ServiceNow, Inc. (NYSE:NOW) Files An 8-K Entry into a Material Definitive Agreement
Item1.01. Entry into a Material Definitive Agreement.
The information set forth in Item 8.01 of this report under the
headings Indenture, Convertible Note Hedge Transactions and
Warrant Transactions is incorporated by reference into this Item
1.01.
ServiceNow, Inc. (the Company) estimates that the net proceeds
from the offering of the Notes (as defined below) will be
approximately $740.1million ($851.2million if the initial
purchasers exercise their over-allotment option in full), after
deducting the initial purchasers discount and estimated offering
expenses payable by the Company. The Company expects to use
approximately $575.0million of the net proceeds to repay its
existing 0% convertible senior notes due November1, 2018 through
cash settlement upon conversion, or repayment, at maturity, or
for potential repurchases of such 2018 notes prior to maturity,
$70.9million of the net proceeds to pay the cost of the
convertible note hedge transactions described below (after such
cost was partially offset by the proceeds to the Company of the
warrant transactions described below) and approximately
$55.0million of the net proceeds to repurchase shares of the
Companys common stock (the Common Stock) sold by certain
purchasers of the notes in privately negotiated transactions
effected through Morgan Stanley Co. LLC or one of its affiliates.
The Company intends to use the remaining net proceeds from this
offering for working capital and other general corporate
purposes.
Item2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement
of a Registrant.
The terms and
conditions of the Notes and Indenture described in Item 8.01 of
this report are incorporated herein by reference into this Item
2.03.
Item3.02.
Unregistered Sales of Equity Securities.
The information
set forth in Item 8.01 of this report under the headings Purchase
Agreement and Warrant Transactions is incorporated by reference
into this Item 3.02.
Item8.01.
Other Events.
Purchase
Agreement
On May23, 2017,
the Company entered into a Purchase Agreement (the Purchase
Agreement) with Morgan Stanley Co. LLC, J.P. Morgan Securities
LLC and RBC Capital Markets, LLC, as representatives (the
Representatives) of the purchasers named therein (collectively,
the Initial Purchasers), relating to the Companys sale of
$750million aggregate principal amount of its 0% Convertible
Senior Notes due 2022 (the Notes) to the Initial Purchasers in a
private placement in reliance on Section 4(a)(2) of the
Securities Act of 1933, as amended (the Securities Act) and for
initial resale by the Initial Purchasers to qualified
institutional buyers to the exemption from registration provided
by Rule 144A under the Securities Act. The Company relied on
these exemptions from registration based in part on
representations made by the Initial Purchasers. The
Representatives have an option under the Purchase Agreement to
purchase up to an additional $112.5million aggregate principal
amount of Notes, solely to cover over-allotments. The Purchase
Agreement includes customary representations, warranties and
covenants by the Company. Under the terms of the Purchase
Agreement, the Company has agreed to indemnify the Initial
Purchasers against certain liabilities under the Securities Act.
The Notes and the shares of the Companys common stock (the Common
Stock) issuable upon conversion of the Notes, if any, have not
been registered under the Securities Act and may not be offered
or sold in the United States absent registration or an applicable
exemption from registration requirements.
Indenture
The Notes were
issued to an Indenture, dated as of May30, 2017 (the Indenture),
between the Company and Wells Fargo Bank, National Association,
as trustee. The Notes are unsecured, unsubordinated obligations
of the Company. The Notes will not bear regular interest, and the
principal amount of the Notes will not accrete. The Notes mature
on June1, 2022 unless repurchased or converted in accordance with
their terms prior to such date. The Company may not redeem the
Notes prior to their maturity.
The Indenture
includes customary terms and covenants, including certain events
of default after which the Notes may be due and payable
immediately. The following events are considered events of
default, which may result in acceleration of the maturity of the
Notes:
| (1) |
default by the Company in any payment of special interest on the Notes when due and payable, and the default continues for a period of 30 days; |
| (2) |
default by the Company in the payment of principal of any Note when due and payable at its stated maturity, upon any required repurchase, upon declaration of acceleration or otherwise; |
| (3) |
failure by the Company to comply with its obligation to convert the Notes in accordance with the Indenture upon exercise of a holders conversion right, and such failure continues for a period of three business days; |
| (4) |
failure by the Company to give a fundamental change notice or a notice of a specified corporate event at the time and in the manner provided in the Indenture; |
| (5) |
failure by the Company to comply with its obligations under the Indenture with respect to consolidation, merger or sale of assets of the Company; |
| (6) |
failure by the Company for a period of 60 days after written notice from the trustee or the holders of at least 25% in principal amount of the Notes then outstanding has been received to comply with any of its agreements under the Notes or the Indenture; |
| (7) |
an event of default by the Company or any of its subsidiaries as defined under 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 $35,000,000 in the aggregate of the Company and/or any such subsidiary, and such default: |
| (i) |
results in such indebtedness becoming or being declared due and payable, or |
| (ii) |
constitutes a failure to pay when due (at express maturity, upon required repurchase, upon acceleration as a result of an event of default or otherwise) the principal or interest of any such indebtedness, if such default or acceleration is not cured or waived, or rescinded within 30 days after written notice of such failure to the Company by the trustee or holders of at least 25% in principal amount of the Notes then outstanding; |
| (8) |
a final judgment for payment of $35,000,000 or more is rendered against the Company or any of its subsidiaries, and such judgment is not discharged or stayed within 60 days after (i)the date on which the right to appeal thereof has expired if no such appeal has commenced or (ii)the date on which all rights to appeal have been extinguished; or |
| (9) |
certain events of bankruptcy, insolvency or reorganization of the Company or any of its significant subsidiaries occurs. |
The Notes are
convertible into cash, shares of Common Stock or a combination
thereof, at the Companys election, at an initial conversion rate
of 7.4210 shares of Common Stock per $1,000 principal amount of
the Notes, which is equal to an initial conversion price of
approximately $134.75 per share of Common Stock subject to
adjustment. Prior to the close of business on the business day
immediately preceding February1, 2022, such conversion is subject
to the satisfaction of certain conditions set forth below.
Holders of the
Notes who convert their Notes in connection with a make-whole
fundamental change (as defined in the Indenture) are, under
certain circumstances, entitled to an increase in the conversion
rate. Additionally, in the event of a fundamental change (as
defined in the Indenture), holders of the Notes may require the
Company to repurchase all or a portion of their Notes at a price
equal to 50% of the principal amount of Notes, plus any accrued
and unpaid special interest to, but excluding, the repurchase
date.
2
Holders of the
Notes may convert all or a portion of their Notes prior to the
close of business on the business day immediately preceding
February1, 2022, in multiples of $1,000 principal amount, only
under the following circumstances:
|
during any calendar quarter commencing after the calendar quarter ending on September30, 2017 (and only during such calendar quarter), if the last reported sale price of Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the Notes on each applicable trading day; |
|
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each day of that five day consecutive trading day period was less than 98% of the product of the last reported sale price of Common Stock and the conversion rate of the Notes on such trading day; or |
| upon the occurrence of specified corporate events. |
A copy of the
Indenture is attached hereto as Exhibit 4.1 and is incorporated
herein by reference. The description of the Notes contained in
this Form 8-K is qualified in its entirety by reference to the
Indenture.
Convertible
Note Hedge Transactions
On May23, 2017,
concurrently with the pricing of the Notes, the Company entered
into convertible note hedge transactions with respect to its
Common Stock (the Purchased Options) with each of Morgan Stanley
Co. International plc, JPMorgan Chase Bank, National Association,
London Branch, Goldman Sachs Co. LLC and Citibank, N.A
(collectively, the Counterparties). The Purchased Options cover,
subject to anti-dilution adjustments substantially identical to
those in the Notes, approximately 5.57million shares of Common
Stock in the aggregate and are exercisable upon conversion of the
Notes. The Purchased Options have an initial strike price that
corresponds to the initial conversion price of the Notes, subject
to anti-dilution adjustments substantially similar to those in
the Notes. The Purchased Options will expire upon the maturity of
the Notes, if not earlier exercised. The form of confirmation for
the Purchased Options is attached hereto as Exhibits 99.1 and is
incorporated herein by reference. The Purchased Options are
intended to reduce potential dilution to the Common Stock upon
any conversion of the Notes and/or offset any cash payments the
Company is required to make in excess of the principal amount of
converted Notes, as the case may be, in the event that the market
value per share of the Common Stock, as measured under the
Purchased Options, at the time of exercise is greater than the
strike price of the Purchased Options, which initially
corresponds to the conversion price of the Notes. The Purchased
Options are separate transactions, entered into by the Company
with the Counterparties, and are not part of the terms of the
Notes. Holders of the Notes will not have any rights with respect
to the Purchased Options.
The Company used
approximately $70.9million of the net proceeds from the offering
of the Notes to pay the cost of the Purchased Options (after such
cost was partially offset by the proceeds to the Company of the
Warrants (as defined below)).
Warrant
Transactions
Separately from
the Purchased Options, on May23, 2017, concurrently with the
pricing of the Notes, the Company entered into warrant
transactions to sell to the Counterparties warrants (the
Warrants) to acquire, subject to anti-dilution adjustments, up to
approximately 5.57million shares of Common Stock in the aggregate
at a strike price of $203.40 per share. The Company offered and
sold the Warrants in reliance on the exemption from registration
provided by Section 4(a)(2) of the Securities Act. Neither the
Warrants nor the underlying shares of Common Stock issuable upon
conversion of the Warrants have been registered under the
Securities Act and neither may be offered or sold in the United
States absent registration or an applicable exemption from
registration requirements. The form of confirmation for the
Warrants is attached hereto as Exhibit 99.2 and is incorporated
herein by reference. If the market value per share of Common
Stock, as measured under the Warrants, at the time of exercise
exceeds the strike price of the Warrants, the Warrants will have
a dilutive effect on the Companys earnings per share. The
Warrants are separate transactions, entered into by the Company
with the Counterparties, and are not part of the terms of the
Notes. Holders of the Notes will not have any rights with respect
to the Warrants. The Warrants will expire in 2022.
3
Item9.01.
Financial Statements and Exhibits.
| (a) | Not applicable. |
| (b) | Not applicable. |
| (c) | Not applicable. |
| (d) | Exhibits. |
|
Exhibit No. |
Description |
|
| 4.1 |
Indenture dated May30, 2017 between ServiceNow, Inc. and Wells Fargo Bank, National Association. |
|
| 99.1 | Form of Base Convertible Note Hedge Transaction Confirmation. | |
| 99.2 | Form of Base Warrant Transaction Confirmation. |
4
About ServiceNow, Inc. (NYSE:NOW)
ServiceNow, Inc. is a provider of cloud-based solutions that define, structure, manage and automate services across the global enterprise. The Company provides cloud-based service management and business management solutions that address the needs of various departments within an enterprise, including information technology (IT), human resources (HR), facilities, field service, marketing, customer service, security, legal and finance. Its service management solutions are built on the Company’s platform that also allows customers to create, by themselves or with its partners, their own service-oriented applications for use in departments across the enterprise. The Company markets its services to enterprises in a range of industries, including financial services, consumer products, IT services, healthcare and technology. It sells solutions primarily through direct sales and through indirect channel sales. The Company also provides a portfolio of professional services to customers. ServiceNow, Inc. (NYSE:NOW) Recent Trading Information
ServiceNow, Inc. (NYSE:NOW) closed its last trading session down -0.67 at 105.36 with 1,610,653 shares trading hands.
