated and BMO Capital Markets Corp. (collectively, the Initial Purchasers), to issue $275 million in aggregate principal amount of 0.75% Convertible Senior Notes due 2026 (the Notes) in a private placement to qualified institutional buyers to Rule 144A under the Securities Act of 1933, as amended. In addition, the Company granted the Initial Purchasers a 13-day option to purchase up to an additional $41.25 million in aggregate principal amount of Notes on the same terms and conditions. The Initial Purchasers exercised their option in full on June 6, 2019, and a total of $316.25 million in aggregate principal amount of Notes were issued on June 10, 2019 to an Indenture (the Indenture), by and between the Company and Wilmington Trust, National Association, as trustee. The Notes will bear interest at 0.75% per annum, payable semiannually on June 1 and December 1 of each year, beginning on December 1, 2019. The Notes will mature on June 1, 2026, unless earlier repurchased or redeemed by the Company or converted to their terms.
The Notes are our general unsecured obligations and will rank senior in right of payment to all of our indebtedness that is expressly subordinated in right of payment to the Notes, will rank equally in right of payment with all of our existing and future liabilities that are not so subordinated, will be effectively junior to any of the Companys secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of the Companys current or future subsidiaries.
Holders may convert their Notes at their option on any day prior to the close of business on the business day immediately preceding March 1, 2026 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2019 (and only during such calendar quarter), if the last reported sale price of our common stock (Common Stock) for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) at any time 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 Common Stock and the conversion rate for the Notes on each such trading day; (3) if the Company calls the Notes for redemption; or (4) upon the occurrence of specified corporate events. The Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, March 1, 2026 until the close of business on the scheduled trading day immediately preceding the applicable maturity date.
Upon conversion we will pay cash or deliver, as the case may be, cash, shares of Common Stock or a combination of cash and shares of Common Stock, at our election. If we satisfy our conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of Common Stock, the amount of cash and shares of Common Stock, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 40 trading day observation period. The initial conversion rate for the Notes will be 11.2851 shares of Common Stock per $1,000 in principal amount of Notes, equivalent to a conversion price of approximately $88.61 per share of Common Stock. The conversion rate will be subject to adjustment in certain circumstances.
Subject to certain exceptions, holders may require the Company to repurchase, for cash, all or part of their Notes upon a Fundamental Change (as defined in the Indenture) at a price equal to 50% of the principal amount of the Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the Fundamental Change Repurchase Date (as defined in the Indenture). In addition, upon a Make-Whole Fundamental Change (as defined in the Indenture) prior to the maturity date of the Notes, we will, in some cases, increase the conversion rate for a holder that elects to convert its Notes in connection with such Make-Whole Fundamental Change. On or after June 5, 2023, the Company may redeem the Notes at a redemption price of 50% of their principal amount plus any accrued and unpaid interest if the last reported sale price of Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 50% of the principal amount of Notes to be redeemed. Upon any such redemption, holders of the Notes would, subject to specified conditions, be permitted to convert their Notes at an increased conversion rate.
The Indenture contains certain events of default after which the Notes may be due and payable immediately. Such events of default include, without limitation, the following: failure to pay interest on any Note when due and payable and such failure continues for 30 days; failure to pay any principal of any Note when due and payable at maturity, upon required repurchase, upon acceleration or otherwise; failure to comply with our obligation to convert the Notes, in accordance with the Indenture, upon exercise of a holders conversion right and such failure continues for 3 business days; failure to comply with our obligations under the Indenture with respect to our consolidation with or merger with or into or sale, transfer or lease of all or substantially all of our properties and assets to another person; failure by us to provide timely notice of a Fundamental Change, Make-Whole Fundamental Change or certain specified corporate transactions; our failure in performance with any other agreements under the Indenture (other than those described above in this paragraph) and such failure or breach continues for 60 days after written notice has been given to us by the holders of at least 25% in principal amount of the Notes then outstanding; default by us or one of our significant subsidiaries with respect to any