Item 1.01 Entry into a Material Definitive Agreement.
Indenture and 5.75% Convertible Senior Subordinated Exchange Notes due 2021
On October 30, 2017, MannKind Corporation (the Company) completed its previously announced exchange of $27,690,000 aggregate principal amount
of the Companys outstanding 5.75% Convertible Senior Subordinated Exchange Notes due 2018 for (i) $23,690,000 aggregate principal amount of new 5.75% Convertible Senior Subordinated Exchange Notes due 2021 (the 2021 notes) and
(ii) an aggregate of 973,236 shares of its common stock, as described in the Companys Current Report on Form
8-K
filed on October 23, 2017.
Also on October 30, 2017, the Company entered into an indenture governing the 2021 notes (the Indenture) with U.S. Bank National Association,
as trustee (the Trustee). The 2021 notes are the Companys general, unsecured, senior obligations, except that the 2021 notes are subordinated in right of payment to the outstanding notes issued pursuant to the Companys
Facility Agreement, dated July 1, 2013, as amended (the Facility Agreement), with Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (Deerfield). The 2021 notes rank equally in
right of payment with the Companys other unsecured senior debt. The 2021 notes bear interest at the rate of 5.75% per year on the principal amount, payable semiannually in arrears in cash or, at the option of the Company if certain conditions
are met, in shares of the Companys common stock (the Interest Shares), on February 15 and August 15 of each year, beginning February 15, 2018, with interest accruing from August 15, 2017. The aggregate number of
Interest Shares that the Company may issue may not exceed 13,648,300, unless the Company receives stockholder approval to issue Interest Shares in excess of such number in accordance with the listing standards of The NASDAQ Global Market. The 2021
notes will mature on October 23, 2021.
The 2021 notes are convertible, at the option of the holder, at any time on or prior to the close of business
on the business day immediately preceding the stated maturity date, into shares of the Companys common stock at a conversion rate of 194.1748 shares per $1,000 principal amount of 2021 notes, which is equal to a conversion price of
approximately $5.15 per share. The conversion rate is subject to adjustment under certain circumstances as described in the Indenture.
If the Company
undergoes certain fundamental changes, except in certain circumstances, each holder of 2021 notes will have the option to require the Company to repurchase all or any portion of that holders 2021 notes. The fundamental change repurchase price
will be 100% of the principal amount of the 2021 notes to be repurchased plus accrued and unpaid interest, if any.
The Company may elect at its option to
cause all or any portion of the 2021 notes to be mandatorily converted in whole or in part at any time prior to the close of business on the business day immediately preceding the maturity date, if the last reported sale price of its common stock
equals or exceeds 120% of the conversion price then in effect for at least 10 trading days in any 20 trading day period, ending within five business days prior to the date of the mandatory conversion notice.
The Indenture includes customary events of default, including:
(1)
|
the Company fails to pay when due the principal of or premium, if any, on any of the 2021 notes at maturity, upon repurchase, acceleration or otherwise;
|
(2)
|
the Company fails to pay an installment of interest on any of the 2021 notes for 30 days after the date when due;
|
(3)
|
the Company fails to deliver when due all shares of the Companys common stock, together with cash instead of fractional shares, and/or other property, if applicable, deliverable upon conversion of the 2021 notes,
which failure continues for 10 days;
|
(4)
|
the Company fails to perform or observe any other term, covenant or agreement contained in the 2021 notes or the Indenture for a period of 60 days after written notice of such failure, requiring the Company to remedy
the same, shall have been given to the Company;
|
(5)
|
(i) the Company fails to make any payment by the end of the applicable grace period, if any, after the maturity of any indebtedness for borrowed money in an amount in excess of $25,000,000 or (ii) there is an
acceleration of any indebtedness for borrowed money in an amount in excess of $25,000,000 because of a default with respect to such indebtedness without such indebtedness having been discharged or such acceleration having been cured, waived,
rescinded or annulled, in the case of either (i) or (ii) above, for a period of 30 days after written notice to the Company;
|
(6)
|
the Company fails to provide a fundamental change company notice; and
|
(7)
|
certain events of bankruptcy, insolvency or reorganization of the Company.
|
If certain bankruptcy and
insolvency-related events of default occur, the principal of, and accrued and unpaid interest on, all of the then outstanding 2021 notes shall automatically become due and payable. If an event of default other than certain bankruptcy and
insolvency-related events of defaults occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding 2021 notes, by written notice to the Trustee, may declare the 2021 notes due and payable
at their principal amount plus any accrued and unpaid interest, and thereupon the Trustee may, at its discretion, proceed to protect and enforce the rights of the holders by the appropriate judicial proceedings. Notwithstanding the foregoing, the
Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 180 days after such event
of default, consist exclusively of the right to receive additional interest on the Notes.
The descriptions of the Indenture and the 2021 notes contained
herein do not purport to be complete and are qualified in their entirety by reference to the Indenture and form of 2021 note, copies of which are attached to this report as Exhibits 4.1 and 4.2, respectively.