RISK FACTORS
Investing in our notes involves a high degree of risk. You should consider carefully the risks described below and discussed under the
section captioned Risk Factors contained in our 2019 Annual Report, as updated by our subsequent filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act, each of which is incorporated by reference in this
prospectus supplement and the accompanying prospectus in their entirety, together with other information in this prospectus supplement and the accompanying prospectus, and the information and documents incorporated by reference in this prospectus
supplement and the accompanying prospectus, and any free writing prospectus that we have authorized for use in connection with this offering before you make a decision to invest in our notes. If any of the following events actually occur, our
business, operating results, prospects or financial condition could be materially and adversely affected. This could cause the trading price of our notes to decline and you may lose all or part of your investment. The risks described below are not
the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business and operations.
Additional Risks Relating to our Business
Our business, financial condition, results of operations and growth could be harmed by the effects of the
COVID-19 pandemic.
We are subject to risks related to the public health crises such as the
global pandemic associated with COVID-19. In December 2019, a novel strain of coronavirus, SARS-CoV-2, was reported to have
surfaced in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease COVID-19, has spread to most countries, and all 50
states within the United States. The COVID-19 outbreak has negatively impacted, and is expected to continue to negatively impact our operations and revenues and overall financial condition by significantly
decreasing the number of Senza systems procedures performed. The number of Senza systems procedures performed, similar to other elective surgical procedures, has significantly decreased as health care organizations globally have prioritized the
treatment of patients with COVID-19. For example, in the United States, governmental authorities have recommended, and in certain cases required, that elective, specialty and other procedures and appointments,
be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and
personnel capacity toward the treatment of COVID-19. These measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and will significantly reduce our revenue while the
pandemic continues. Further, once the pandemic subsides, we anticipate there will be substantial backlog of patients seeking appointments with physicians and surgeries to be performed at hospitals and ambulatory surgery centers relating to a variety
of medical conditions, and as a result, patients seeking to Senza system trials or implant procedures performed will have to navigate limited provider capacity. We believe this limited provider capacity could have an adverse effect on our sales
following the end of the pandemic.
Numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. Starting in mid-March 2020, the governor of California, where our headquarters are located, issued
shelter-in-place or stay at home orders restricting non-essential activities, travel and business
operations for an indefinite period of time, subject to certain exceptions for necessary activities. Such orders or restrictions, have resulted in our headquarters closing, work stoppages, slowdowns and delays, travel restrictions and cancellation
of events, among other effects, thereby negatively impacting our operations. Other disruptions or potential disruptions include restrictions on our personnel and personnel of partners to travel and access customers for training and case support;
delays in approvals by regulatory bodies; delays in product development efforts; and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers capacity to manufacture, sell and
support the use of our Senza systems.
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While the potential economic impact brought by and the duration of
COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access
capital, which could in the future negatively affect our liquidity, including our ability to repay our senior convertible notes which are due in June 2021. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our notes. The COVID-19 pandemic has also resulted in a significant increase in unemployment in the United
States which may continue even after the pandemic. The occurrence of any such events may lead to reduced disposable income and access to health insurance which could adversely affect the number of Senza systems sold after the pandemic has ended.
Risks Related to the Notes
The notes are effectively subordinated to our secured debt and any liabilities of our subsidiaries.
The notes will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes;
equal in right of payment to any of our liabilities that are not so subordinated (including our outstanding 2021 Notes); effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such
indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure debt ranking
senior in right of payment to the notes will be available to pay obligations on the notes only after the secured debt has been repaid in full from these assets. There may not be sufficient assets remaining to pay amounts due on any or all of the
notes then outstanding. The indenture governing the notes will not prohibit us from incurring additional senior debt or secured debt, nor will it prohibit any of our subsidiaries from incurring additional liabilities.
The notes are our obligations only and our operations are conducted through, and a substantial portion of our consolidated assets are
held by, our subsidiaries.
The notes are our obligations exclusively and are not guaranteed by any of our operating subsidiaries.
A substantial portion of our consolidated assets is held by our subsidiaries. Accordingly, our ability to service our debt, including the notes, depends on the results of operations of our subsidiaries and upon the ability of such subsidiaries to
provide us with cash, whether in the form of dividends, loans or otherwise, to pay amounts due on our obligations, including the notes. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to
make payments on the notes or to make any funds available for that purpose. In addition, dividends, loans or other distributions to us from such subsidiaries may be subject to contractual and other restrictions and are subject to other business
considerations.
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our
business to pay our substantial debt.
Our ability to make scheduled payments of the principal of, to pay interest on or to
refinance our indebtedness, including the notes and the 2021 Notes, or to make cash payments in connection with any conversions of the notes or the 2021 Notes, depends on our future performance, which is subject to economic, financial, competitive
and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be
required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital
markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
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Regulatory actions and other events may adversely affect the trading price and liquidity of
the notes.
We expect that many investors in, and potential purchasers of, the notes will employ, or seek to employ, a convertible
arbitrage strategy with respect to the notes. Investors would typically implement such a strategy by selling short the common stock underlying the notes and dynamically adjusting their short position while continuing to hold the notes. Investors may
also implement this type of strategy by entering into swaps on our common stock in lieu of or in addition to short selling the common stock.
The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions, and may in the future
adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our common stock). Such rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the
Financial Industry Regulatory Authority, Inc., or FINRA, and the national securities exchanges of a Limit Up-Limit Down program, the imposition of market-wide circuit breakers that halt trading of
securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that
restricts the ability of investors in, or potential purchasers of, the notes to effect short sales of our common stock, borrow our common stock or enter into swaps on our common stock could adversely affect the trading price and the liquidity of the
notes.
Volatility in the market price and trading volume of our common stock could adversely impact the trading price of the notes.
The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the
operating performance of companies. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section, elsewhere in this prospectus supplement or the documents we have
incorporated by reference in this prospectus supplement or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own
performance, as well as industry conditions and general financial, economic and political instability. A decrease in the market price of our common stock would likely adversely impact the trading price of the notes. The market price of our common
stock could also be affected by possible sales of our common stock by investors who view the notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that we expect to develop involving our common
stock. This trading activity could, in turn, affect the trading price of the notes.
We may incur substantially more debt or take
other actions which would intensify the risks discussed above.
We and our subsidiaries may incur substantial additional debt in
the future, subject to the restrictions contained in any debt instruments we may have, some of which debt may be secured debt. We are not restricted under the terms of the indenture governing our 2021 Notes, and will not be restricted under the
terms of the indenture governing the notes offered hereby, from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the
notes that could have the effect of diminishing our ability to make payments on the notes when due.
We may not have the ability to
raise the funds necessary to repurchase the notes or the outstanding 2021 Notes for cash upon a fundamental change or to settle for cash conversions of the notes or the outstanding 2021 Notes, and our future debt may contain limitations on our
ability to pay cash upon conversion or repurchase of the notes or the outstanding 2021 Notes.
Holders of the notes will have the
right to require us to repurchase all or a portion of their notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, as
described under Description of NotesFundamental
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Change Permits Holders to Require Us to Repurchase Notes. In addition, upon conversion of the notes, unless we elect to deliver solely shares of our common stock to settle such conversion
(other than paying cash in lieu of delivering any fractional share) or we are unable to take advantage of the procedures described in Description of NotesExchange in Lieu of Conversion, we will be required to make cash payments in
respect of the notes being converted as described under Description of NotesConversion RightsSettlement upon Conversion. Our outstanding 2021 Notes contain similar provisions concerning the holders rights to require us
to repurchase their 2021 Notes and to pay cash to settle conversions of their 2021 Notes. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the notes or 2021 Notes
surrendered therefor or pay cash with respect to the notes or 2021 Notes being converted.
In addition, our ability to repurchase the
notes or 2021 Notes or to pay cash upon conversion of the notes or 2021 Notes may be limited by law, regulatory authority or agreements governing our future indebtedness that exist at the time of repurchase. Our failure to repurchase the notes or
2021 Notes at a time when the repurchase is required by the respective indenture or to pay any cash upon conversion of the notes or 2021 Notes as required by the respective indenture would constitute a default under the indenture for that series of
convertible notes and could also lead to a default under the indenture for the other series of convertible notes. A default under either indenture or the fundamental change itself could lead to a default under any of our future indebtedness. If the
payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or 2021 Notes or to pay cash upon conversion of the notes or
2021 Notes.
The conditional conversion feature of the notes, if triggered, may adversely affect our financial condition and
operating results.
In the event the conditional conversion feature of the notes is triggered, holders of notes will be entitled to
convert the notes at any time during specified periods at their option. See Description of NotesConversion Rights. If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by
delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect
our liquidity. In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term
liability, which would result in a material reduction of our net working capital.
The accounting method for convertible debt
securities that may be settled in cash, such as the notes and the 2021 Notes, could have a material effect on our reported financial results.
Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (ASC 470-20), an entity must separately account for the liability and equity components of the convertible debt instruments (such as the notes and the 2021 Notes) that may be settled entirely or partially in cash
upon conversion in a manner that reflects the issuers economic interest cost. The effect of ASC 470-20 on the accounting for the notes and the 2021 Notes is that the equity component is required to be
included in the additional paid-in capital section of stockholders equity on our consolidated balance sheet, and the value of the equity component would be treated as debt discount for purposes of
accounting for the debt component of the notes and the 2021 Notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the
amortization of the discounted carrying value of the notes and the 2021 Notes to their face amount over the respective terms of the notes and the 2021 Notes. We will report lower net income (or larger net losses) in our financial results because ASC
470-20 will require interest to include both the current periods amortization of the debt discount and the instruments non-convertible interest rate, which
could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the notes.
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In addition, under certain circumstances, convertible debt instruments (such as the notes and the
2021 Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the notes or the 2021 Notes are not included in the
calculation of diluted earnings per share except to the extent that the respective conversion values of the notes and the 2021 Notes exceeds their respective principal amounts. Under the treasury stock method, for diluted earnings per share
purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.
In July 2019, the FASB issued an exposure draft that proposes to change the accounting for the convertible debt instruments described above.
Under the exposure draft, an entity may no longer be required to separately account for the liability and equity components of convertible debt instruments. This could have the impact of reducing non-cash
interest expense, and thereby increasing net income (or decreasing net losses). Additionally, as currently proposed, the treasury stock method for calculating earnings per share will no longer be allowed for convertible debt instruments whose
principal amount may be settled using shares. Rather, the if-converted method may be required, which could decrease our diluted earnings per share. We cannot be sure that the proposed changes in this exposure
draft will be adopted, or will be adopted in their current format. We also cannot be sure whether other changes may be made to the current accounting standards related to the notes, or otherwise, that could have an adverse impact on our financial
statements.
Future sales of our common stock in the public market could lower the market price for our common stock and adversely
impact the trading price of the notes.
In the future, we may sell additional shares of our common stock to raise capital. In
addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options, upon the vesting of restricted stock units, upon conversion of the 2021 Notes, upon the conversion of the notes offered hereby
and upon exercise of the warrants in the warrant transactions we entered into in connection with the offering of the 2021 Notes and the warrant transactions we expect to enter into concurrently with the pricing of the notes. We cannot predict the
size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance and sale of substantial amounts of common stock, or the perception that such issuances and sales may occur, could adversely
affect the trading price of the notes and the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.
As of December 31, 2019, we had outstanding approximately 31.5 million shares of our common stock and options to purchase
approximately 1.6 million shares of our common stock (of which approximately 1.1 million were exercisable as of that date). We also had outstanding approximately 1.3 million shares of our common stock issuable pursuant to outstanding
restricted stock units. The sale or the availability for sale of a large number of shares of our common stock in the public market could cause the market price of our common stock, and the value of your notes, to decline.
Holders of notes will not be entitled to any rights with respect to our common stock, but they will be subject to all changes made with
respect to them to the extent our conversion obligation includes shares of our common stock.
Holders of notes will not be entitled
to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock) prior to the conversion date relating to such notes (if we have elected to
settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share)) or the last trading day of the relevant observation period (if we elect to pay and deliver, as the
case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), but holders of notes will be subject to all changes affecting our common stock. For example, if an amendment is proposed to our certificate of
incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the conversion date related to a holders conversion of
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its notes (if we have elected to settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share)) or the last
trading day of the relevant observation period (if we elect to pay and deliver, as the case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), such holder will not be entitled to vote on the
amendment, although such holder will nevertheless be subject to any changes affecting our common stock.
The conditional conversion
feature of the notes could result in your receiving less than the value of our common stock into which the notes would otherwise be convertible.
Prior to the close of business on the business day immediately preceding October 1, 2024, you may convert your notes only if specified
conditions are met. If the specific conditions for conversion are not met, you will not be able to convert your notes, and you may not be able to receive the value of the cash, common stock or a combination of cash and common stock, as applicable,
into which the notes would otherwise be convertible.
Upon conversion of the notes, you may receive less valuable consideration than
expected because the value of our common stock may decline after you exercise your conversion right but before we settle our conversion obligation.
Under the notes, a converting holder will be exposed to fluctuations in the value of our common stock during the period from the date such
holder surrenders notes for conversion until the date we settle our conversion obligation.
Upon conversion of the notes, we have the
option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we elect to satisfy our conversion obligation in cash or a combination of cash and shares of our common
stock, the amount of consideration that you will receive upon conversion of your notes will be determined by reference to the volume-weighted average price of our common stock for each trading day in a 30 trading day observation period. As described
under Description of NotesConversion RightsSettlement Upon Conversion, this period would be: (i) if the relevant conversion date occurs prior to October 1, 2024, the 30 consecutive trading days beginning on, and
including, the second trading day immediately succeeding such conversion date; and (ii) if the relevant conversion date occurs during the period from, and including, October 1, 2024 to the close of business on the second scheduled trading
day immediately preceding the maturity date, the 30 consecutive trading days beginning on, and including, the 31st scheduled trading day immediately preceding the maturity date. Accordingly, if the price of our common stock decreases during this
period, the amount and/or value of consideration you receive will be adversely affected. In addition, if the market price of our common stock at the end of such period is below the average volume-weighted average price of our common stock during
such period, the value of any shares of our common stock that you will receive in satisfaction of our conversion obligation will be less than the value used to determine the number of shares that you will receive.
If we elect to satisfy our conversion obligation solely in shares of our common stock upon conversion of the notes, we will be required to
deliver the shares of our common stock, together with cash for any fractional share, on the second business day following the relevant conversion date. Accordingly, if the price of our common stock decreases during this period, the value of the
shares that you receive will be adversely affected and would be less than the conversion value of the notes on the conversion date.
The notes are not protected by restrictive covenants.
The indenture governing the notes will not contain any financial or operating covenants or restrictions on the payments of dividends, the
incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries. The indenture will not contain any covenants or other provisions to afford protection to holders of the notes in the event of a fundamental
change or other corporate transaction involving us except to the extent described under Description of NotesFundamental Change Permits Holders to Require Us to
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Repurchase Notes, Description of NotesConversion RightsIncrease in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change and Description of
NotesConsolidation, Merger and Sale of Assets.
The increase in the conversion rate for notes converted in connection
with a make-whole fundamental change may not adequately compensate you for any lost value of your notes as a result of such transaction.
If a make-whole fundamental change occurs prior to the maturity date, under certain circumstances, we will increase the conversion rate by a
number of additional shares of our common stock for notes converted in connection with such make-whole fundamental change. The increase in the conversion rate will be determined based on the date on which the specified corporate transaction becomes
effective and the price paid (or deemed to be paid) per share of our common stock in such transaction, as described below under Description of Notes Conversion RightsIncrease in Conversion Rate upon Conversion upon a Make-Whole
Fundamental Change. The increase in the conversion rate for notes converted in connection with a make-whole fundamental change may not adequately compensate you for any lost value of your notes as a result of such transaction. In addition, if
the price of our common stock in the transaction is greater than $ per share or less than $ per share (in each case, subject to adjustment), no additional shares will be added to the conversion rate. Moreover, in no event will the conversion rate
per $1,000 principal amount of notes as a result of this adjustment exceed shares of common stock, subject to adjustment in the same manner as the conversion rate as set forth under Description of NotesConversion RightsConversion
Rate Adjustments.
Our obligation to increase the conversion rate for notes converted in connection with a make-whole fundamental
change could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.
The conversion rate of the notes may not be adjusted for all dilutive events.
The conversion rate of the notes is subject to adjustment for certain events, including, but not limited to, the issuance of certain stock
dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and certain issuer tender or exchange offers as described under
Description of NotesConversion RightsConversion Rate Adjustments. However, the conversion rate will not be adjusted for other events, such as a third-party tender or exchange offer or an issuance of common stock for cash,
that may adversely affect the trading price of the notes or the market price of our common stock. An event that adversely affects the value of the notes may occur, and that event may not result in an adjustment to the conversion rate.
Some significant restructuring transactions may not and changes in the composition of our board will not constitute a fundamental
change, in which case we would not be obligated to offer to repurchase the notes.
Upon the occurrence of a fundamental change, you
have the right to require us to repurchase your notes. However, the fundamental change provisions will not afford protection to holders of notes in the event of other transactions that could adversely affect the notes. For example, transactions such
as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change requiring us to repurchase the notes. In the event of any such transaction, the holders would not have the right to
require us to repurchase the notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of notes.
In addition, absent the occurrence of a fundamental change as described under Description of Notes Fundamental Change Permits
Holders to Require Us to Repurchase Notes or a make-whole fundamental change as described under Description of NotesConversion RightsIncrease in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change,
changes in the composition of our board of directors will not provide holders with the right to require us to repurchase the notes or to an increase in the conversion rate upon conversion.
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We cannot assure you that an active trading market will develop for the notes.
Prior to this offering, there has been no trading market for the notes, and we do not intend to apply to list the notes on any securities
exchange or to arrange for quotation on any automated dealer quotation system. We have been informed by the underwriters that they intend to make a market in the notes after the offering is completed. However, the underwriters may cease their
market-making at any time without notice. In addition, the liquidity of the trading market in the notes, and the market price quoted for the notes, may be adversely affected by changes in the overall market for this type of security and by changes
in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, we cannot assure you that an active trading market will develop for the notes. If an active trading market does not develop or is not
maintained, the market price and liquidity of the notes may be adversely affected. In that case you may not be able to sell your notes at a particular time or you may not be able to sell your notes at a favorable price.
Any adverse rating of the notes may cause their trading price to fall.
We do not intend to seek a rating on the notes. However, if a rating service were to rate the notes and if such rating service were to lower
its rating on the notes below the rating initially assigned to the notes or otherwise announces its intention to put the notes on credit watch, the trading price of the notes could decline.
You will be subject to tax if we make or fail to make certain adjustments to the conversion rate of the notes even though you do not
receive a corresponding cash distribution.
The conversion rate of the notes is subject to adjustment in certain circumstances,
including the payment of cash dividends. If the conversion rate is adjusted as a result of a distribution that is taxable to our common stockholders, such as a cash dividend, you will be deemed to have received a dividend subject to U.S. federal
income tax without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases your proportionate interest in us could be treated as a deemed taxable dividend to you. If a
make-whole fundamental change occurs prior to the maturity date, under some circumstances, we will increase the conversion rate for notes converted in connection with the make-whole fundamental change. Such increase may also be treated as a
distribution subject to U.S. federal income tax as a dividend. See Material U.S. Federal Income Tax Considerations. If you are a non-U.S. holder (as defined in Material U.S. Federal Income
Tax Considerations), any deemed dividend would generally be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty, which may be withheld from or set off against subsequent
payments on the notes or any shares of our common stock owned by such non-U.S. holder or from any proceeds of any subsequent sale, exchange or other disposition of such note (including the retirement of such
note) or such common stock by such non-U.S. holder or other funds or assets of such non-U.S. holder. The Internal Revenue Service has issued proposed regulations
addressing the amount and timing of deemed distributions, obligations of withholding agents and filing and notice obligations of issuers, which if adopted could affect the U.S. federal income tax treatment of a holder of notes deemed to receive such
a distribution. See Material U.S. Federal Income Tax Considerations.
Because the notes will initially be issued in
book-entry form, holders must rely on DTCs procedures to receive communications relating to the notes and exercise their rights and remedies.
We will initially issue the notes in the form of one or more global notes registered in the name of Cede & Co., as nominee of DTC.
Beneficial interests in global notes will be shown on, and transfers of global notes will be effected only through, the records maintained by DTC. Except in limited circumstances, we will not issue certificated notes. See Description of
NotesBook-Entry, Settlement and Clearance. Accordingly, if you own a beneficial interest in a global note, then you will not be considered an owner or holder of the notes. Instead, DTC or its nominee will be the sole holder of global
notes. Unlike persons who have certificated notes registered in their names, owners of beneficial interests in global notes will not have the direct right to act on our solicitations for consents or requests for waivers or other actions from
holders. Instead, those beneficial owners
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will be permitted to act only to the extent that they have received appropriate proxies to do so from DTC or, if applicable, a DTC participant. The applicable procedures for the granting of these
proxies may not be sufficient to enable owners of beneficial interests in global notes to vote on any requested actions on a timely basis. In addition, notices and other communications relating to the notes will be sent to DTC. We expect DTC to
forward any such communications to DTC participants, which in turn would forward such communications to indirect DTC participants. But we can make no assurances that you timely receive any such communications.
Any repurchases of the 2021 Notes prior to maturity may affect the value of the notes and our common stock.
In June 2016, we issued $150 million in aggregate principal amount of the 2021 Notes. From time to time, we may repurchase or otherwise
retire some or all of our 2021 Notes, including with a portion of the net proceeds of the sale of the notes offered hereby. Any repurchase of our 2021 Notes could affect the market price of our common stock and our notes. We expect that, should we
repurchase a portion of our 2021 Notes, those holders of the 2021 Notes that sell their 2021 Notes to us may enter into or unwind various derivatives with respect to our common stock and/or purchase or sell shares of our common stock in the market
to hedge their exposure in connection with these transactions. In particular, we expect that many holders of the 2021 Notes employ a convertible arbitrage strategy with respect to the 2021 Notes and have a short position with respect to our common
stock that they would close, through purchases of our common stock, in connection with our repurchase of their 2021 Notes. If we engage in any such repurchases or other retirement of the 2021 Notes and such activity occurs, it could increase (or
reduce the size of any decrease in) the market price of our common stock or the notes at that time.
The convertible note hedge and
warrant transactions may affect the value of the notes and our common stock.
In connection with the pricing of the notes, we
expect to enter into convertible note hedge transactions with the option counterparties. The convertible note hedge transactions are expected generally to reduce the potential dilution upon conversion of the notes and/or offset any cash payments we
are required to make in excess of the principal amount of converted notes, as the case may be. We also expect to enter into warrant transactions with the option counterparties. However, the warrant transactions could separately have a dilutive
effect on our common stock to the extent that the market price per share of our common stock exceeds the applicable strike price of the warrants. If the underwriters exercise their over-allotment option, we expect to enter into additional
convertible note hedge transactions and additional warrant transactions with the option counterparties.
In connection with establishing
their initial hedges of the convertible note hedge and warrant transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to our common stock concurrently with or shortly
after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of our common stock or the notes at that time.
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various
derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do
so during any observation period related to a conversion of notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the notes, which could affect your ability to convert the notes and, to
the extent the activity occurs during any observation period related to a conversion of notes, it could affect the number of shares and value of the consideration that you will receive upon conversion of the notes.
In addition, if any such convertible note hedge and warrant transactions fail to become effective, whether or not this offering of notes is
completed, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock and, if the notes have been issued, the value of the
notes.
S-24
The existing convertible note hedge and warrant transactions may affect the value of the
notes and our common stock.
In connection with the issuance of the 2021 Notes, we entered into convertible note hedge
transactions ((the existing convertible note hedge transactions) and warrant transactions (the existing warrant transactions and, together with the existing convertible note hedge transactions, the existing call spread
transactions) with certain financial institutions (the existing option counterparties).
The existing option
counterparties or their respective affiliates may modify their hedge positions with respect to the existing call spread transactions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our
common stock or other securities of ours in secondary market transactions prior to the maturity of the notes offered hereby (and are likely to do so during any observation period related to a conversion of the 2021 Notes), which activity could
coincide with an observation period related to a conversion of the notes offered hereby. This activity could cause or avoid an increase or a decrease in the market price of our common stock or the notes, which could affect your ability to convert
the notes and, to the extent the activity occurs during any observation period related to a conversion of notes, it could affect the number of shares and value of the consideration that you will receive upon conversion of the notes.
The termination of the existing call spread transactions may affect the value of the notes and our common stock.
In connection with any repurchase of 2021 Notes, we expect to enter into agreements with the existing option counterparties to terminate a
portion of the existing call spread transactions, in each case, in a notional amount corresponding to the amount of such 2021 Notes repurchased, if any. In connection with any termination of existing call spread transactions and the related
unwinding of the existing hedge position of the existing option counterparties with respect to such transactions, such existing option counterparties and/or their respective affiliates will sell shares of our common stock in secondary market
transactions, and/or enter into or unwind various derivative transactions with respect to our common stock. In particular, in connection with our repurchase of 2021 Notes concurrently with the offering of the notes, we will terminate a corresponding
portion of the existing call spread transactions, and we expect the existing option counterparties to sell shares of our common stock in the open market for some period of time beginning as early as five scheduled trading days after this offering.
This activity could decrease (or reduce the size of any increase in) the market price of our common stock at that time and it could decrease (or reduce the size of any increase in) the market value of the notes. We may enter into further agreements
with the existing option counterparties to terminate any remaining portion of the existing call spread transactions in connection with any subsequent repurchase of our 2021 Notes.
We are subject to counterparty risk with respect to the convertible note hedge transactions.
The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the
convertible note hedge transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of
many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the convertible note hedge transactions
with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an
option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.
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This offering is not contingent on the consummation of the Concurrent Common Stock
Offering.
The consummation of this offering and the consummation of the Concurrent Common Stock Offering are not contingent upon
one another. Accordingly, if you decide to purchase Notes in this offering, you should be willing to do so whether or not we complete the Concurrent Common Stock Offering.
Risks Related to Our Common Stock
The price of our common stock may be volatile and our stockholders may not be able to resell shares of our common stock at or above the
price they paid.
The trading price of our common stock is highly volatile and could be subject to wide fluctuations in response to
various factors, some of which are beyond our control. Factors that could cause volatility in the market price of our common stock include, but are not limited to:
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achievement of expected product sales and profitability, including the effects of seasonality on our results of
operations, as well as adjustments to our sales forecasts;
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the ongoing COVID-19 pandemic, see Risks Related to our
BusinessOur business, financial condition, results of operations and growth could be harmed by the effects of the COVID-19 pandemic;
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delays or setbacks in the commercialization of Senza or the expansion of indications for which Senza is approved;
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announcements of new products by us or our competitors;
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announcements or developments in any intellectual property infringement actions in which we may become involved,
including our lawsuits with Boston Scientific and Nalu Medical;
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manufacture, supply or distribution shortages;
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fluctuations in our expenses associated with inventory buildup or write-downs from analyzing our inventory for
obsolescence or conformity with our product requirements;
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adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or
sales and marketing activities;
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results from, or any delays in, clinical trial programs relating to our product candidates;
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changes or developments in laws or regulations applicable to our products;
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any adverse changes in our relationship with any manufacturers or suppliers;
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the success of our efforts to acquire or develop additional products;
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announcements concerning our competitors or the medical device industry in general;
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actual or anticipated fluctuations in our operating results;
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FDA or other U.S. or foreign regulatory actions affecting us or our industry or other healthcare reform measures
in the United States;
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changes in financial estimates or recommendations by securities analysts;
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trading volume of our common stock;
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trading activity in our common stock by the option counterparties to our convertible note hedge transactions to
unwind or modify their hedge positions;
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sales of our common stock by us, our executive officers and directors or our stockholders in the future;
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general economic and market conditions and overall fluctuations in the United States equity markets, including as
a result of volatility related to the recent coronavirus outbreak and related health concerns; and
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the loss of any of our key scientific or management personnel.
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Broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a
stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the
lawsuit and the attention of our management would be diverted from the operation of our business, which could seriously harm our financial position. Any adverse determination in litigation could also subject us to significant liabilities.
If securities or industry analysts issue an adverse or misleading opinion regarding our stock, our stock price and trading volume and
the value of your notes could decline.
The trading market for our common stock is influenced by the research and reports that
industry or securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical
trials and operating results fail to meet the expectations of analysts, our stock price and the value of your notes would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume and the value of your notes to decline.
S-27
DESCRIPTION OF NOTES
We will issue the notes under the base indenture, dated as of June 13, 2016, between us and Wilmington Trust, National Association, as
trustee (the trustee), as supplemented by a supplemental indenture, to be dated the date of the initial issuance of the Notes, with respect to the notes. In this section, we refer to the base indenture (the base indenture),
as supplemented by the supplemental indenture (the supplemental indenture), collectively as the indenture. This description of the notes supplements and, to the extent it is inconsistent, replaces the description of the
general provisions of the notes and the base indenture in the accompanying prospectus. The terms of the notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as
amended (the Trust Indenture Act).
You may request a copy of the indenture from us as described under Where You Can
Find More Information.
The following description is a summary of the material provisions of the notes and the indenture and does
not purport to be complete. This summary is subject to and is qualified by reference to all the provisions of the notes and the indenture, including the definitions of certain terms used in the indenture. We urge you to read these documents because
they, and not this description, define your rights as a holder of the notes.
For purposes of this description, references to
we, our and us refer only to Nevro Corp. and not to its subsidiaries.
General
The notes will:
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be our general unsecured, senior obligations;
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initially be limited to an aggregate principal amount of $165.0 (or $189.7 if the underwriters
over-allotment option is exercised in full);
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bear cash interest from , 2020 at an
annual rate of % payable on April 1 and October 1 of each year, beginning on October 1, 2020;
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not be redeemable prior to maturity;
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be subject to repurchase by us at the option of the holders following a fundamental change (as defined below
under Fundamental Change Permits Holders to Require Us to Repurchase Notes), at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to,
but excluding, the fundamental change repurchase date;
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mature on April 1, 2025, unless earlier converted or repurchased;
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be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof; and
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be represented by one or more registered notes in global form, but in certain limited circumstances may be
represented by notes in definitive form. See Book-Entry, Settlement and Clearance.
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Subject to satisfaction
of certain conditions and during the periods described below, the notes may be converted at an initial conversion rate of shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price
of approximately $ per share of common stock). The conversion rate is subject to adjustment if certain events occur.
We will settle conversions of notes by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and
shares of our common stock, at our election, as described under
S-33
Conversion RightsSettlement upon Conversion. You will not receive any separate cash payment for interest, if any, accrued and unpaid to the conversion date except under the limited
circumstances described below.
The indenture will not limit the amount of debt that may be issued by us or our subsidiaries under the
indenture or otherwise. The indenture will not contain any financial covenants and will not restrict us from paying dividends or issuing or repurchasing our other securities. Other than restrictions described under Fundamental Change
Permits Holders to Require Us to Repurchase Notes and Consolidation, Merger and Sale of Assets below, and except for the provisions set forth under Conversion RightsIncrease in Conversion Rate upon
Conversion upon a Make-Whole Fundamental Change, the indenture will not contain any covenants or other provisions designed to afford holders of the notes protection in the event of a highly leveraged transaction involving us or in the event of
a decline in our credit rating as the result of a takeover, recapitalization, highly leveraged transaction or similar restructuring involving us that could adversely affect such holders.
We may, without the consent of the holders, reopen the indenture for the notes and issue additional notes under the indenture with the same
terms as the notes offered hereby (other than differences in the issue date, the issue price, interest accrued prior to the issue date of such additional notes, and, if applicable, restrictions on transfer in respect of such additional notes) in an
unlimited aggregate principal amount; provided that if any such additional notes are not fungible with the notes initially offered hereby for U.S. federal income tax or securities law purposes, such additional notes will have one or more
separate CUSIP numbers.
We do not intend to list the notes on any securities exchange or any automated dealer quotation system.
Except to the extent the context otherwise requires, we use the term notes in this prospectus supplement to refer to each $1,000
principal amount of notes. We use the term common stock in this prospectus supplement to refer to our common stock, par value $0.001 per share. References in this prospectus supplement to a holder or holders of
notes that are held through The Depository Trust Company (DTC) are references to owners of beneficial interests in such notes, unless the context otherwise requires. However, we, the paying agent and the trustee will treat the person in
whose name the notes are registered (Cede & Co., in the case of notes held through DTC) as the owner of such notes for all purposes. References herein to the close of business refer to 5:00 p.m., New York City time, and to the
open of business refer to 9:00 a.m., New York City time.
Purchase and Cancellation
We will cause all notes surrendered for payment at maturity, redemption, registration of transfer or exchange or conversion, if surrendered to
any person other than the trustee (including any of our agents, subsidiaries or affiliates), to be delivered to the trustee for cancellation. All notes delivered to the trustee shall be cancelled promptly by the trustee. No notes shall be
authenticated in exchange for any notes cancelled except as provided in the indenture. We may, to the extent permitted by law, and directly or indirectly (regardless of whether such notes are surrendered to us), repurchase notes in the open market
or otherwise, whether by us or our subsidiaries or through a private or public tender or exchange offer or through counterparties to private agreements, including by cash-settled swaps or other derivatives.
We may, at our option and to the extent permitted by applicable law, reissue, resell, hold or surrender to the trustee for cancellation any
notes that we may repurchase, in the case of a reissuance or resale, so long as such notes do not constitute restricted securities upon such reissuance or resale. Any notes that we may repurchase will be considered outstanding for all purposes under
the indenture (other than, at any time when such notes are held by us, any of our subsidiaries or our affiliates or any subsidiary of any of such affiliates, for the purpose of determining whether holders of the requisite aggregate principal amount
of notes have concurred in any direction, consent, waiver or other action under the indenture) unless and until such time we surrender them to the trustee for cancellation and, upon receipt of a written order from us, the trustee will cancel all
notes so surrendered.
S-34
Payments on the Notes; Paying Agent and Registrar; Transfer and Exchange
We will pay or cause the paying agent to pay the principal of, and interest on, notes in global form registered in the name of or held by DTC
or its nominee in immediately available funds to DTC or its nominee, as the case may be, as the registered holder of such global note.
We
will pay or cause the paying agent to pay the principal of any certificated notes at the office or agency designated by us for that purpose. We have initially designated the trustee as our paying agent and registrar and its corporate trust office as
a place where notes may be presented for payment or for registration of transfer. We may, however, change the paying agent or registrar without prior notice to the holders of the notes, and we may act as paying agent or registrar. Interest on
certificated notes will be payable (i) to holders having an aggregate principal amount of $5,000,000 or less, by check mailed to the holders of these notes and (ii) to holders having an aggregate principal amount of more than $5,000,000,
either by check mailed to each holder or, upon application by such a holder to the registrar not later than the relevant regular record date, by wire transfer in immediately available funds to that holders account within the United States,
which application shall remain in effect until the holder notifies, in writing, the registrar to the contrary.
A holder of notes may
transfer or exchange notes at the office of the registrar in accordance with the indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents. No service charge will be
imposed by us, the trustee or the registrar for any registration of transfer or exchange of notes, but we may require a holder to pay a sum sufficient to cover any transfer tax or other similar governmental charge required by law or permitted by the
indenture. We are not required to transfer or exchange any note surrendered for conversion or required repurchase.
The registered holder
of a note will be treated as its owner for all purposes under the indenture.
Interest
The notes will bear cash interest at a rate of % per year until maturity. Interest on the notes will accrue
from , 2020 or from the most recent date on which interest has been paid or duly provided for.
Interest will be payable semiannually in arrears on April 1 and October 1 of each year, beginning on October 1, 2020.
Interest will be paid to the person in whose name a note is registered at the close of business on March 15 or September 15, as the
case may be, immediately preceding the relevant interest payment date (each, a regular record date). Interest on the notes will be computed on the basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of the number of days actually elapsed in a 30-day month.
If any interest payment date, the maturity date or any earlier required repurchase date upon a fundamental change of a note falls on a day
that is not a business day, the required payment will be made on the next succeeding business day and no interest on such payment will accrue in respect of the delay. The term business day means, with respect to any note, any day other
than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.
Unless the context otherwise requires, all references to interest in this prospectus supplement include additional interest, if any, payable
at our election as the sole remedy relating to the failure to comply with our reporting obligations as described under Events of Default.
Ranking
The notes will be our general
unsecured obligations that rank senior in right of payment to all of our indebtedness that is expressly subordinated in right of payment to the notes. The notes will rank equal in right of
S-35
payment with all of our liabilities that are not so subordinated (including our outstanding 2021 Notes). The notes will effectively rank junior to any of our secured indebtedness to the extent of
the value of the assets securing such indebtedness. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure secured debt will be available to pay obligations on the notes only after all indebtedness
under such secured debt has been repaid in full from such assets. The notes will rank structurally junior to all indebtedness and other liabilities of our subsidiaries. We advise you that upon such a bankruptcy, liquidation, reorganization or other
winding up event, there may not be sufficient assets remaining to pay amounts due on any or all the notes then outstanding.
As of
December 31, 2019, our total consolidated indebtedness was $172.5 million, all of which was senior secured indebtedness under our credit facility, and our subsidiaries had $5.2 million of indebtedness and other liabilities (including
trade payables, but excluding intercompany obligations and liabilities of a type not required to be reflected on a balance sheet of such subsidiaries in accordance with GAAP) to which the notes would have been structurally subordinated. After giving
effect to the issuance of the notes and the repayment of amounts outstanding under the credit facility with a portion of such proceeds (assuming no exercise of the underwriters over-allotment option), our total consolidated indebtedness would
have been $ million as of December 31, 2019.
The ability of our subsidiaries to pay
dividends and make other payments to us is restricted by, among other things, applicable corporate and other laws and regulations, and may be restricted by agreements to which our subsidiaries may become a party. We may not be able to pay the cash
portions of any settlement amount upon conversion of the notes, if any, or to pay cash for the fundamental change repurchase price upon a fundamental change if a holder requires us to repurchase notes as described below. See Risk
FactorsRisks Related to the NotesWe may not have the ability to raise the funds necessary to repurchase the notes or the outstanding 2021 Notes for cash upon a fundamental change or to settle for cash conversions of the notes or the
outstanding 2021 Notes, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes or the outstanding 2021 Notes.
No Redemption
We may not redeem the
notes prior to the maturity date, and no sinking fund is provided for the notes, which means that we are not required to redeem or retire the notes periodically.
Conversion Rights
General
Prior to the close of business on the business day immediately preceding October 1, 2024, the notes will be convertible only
upon satisfaction of one or more of the conditions described under the headings Conversion upon Satisfaction of Sale Price Condition, Conversion upon Satisfaction of Trading Price Condition, and
Conversion upon Specified Corporate Events. On or after October 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their
notes at the conversion rate at any time irrespective of the foregoing conditions.
The conversion rate will initially be shares of common
stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $ per share of common stock). Upon conversion of a note, we will satisfy our conversion obligation
by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, all as set forth below under Settlement upon Conversion. 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 our common stock, the amount of cash and shares of common stock, if any, due upon conversion will be based on a daily
conversion value (as defined below) calculated on a proportionate basis for each trading day in a 30 trading day observation period (as defined below under Settlement upon Conversion). The trustee will initially act as the
conversion agent.
S-36
A holder may convert fewer than all of such holders notes so long as the notes converted
are a multiple of $1,000 principal amount.
Upon conversion, you will not receive any separate cash payment for accrued and unpaid
interest, if any, except as described below. We will not issue fractional shares of our common stock upon conversion of notes. Instead, we will pay cash in lieu of delivering any fractional share as described under Settlement upon
Conversion. Our payment and delivery to you of the cash, shares of our common stock or a combination thereof, as the case may be, into which a note is convertible will be deemed to satisfy in full our obligation to pay:
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the principal amount of the note; and
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accrued and unpaid interest, if any, to, but not including, the relevant conversion date.
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As a result, accrued and unpaid interest, if any, to, but not including, the relevant conversion date will be deemed to be paid in full rather
than cancelled, extinguished or forfeited. Upon a conversion of notes into a combination of cash and shares of our common stock, accrued and unpaid interest will be deemed to be paid first out of the cash paid upon such conversion.
Notwithstanding the immediately preceding paragraph, if notes are converted after the close of business on a regular record date for the
payment of interest, holders of such notes at the close of business on such regular record date will receive the full amount of interest payable on such notes on the corresponding interest payment date notwithstanding the conversion. Notes
surrendered for conversion during the period from the close of business on any regular record date to the open of business on the immediately following interest payment date must be accompanied by funds equal to the amount of interest payable on the
notes so converted; provided that no such payment need be made:
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for conversions after the close of business on the regular record date immediately preceding the maturity date;
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if we have specified a fundamental change repurchase date that is after a regular record date and on or prior to
the business day immediately following the corresponding interest payment date; or
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to the extent of any overdue interest, if any overdue interest exists at the time of conversion with respect to
such note.
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Therefore, for the avoidance of doubt, all record holders at the close of business on the regular record
date immediately preceding the maturity date will receive the full interest payment due on the maturity date regardless of whether their notes have been converted following such regular record date.
If a holder converts notes, we will pay any documentary, stamp or similar issue or transfer tax due on any issuance of any shares of our
common stock upon the conversion, unless the tax is due because the holder requests such shares to be issued in a name other than the holders name, in which case the holder will pay that tax.
Holders may surrender their notes for conversion under the following circumstances:
Conversion upon Satisfaction of Sale Price Condition
Prior to the close of business on the business day immediately preceding October 1, 2024, a holder may surrender all or any portion of its
notes for conversion at any time during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days
(whether or not consecutive) during the 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 on each applicable trading day. If
the sale price condition has been met, we will so notify in writing the holder, the trustee and the conversion agent (if other than the trustee).
S-37
The last reported sale price of our common stock on any date means the closing sale
price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for
the principal U.S. national or regional securities exchange on which our common stock is traded. If our common stock is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the last reported sale
price will be the last quoted bid price per share for our common stock in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or
a similar organization. If our common stock is not so quoted, the last reported sale price will be the average of the mid-point of the last bid and last ask prices per share for our common stock on
the relevant date from a nationally recognized independent investment banking firm selected by us for this purpose.
Except for purposes
of determining amounts due upon conversion, trading day means a day on which (i) trading in our common stock (or other security for which a closing sale price must be determined) generally occurs on The New York Stock Exchange or,
if our common stock (or such other security) is not then listed on The New York Stock Exchange, on the principal other U.S. national or regional securities exchange on which our common stock (or such other security) is then listed or, if our common
stock (or such other security) is not then listed on a U.S. national or regional securities exchange, on the principal other market on which our common stock (or such other security) is then traded, and (ii) a last reported sale price for our
common stock (or closing sale price for such other security) is available on such securities exchange or market. If our common stock (or such other security) is not so listed or traded, trading day means a business day.
Conversion upon Satisfaction of Trading Price Condition
Prior to the close of business on the business day immediately preceding October 1, 2024, a holder of notes may surrender all or any
portion of its notes for conversion at any time during the five business day period after any ten consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of notes, as
determined following a request by a holder of notes in accordance with the procedures described below, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the
conversion rate on each such trading day.
The trading price of the notes on any date of determination means the average of
the secondary market bid quotations obtained by the bid solicitation agent for $5,000,000 principal amount of notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities
dealers we select for this purpose; provided that if three such bids cannot reasonably be obtained by the bid solicitation agent but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can
reasonably be obtained by the bid solicitation agent, that one bid shall be used. If the bid solicitation agent cannot reasonably obtain at least one bid for $5,000,000 principal amount of notes from a nationally recognized securities dealer, then
the trading price per $1,000 principal amount of notes will be deemed to be less than 98% of the product of the last reported sale price of our common stock and the conversion rate. If (x) we are not acting as bid solicitation agent, and we do
not, when we are required to, instruct the bid solicitation agent to obtain bids, or if we give such instruction to the bid solicitation agent, and the bid solicitation agent fails to carry out such instruction, or (y) we are acting as bid
solicitation agent and we fail to make such determination, then, in either case, the trading price per $1,000 principal amount of notes will be deemed to be less than 98% of the product of the last reported sale price of our common stock and the
conversion rate on each trading day of such failure.
The bid solicitation agent (if other than us) shall have no obligation to solicit in
the manner above the trading price per $1,000 principal amount of notes unless we have requested such solicitation in writing and provided the name and contact information of the three nationally recognized securities dealer selected by us (or, if
we are acting as bid solicitation agent, we shall have no obligation to solicit the trading price); and we shall have no obligation to make such request unless a holder of at least $5,000,000 aggregate principal amount of notes provides us with
reasonable evidence that the trading price per $1,000 principal amount of notes would be
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less than 98% of the product of the last reported sale price of our common stock and the conversion rate. We shall determine, the trading price per $1,000 principal amount of notes, in accordance
with the bids solicited by the bid solicitation agent, beginning on the next trading day and on each successive trading day until the trading price per $1,000 principal amount of notes is greater than or equal to 98% of the product of the last
reported sale price of our common stock and the conversion rate. If the trading price condition has been met, we will so notify in writing the holders, the trustee and the conversion agent (if other than the trustee). If, at any time after the
trading price condition has been met, the trading price per $1,000 principal amount of notes is greater than or equal to 98% of the product of the last reported sale price of our common stock and the conversion rate for such date, we will so notify
in writing the holders, the trustee and the conversion agent (if other than the trustee) on or within one business day of such trading day.
The trustee will initially act as the bid solicitation agent.
Conversion upon Specified Corporate Events
Certain Distributions
If, prior to the
close of business on the business day immediately preceding October 1, 2024, we elect to:
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issue to all or substantially all holders of our common stock any rights, options or warrants (other than
pursuant to a stockholders rights plan, so long as such rights have not separated from the shares of common stock) entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or
purchase shares of our common stock at a price per share that is less than the average of the last reported sale prices of our common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the
date of announcement of such issuance; or
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distribute to all or substantially all holders of our common stock our assets, securities or rights to purchase
our securities (other than pursuant to a stockholders rights plan, so long as such rights have not separated from the shares of common stock), which distribution has a per share value, as reasonably determined by us in good faith, exceeding 10% of
the last reported sale price of our common stock on the trading day preceding the date of announcement for such distribution,
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then, in either case, we must notify in writing the holders of the notes (with a copy to the trustee and conversion agent) at least 35
scheduled trading days prior to the ex-dividend date for such issuance or distribution. However, if we are then otherwise permitted to settle conversions by physical settlement (and, for the avoidance of
doubt, we have not elected another settlement method to apply, including pursuant to the provisions described in the second paragraph under the caption Settlement upon Conversion below), then we may instead elect to provide such
notice at least 10 scheduled trading days before the ex-dividend date. In that event, we will be required to settle all conversions with a conversion date occurring on or after the date we provide such notice
and before such ex-dividend date (or, if earlier, the date we announce that such issuance or distribution will not take place) by physical settlement, and we will describe the same in the notice.
Once we have given such notice, holders may surrender all or any portion of their notes for conversion at any time until the earlier of the
close of business on the business day immediately preceding the ex-dividend date for such issuance or distribution and our announcement that such issuance or distribution will not take place, even if the notes
are not otherwise convertible at such time. Holders of the notes may not exercise this right if they participate (other than in the case of a share split or share combination), at the same time and upon the same terms as holders of our common stock
and solely as a result of holding the notes, in any of the transactions described above without having to convert their notes as if they held a number of shares of common stock equal to the applicable conversion rate multiplied by the principal
amount (expressed in thousands) of notes held by such holder.
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Certain Corporate Events
If a transaction or event that constitutes a fundamental change (as defined under Fundamental Change Permits Holders to
Require Us to Repurchase Notes) or a make-whole fundamental change (as defined under Increase in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change) occurs prior to the close of business on the
business day immediately preceding October 1, 2024, regardless of whether a holder has the right to require us to repurchase the notes as described under Fundamental Change Permits Holders to Require Us to Repurchase Notes, or
if we are a party to a consolidation, merger, binding share exchange, or transfer or lease of all or substantially all of our assets, in each case, pursuant to which our common stock would be converted into cash, securities or other assets, other
than a merger effected solely to change our jurisdiction of incorporation that does not otherwise constitute a fundamental change or a make-whole fundamental change, all or any portion of a holders notes may be surrendered for conversion at
any time from or after the effective date of the transaction until 35 trading days after such effective date or, if such transaction also constitutes a fundamental change, until the related fundamental change repurchase date. We will notify in
writing the holders, the trustee and the conversion agent (if other than the trustee) no later than the business day following the effective date of such transaction.
Conversions on or after October 1, 2024
On or after October 1, 2024 a holder may convert all or any portion of its notes at any time prior to the close of business on the second
scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions.
Conversion Procedures
If you hold a beneficial interest in a global note, to convert you must comply with DTCs procedures for converting a
beneficial interest in a global note and, if required, pay funds equal to the interest payable on the next interest payment date to which you are not entitled. As such, if you are a beneficial owner of the notes, you must allow for sufficient time
to comply with DTCs procedures if you wish to exercise your conversion rights.
If you hold a certificated note, to convert you
must:
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complete and manually sign the conversion notice on the back of the note, or a facsimile of the conversion
notice;
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deliver the conversion notice, which is irrevocable, and the note to the conversion agent;
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if required, furnish appropriate endorsements and transfer documents; and
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if required, pay funds equal to interest payable on the next interest payment date to which you are not entitled.
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We will pay any documentary, stamp or similar issue or transfer tax on the issuance of any shares of our common stock
upon conversion of the notes, unless the tax is due because the holder requests such shares to be issued in a name other than the holders name, in which case the holder will pay the tax.
We refer to the date you comply with the relevant procedures for conversion described above as the conversion date.
If a holder has already delivered a repurchase notice as described under Fundamental Change Permits Holders to Require Us to
Repurchase Notes with respect to a note, the holder may not surrender that note for conversion until the holder has withdrawn the repurchase notice in accordance with the relevant provisions of the indenture. If a holder submits its notes for
required repurchase, the holders right to withdraw the repurchase notice and convert the notes that are subject to repurchase will terminate at the close of business on the second business day immediately preceding the relevant fundamental
change repurchase date.
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Settlement upon Conversion
Upon conversion, we may choose to pay or deliver, as the case may be, either cash (cash settlement), shares of our common stock
(physical settlement) or a combination of cash and shares of our common stock (combination settlement), as described below. We refer to each of these settlement methods as a settlement method.
All conversions for which the relevant conversion date occurs on or after October 1, 2024 will be settled using the same settlement
method. For any conversions for which the relevant conversion date occurs prior to October 1, 2024, we will use the same settlement method for all conversions with the same conversion date, but we will not have any obligation to use the same
settlement method with respect to conversions with different conversion dates. That is, we may choose for notes converted on one conversion date to settle conversions using one settlement method (e.g., physical settlement), and choose for notes
converted on another conversion date to use a different settlement method (e.g., cash settlement or combination settlement).
If we elect
a settlement method, we will in writing the inform holders so converting, the trustee and the conversion agent (if other than the trustee) of the settlement method we have selected no later than the close of business on the trading day immediately
following the related conversion date (or in the case of any conversions for which the relevant conversion date occurs on or after October 1, 2024, no later than the business day immediately preceding October 1, 2024). If we do not timely
elect a settlement method, we will be deemed to have elected the default settlement method (as defined below). If we timely elect combination settlement with respect to a conversion but do not timely notify in writing the converting
holder, with a copy to the trustee and the conversion agent (if other than the trustee), of the applicable specified dollar amount (as defined below), then the specified dollar amount for such conversion will be deemed to be $1,000 per $1,000
principal amount of notes. For the avoidance of doubt, our failure to timely elect a settlement method or specify the applicable specified dollar amount will not constitute a default under the indenture. It is our current intent and policy to settle
conversions through combination settlement with a specified dollar amount per $1,000 principal amount of notes of $1,000.
The
default settlement method will initially be combination settlement with a specified dollar amount of $1,000 per $1,000 principal amount of notes. However, we may, from time to time, change the default settlement method by sending written
notice of the new default settlement method to the holders, the trustee and the conversion agent (if other than the trustee). In addition, we may, by sending written notice to the holders, irrevocably fix the settlement method to any settlement
method that we are then permitted to elect that will apply to all note conversions with a conversion date that is on or after the date we send such notice. Notwithstanding the foregoing, no such change in the default settlement method or irrevocable
election will affect any settlement method theretofore elected (or deemed to be elected) with respect to any note pursuant to the provisions described in this Conversion RightsSettlement upon Conversion section. For the
avoidance of doubt, such an irrevocable election, if made, will be effective without the need to amend the indenture or the notes, including pursuant to the provisions described under the caption Modification and Amendment below.
However, we may nonetheless choose to execute such an amendment at our option.
Settlement amounts will be computed as follows:
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if we elect physical settlement, we will deliver to the converting holder in respect of each $1,000 principal
amount of notes being converted a number of shares of common stock equal to the conversion rate;
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if we elect cash settlement, we will pay to the converting holder in respect of each $1,000 principal amount of
notes being converted cash in an amount equal to the sum of the daily conversion values for each of the 30 consecutive trading days during the relevant observation period; and
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if we elect (or are deemed to have elected) combination settlement, we will pay or deliver, as the case may be,
to the converting holder in respect of each $1,000 principal amount of notes being converted a settlement amount equal to the sum of the daily settlement amounts for each of the 30 consecutive trading days during the relevant observation
period.
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S-41
The daily settlement amount, for each of the 30 consecutive trading days during the
relevant observation period, shall consist of:
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cash equal to the lesser of (i) the maximum cash amount per $1,000 principal amount of notes to be received
upon conversion as specified in the notice specifying our chosen (or deemed) settlement method (the specified dollar amount), if any, divided by 30 (such quotient, the daily measurement value) and (ii) the daily
conversion value; and
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if the daily conversion value exceeds the daily measurement value, a number of shares equal to (i) the
difference between the daily conversion value and the daily measurement value, divided by (ii) the daily VWAP for such trading day.
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The daily conversion value means, for each of the 30 consecutive trading days during the relevant observation period, 1/30th of
the product of (1) the conversion rate on such trading day and (2) the daily VWAP for such trading day.
The daily
VWAP means, for each of the 30 consecutive trading days during the relevant observation period, the per share volume-weighted average price as displayed under the heading Bloomberg VWAP on Bloomberg page NVRO <equity>
AQR (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such trading day (or if such volume-weighted
average price is unavailable, the market value of one share of our common stock on such trading day determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained for this purpose by us).
The daily VWAP will be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.
The observation period with respect to any note surrendered for conversion means:
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if the relevant conversion date occurs prior to October 1, 2024, the 30 consecutive trading day period
beginning on, and including, the second trading day immediately succeeding such conversion date; and
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if the relevant conversion date occurs on or after October 1, 2024, the 30 consecutive trading days
beginning on, and including, the 31st scheduled trading day immediately preceding the maturity date.
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For the purposes
of determining amounts due upon conversion only, trading day means a day on which (i) there is no market disruption event (as defined below) and (ii) trading in our common stock generally occurs on The New York
Stock Exchange or, if our common stock is not then listed on The New York Stock Exchange, on the principal other U.S. national or regional securities exchange on which our common stock is then listed or, if our common stock is not then listed on a
U.S. national or regional securities exchange, on the principal other market on which our common stock is then listed or admitted for trading. If our common stock is not so listed or admitted for trading, trading day means a
business day.
Scheduled trading day means a day that is scheduled to be a trading day on the principal U.S.
national or regional securities exchange or market on which our common stock is listed or admitted for trading. If our common stock is not so listed or admitted for trading, scheduled trading day means a business day.
For the purposes of determining amounts due upon conversion, market disruption event means (i) a failure by the primary U.S.
national or regional securities exchange or market on which our common stock is listed or admitted for trading to open for trading during its regular trading session or (ii) the occurrence or existence prior to 1:00 p.m., New York City time, on
any scheduled trading day for our common stock for more than one half-hour period in the aggregate during regular trading hours of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the
relevant stock exchange or otherwise) in our common stock or in any options contracts or futures contracts relating to our common stock.
S-42
Except as described under Increase in Conversion Rate upon Conversion upon a
Make-Whole Fundamental Change and Recapitalizations, Reclassifications and Changes of Our Common Stock, we will deliver the consideration due in respect of conversion on the second business day immediately following the
relevant conversion date, if we elect physical settlement (provided that, with respect to any conversion following the regular record date immediately preceding the maturity date where physical settlement applies, we will settle any such conversion
on the maturity date), or on the second business day immediately following the last trading day of the relevant observation period, in the case of any other settlement method.
We will pay cash in lieu of delivering any fractional share of common stock issuable upon conversion based on the daily VWAP for the relevant
conversion date (or, if such conversion date is not a trading day, the immediately preceding trading day) (in the case of physical settlement), or based on the daily VWAP for the last trading day of the relevant observation period (in the case of
combination settlement).
Each conversion will be deemed to have been effected as to any notes surrendered for conversion on the
conversion date; provided, however, that the person in whose name any shares of our common stock shall be issuable upon such conversion will become the holder of record of such shares as of the close of business on the relevant conversion
date (in the case of physical settlement) or the last trading day of the relevant observation period (in the case of combination settlement).
Conversion Rate Adjustments
The conversion rate will be adjusted as described below, except that we will not make any adjustments to the conversion rate if holders of the
notes participate (other than in the case of (x) a share split or share combination or (y) a tender or exchange offer), at the same time and upon the same terms as holders of our common stock and solely as a result of holding the notes, in
any of the transactions described below without having to convert their notes as if they held a number of shares of common stock equal to the conversion rate, multiplied by the principal amount (expressed in thousands) of notes held by such
holder.
(1)
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If we exclusively issue shares of our common stock as a dividend or distribution on shares of our common stock,
or if we effect a share split or share combination, the conversion rate will be adjusted based on the following formula:
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where,
CR0 =
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the conversion rate in effect immediately prior to the open of business on the
ex-dividend date of such dividend or distribution, or immediately prior to the open of business on the effective date of such share split or share combination, as applicable;
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CR1 =
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the conversion rate in effect immediately after the open of business on such
ex-dividend date or effective date, as applicable;
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OS0 =
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the number of shares of our common stock outstanding immediately prior to the open of business on such ex-dividend date or effective date (before giving effect to any such dividend, distribution, split or combination), as applicable; and
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OS1 =
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the number of shares of our common stock outstanding immediately after giving effect to such dividend,
distribution, share split or share combination, as applicable.
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Any adjustment made under this clause (1) shall
become effective immediately after the open of business on the ex-dividend date for such dividend or distribution, or immediately after the open of business on the effective date for such share split or share
combination, as applicable. If any dividend or distribution of the type described in this clause (1) is declared but not so paid or made, the conversion rate shall be immediately readjusted,
S-43
effective as of the date our board of directors or a committee thereof determines not to pay such dividend or distribution, to the conversion rate that would then be in effect if such dividend or
distribution had not been declared.
(2)
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If we issue to all or substantially all holders of our common stock any rights, options or warrants (other than
pursuant to a stockholders rights plan, so long as such rights have not separated from the shares of common stock) entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or
purchase shares of our common stock at a price per share that is less than the average of the last reported sale prices of our common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the
date of announcement of such issuance, the conversion rate will be increased based on the following formula:
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CR1=CR0 ×
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OS0 + X
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OS0 + Y
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where,
CR0 =
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the conversion rate in effect immediately prior to the open of business on the
ex-dividend date for such issuance;
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CR1 =
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the conversion rate in effect immediately after the open of business on such
ex-dividend date;
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OS0 =
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the number of shares of our common stock outstanding immediately prior to the open of business on such ex-dividend date;
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X =
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the total number of shares of our common stock issuable pursuant to such rights, options or warrants; and
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Y =
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the number of shares of our common stock equal to the aggregate price payable to exercise such rights, options
or warrants, divided by the average of the last reported sale prices of our common stock over the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the date of announcement of the issuance of such
rights, options or warrants.
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Any increase made under this clause (2) will be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately after the open of business on the ex-dividend date for such issuance. To the extent that shares of common stock are not delivered
after the expiration of such rights, options or warrants, the conversion rate shall be decreased to the conversion rate that would then be in effect had the increase with respect to the issuance of such rights, options or warrants been made on the
basis of delivery of only the number of shares of common stock actually delivered. If no such rights, options or warrants are issued, or if no such rights, options or warrants are exercised prior to their expiration, the conversion rate shall be
decreased to the conversion rate that would then be in effect if such ex-dividend date for such issuance had not occurred.
For the purpose of this clause (2), and for the purpose of the first bullet point under Conversion upon Specified Corporate
EventsCertain Distributions, in determining whether any rights, options or warrants entitle the holders of our common stock to subscribe for or purchase shares of our common stock at less than such average of the last reported sale
prices for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the date of announcement of such issuance, and in determining the aggregate offering price of such shares of common stock, there shall
be taken into account any consideration received by us for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by us in good faith.
(3)
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If we distribute shares of our capital stock, evidences of our indebtedness, other assets or property of ours
or rights, options or warrants to acquire our capital stock or other securities, to all or substantially all holders of our common stock, excluding:
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dividends, distributions or issuances as to which an adjustment was effected (or will be so effected in
accordance with the 1% provision (as defined below)) pursuant to clause (1) or (2) above, as applicable;
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S-44
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rights issued under a stockholders rights plan (except as set forth below);
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dividends or distributions paid exclusively in cash as to which the provisions set forth in clause (4) below
shall apply;
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distributions of reference property issued in exchange for our common stock as described in
Recapitalizations, Reclassifications and Changes of Our Common Stock; and
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spin-offs as to which the provisions set forth below in this clause (3) shall apply;
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then the conversion rate will be increased based on the following formula:
where,
CR0 =
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the conversion rate in effect immediately prior to the open of business on the
ex-dividend date for such distribution;
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CR1 =
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the conversion rate in effect immediately after the open of business on the
ex-dividend date for such distribution;
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SP0 =
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the average of the last reported sale prices of our common stock over the 10 consecutive trading day period
ending on, and including, the trading day immediately preceding the ex-dividend date for such distribution; and
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FMV =
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the fair market value (as determined by us in good faith) of the shares of capital stock, evidences of
indebtedness, other assets or property of ours or rights, options or warrants to acquire our capital stock or other securities distributed with respect to each outstanding share of our common stock on the
ex-dividend date for such distribution.
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Any increase made under the portion of
this clause (3) above will become effective immediately after the open of business on the ex-dividend date for such distribution. If such distribution is not so paid or made, the conversion rate shall be
decreased to be the conversion rate that would then be in effect if such distribution had not been declared. Notwithstanding the foregoing, if FMV (as defined above) is equal to or greater than SP0 (as defined above), then, in lieu of the foregoing increase, each holder of a note shall receive, in respect of each $1,000 principal amount of notes it holds, at the same time and upon the
same terms as holders of our common stock, the amount and kind of our capital stock, evidences of our indebtedness, other assets or property of ours or rights, options or warrants to acquire our capital stock or other securities that such holder
would have received if such holder owned a number of shares of common stock equal to the conversion rate in effect on the ex-dividend date for the distribution.
With respect to an adjustment pursuant to this clause (3) where there has been a payment of a dividend or other distribution on our
common stock of shares of capital stock of any class or series, or similar equity interest, of or relating to any of our subsidiaries or other business units, that are, or, when issued, will be, listed or admitted for trading on a U.S. national
securities exchange, which we refer to as a spin-off, the conversion rate will be increased based on the following formula:
where,
CR0 =
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the conversion rate in effect immediately prior to the end of the valuation period (as defined below);
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CR1 =
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the conversion rate in effect immediately after the end of the valuation period;
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S-45
FMV0 =
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the average of the last reported sale prices of the capital stock or similar equity interest distributed to
holders of our common stock applicable to one share of our common stock (determined by reference to the definition of last reported sale price set forth under Conversion upon Satisfaction of Sale Price Condition as if references
therein to our common stock were to such capital stock or similar equity interest) over the first 10 consecutive trading day period after, and including, the ex-dividend date of the spin-off (the valuation period); and
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MP0 =
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the average of the last reported sale prices of our common stock over the valuation period.
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The increase to the conversion rate under the preceding paragraph will occur on the last trading day of the valuation
period; provided that (x) in respect of any conversion of notes for which physical settlement is applicable, if the relevant conversion date occurs during the valuation period, the reference to 10 in the preceding paragraph
shall be deemed replaced with such lesser number of trading days as have elapsed from, and including, the ex-dividend date for such spin-off to, and including, such
conversion date in determining the conversion rate and (y) in respect of any conversion of notes for which cash settlement or combination settlement is applicable, subject to the immediately succeeding sentence, for any trading day that falls
within the relevant observation period for such conversion and within the valuation period, the reference to 10 in the preceding paragraph shall be deemed replaced with such lesser number of trading days as have elapsed between the ex-dividend date for such spin-off and such trading day in determining the conversion rate as of such trading day. Further, if the
ex-dividend date for such spin-off is after the 10th trading day immediately preceding, and including, the end of any observation period in respect of a conversion of
notes, references to 10 or 10th in the preceding paragraph and this paragraph shall be deemed to be replaced, solely in respect of that conversion, with such lesser number of trading days as have elapsed from, and including,
the ex-dividend date for such spin-off to, and including, the last trading day of such observation period. If the distribution constituting the spin-off is not so paid or made, the conversion rate shall be decreased to the conversation rate that would be in effect if such distribution had not been declared.
(4)
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If any cash dividend or distribution is made to all or substantially all holders of our common stock, the
conversion rate will be adjusted based on the following formula:
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where,
CR0 =
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the conversion rate in effect immediately prior to the open of business on the
ex-dividend date for such dividend or distribution;
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CR1 =
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the conversion rate in effect immediately after the open of business on the
ex-dividend date for such dividend or distribution;
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SP0 =
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the last reported sale price of our common stock on the trading day immediately preceding the ex-dividend date for such dividend or distribution; and
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C =
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the amount in cash per share we distribute to all or substantially all holders of our common stock.
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Any increase made under this clause (4) shall become effective immediately after the open of business on the ex-dividend date for such dividend or distribution. If such dividend or distribution is not so paid, the conversion rate shall be decreased, effective as of the date our board of directors or a committee thereof
determines not to make or pay such dividend or distribution, to be the conversion rate that would then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if C (as defined above) is equal
to or greater than SP0 (as defined above), then, in lieu of the foregoing increase, each holder of a note shall receive, for each $1,000 principal amount of notes it holds, at the
same time and upon the same terms as holders of shares of our common stock, the amount of cash that such holder would have received if such holder owned a number of shares of our common stock equal to the conversion rate in effect on the ex-dividend date for such cash dividend or distribution.
S-46
(5)
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If we or any of our subsidiaries make a payment in respect of a tender or exchange offer for our common stock
(other than an odd-lot tender offer), to the extent that the cash and value of any other consideration included in the payment per share of common stock exceeds the average of the last reported sale prices of
our common stock over the 10 consecutive trading day period commencing on, and including, the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer, the conversion rate will be
increased based on the following formula:
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CR1=CR0 ×
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AC + (SP1 x OS1)
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OS1 x SP1
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where,
CR0 =
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the conversion rate in effect immediately prior to the close of business on the 10th trading day immediately
following, and including, the trading day next succeeding the date such tender or exchange offer expires;
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CR1 =
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the conversion rate in effect immediately after the close of business on the 10th trading day immediately
following, and including, the trading day next succeeding the date such tender or exchange offer expires;
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AC =
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the aggregate value of all cash and any other consideration (as determined by us in good faith) paid or payable
for shares purchased in such tender or exchange offer;
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OS0 =
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the number of shares of our common stock outstanding immediately prior to the date such tender or exchange
offer expires (prior to giving effect to the purchase of all shares accepted for purchase or exchange in such tender or exchange offer);
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OS1 =
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the number of shares of our common stock outstanding immediately after the date such tender or exchange offer
expires (after giving effect to the purchase of all shares accepted for purchase or exchange in such tender or exchange offer); and
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SP1 =
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the average of the last reported sale prices of our common stock over the 10 consecutive trading day period
commencing on, and including, the trading day next succeeding the date such tender or exchange offer expires.
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The
increase to the conversion rate under the preceding paragraph will occur at the close of business on the 10th trading day immediately following, and including, the trading day next succeeding the date such tender or exchange offer expires;
provided that (x) in respect of any conversion of notes for which physical settlement is applicable, if the relevant conversion date occurs during the 10 trading days immediately following, and including, the trading day next succeeding
the expiration date of any tender or exchange offer, references to 10 or 10th in the preceding paragraph shall be deemed replaced with such lesser number of trading days as have elapsed from, and including, the expiration
date of such tender or exchange offer to, and including, such conversion date in determining the conversion rate and (y) in respect of any conversion of notes for which cash settlement or combination settlement is applicable, subject to the
immediately succeeding sentence, for any trading day that falls within the relevant observation period for such conversion and within the 10 trading days immediately following, and including, the trading day next succeeding the expiration date of
any tender or exchange offer, references to 10 or 10th in the preceding paragraph shall be deemed replaced with such lesser number of trading days as have elapsed from, and including, the expiration date of such tender or
exchange offer to, and including, such trading day in determining the conversion rate as of such trading day. Further, if the trading day next succeeding the date such tender or exchange offer expires is after the 10th trading day immediately
preceding, and including, the end of any observation period in respect of a conversion of notes, references to 10 or 10th in the preceding paragraph and this paragraph shall be deemed to be replaced, solely in respect of that
conversion, with such lesser number of trading days as have elapsed from, and including, the trading day next succeeding the date such tender or exchange offer expires to, and including, the last trading day of such observation period.
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Notwithstanding the foregoing, if:
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a conversion rate adjustment for any event becomes effective on any
ex-dividend date as described above;
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a note is to be converted pursuant to physical settlement or combination settlement;
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the conversion date for such conversion (in the case of physical settlement) or any trading day in the
observation period for such conversion (in the case of combination settlement) occurs on or after such ex-dividend date and on or before the related record date;
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the consideration due upon such conversion (in the case of physical settlement) or due with respect to such
trading day (in the case of combination settlement) includes any whole shares of common stock; and
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the holder of such note would be treated, on such record date, as the record holder of such shares of common
stock based on a conversion rate that is adjusted for such event on such basis, then such conversion rate adjustment will not be given effect for such conversion (in the case of physical settlement) or for such trading day (in the case of
combination settlement). Instead, such holder will be treated as if such holder were, as of such record date, the record owner of such shares of common stock on an unadjusted basis and will participate in such event.
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In addition, notwithstanding the foregoing, if:
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a note is to be converted and, as of the conversion date for such conversion (in the case of physical settlement)
or as of any trading day in the observation period for such conversion (in the case of combination settlement), the record date or effective date for any event that requires an adjustment to the conversion rate as described above has occurred but an
adjustment to the conversion rate for such event has not yet become effective;
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the consideration due upon such conversion (in the case of physical settlement) or due in respect of such trading
day (in the case of combination settlement) consists of any whole shares of common stock; and
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such shares are not entitled to participate in such event (because they were not held on the related record date
or otherwise),
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then, solely for purposes of such conversion, we will, without duplication, give effect to such
adjustment on such conversion date (in the case of physical settlement) or such trading day (in the case of combination settlement).
Except as stated herein, we will not adjust the conversion rate for the issuance of shares of our common stock or any securities convertible
into or exchangeable for shares of our common stock or the right to purchase shares of our common stock or such convertible or exchangeable securities.
As used in this section, ex-dividend date means the first date on which the shares of our
common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question, from us or, if applicable, from the seller of our common stock on such exchange
or market (in the form of due bills or otherwise) as determined by such exchange or market, and effective date means the first date on which the shares of our common stock trade on the applicable exchange or in the applicable market,
regular way, reflecting the relevant share split or share combination, as applicable.
As used in this section, record date
means, with respect to any dividend, distribution or other transaction or event in which the holders of our common stock (or other applicable security) have the right to receive any cash, securities or other property or in which our common stock (or
such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of our common stock
S-48
(or such other security) entitled to receive such cash, securities or other property (whether such date is fixed by our board of directors or a duly authorized committee thereof, statute,
contract or otherwise).
Subject to applicable stock exchange rules, we are permitted (but not required) to increase the conversion rate
of the notes by any amount for a period of at least 20 business days if our board of directors or a duly authorized committee thereof determines that such increase would be in our best interest. Subject to applicable stock exchange rules, we may
also (but are not required to) increase the conversion rate to avoid or diminish income tax to holders of our common stock or rights to purchase shares of our common stock in connection with a dividend or distribution of shares (or rights to acquire
shares) or similar event.
A holder may, in some circumstances, including a distribution of cash dividends to holders of our shares of
common stock, be deemed to have received a distribution subject to U.S. federal income tax as a result of an adjustment or the nonoccurrence of an adjustment to the conversion rate. For a discussion of the U.S. federal income tax treatment of an
adjustment to the conversion rate, see Material U.S. Federal Income Tax Considerations. Any applicable withholding taxes (including backup withholding) may be withheld from interest and payments upon conversion, repurchase or maturity of
the notes, or if any withholding taxes (including backup withholding) are paid on behalf of a holder, those withholding taxes may be set off against payments of cash or common stock, if any, payable on the notes (or, in some circumstances, any
payments on our common stock) or sales proceeds received by or other funds or assets of the holder.
If we have a rights plan in effect
upon conversion of the notes into common stock, you will receive, in addition to any shares of common stock received in connection with such conversion, the rights under the rights plan. However, if, prior to any conversion, the rights have
separated from the shares of common stock in accordance with the provisions of the applicable rights plan, the conversion rate will be adjusted at the time of separation as if we distributed to all or substantially all holders of our common stock,
shares of our capital stock, evidences of indebtedness, assets, property, rights, options or warrants as described in clause (3) above, subject to readjustment in the event of the expiration, termination or redemption of such rights.
Except as described above and under Increase in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change below,
the conversion rate will not be required to be adjusted for any transaction or event. Without limiting the foregoing, the conversion rate will not be required to be adjusted:
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upon the issuance of common stock at a price below the conversion price or otherwise;
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on account of share repurchases that are not tender offers referred to in clause (5) above, including
structured or derivative transactions, or pursuant to a share repurchase program approved by our board of directors or a duly authorized committee thereof or otherwise;
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upon the issuance of any shares of our common stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on our securities and the investment of additional optional amounts in shares of our common stock under any plan;
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upon the issuance of any shares of our common stock or options or rights to purchase those shares pursuant to any
present or future employee, director or consultant benefit plan or program of or assumed by us or any of our subsidiaries;
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upon the issuance of any shares of our common stock pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in the preceding bullet and outstanding as of the date the notes were first issued;
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for a third-party tender offer by any party other than a tender offer by one or more of our subsidiaries as
described in clause (5) above;
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solely for a change in the par value of the common stock; or
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for accrued and unpaid interest, if any.
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Adjustments to the conversion rate will be calculated to the nearest 1/10,000th of a share.
If an adjustment to the conversion rate otherwise required by the provisions described above would result in a change of less than 1% to the
conversion rate, then, notwithstanding the foregoing, we may, at our election, defer and carry forward such adjustment, except that all such deferred adjustments must be given effect immediately upon the earliest to occur of the following:
(i) when all such deferred adjustments would result in an aggregate change of at least 1% to the conversion rate; (ii) the conversion date of, or any trading day of an observation period for, any note; (iii) the date a fundamental
change or make-whole fundamental change occurs; and (iv) October 1, 2024. The provisions described in the preceding sentence are referred to herein as the 1% provision.
Recapitalizations, Reclassifications and Changes of Our Common Stock
In the case of:
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any recapitalization, reclassification or change of our common stock (other than a change to par value, or from
par value to no par value, or changes resulting from a subdivision or combination),
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any consolidation, merger or combination involving us,
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any sale, lease or other transfer to a third party of the consolidated assets of ours and our subsidiaries
substantially as an entirety, or
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any statutory share exchange,
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in each case, as a result of which our common stock would be converted into, or exchanged for, stock, other securities, other property or
assets, including cash or any combination thereof (such transaction, a common stock change event), then, at and after the effective time of the transaction, the right to convert each $1,000 principal amount of notes will be changed into
a right to convert such principal amount of notes into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of shares of common stock equal to the
conversion rate immediately prior to such transaction would have owned or been entitled to receive (the reference property) upon such transaction. However, at and after the effective time of the transaction, (i) we will continue to
have the right to elect physical settlement, cash settlement or combination settlement with respect to conversions to the extent described under Settlement upon Conversion and (ii)(w) any amount payable in cash upon conversion of
the notes as set forth under Settlement upon Conversion will continue to be payable in cash, (x) any shares of our common stock that we would have been required to deliver upon conversion of the notes as set forth under
Settlement upon Conversion will instead be deliverable in the amount and type of reference property that a holder of that number of shares of our common stock would have received in such transaction, (y) the daily VWAP will be
calculated based on the value of the kind and amount of reference property that a holder of one share of our common stock would have received in such transaction (the reference property unit), and (z) the conditions to conversion
described under the headings Conversion upon Satisfaction of Sale Price Condition, Conversion upon Satisfaction of Trading Price Condition and Conversion upon Specified Corporate Events will be
determined as if each reference to a share of common stock were instead a reference to a reference property unit. If the transaction causes our common stock to be converted into, or exchanged for, the right to receive more than a single type of
consideration (determined based in part upon any form of stockholder election), the reference property into which the notes will be convertible will be deemed to be the weighted average of the types and amounts of consideration actually received by
the holders of our common stock. We will notify in writing the holders, the trustee and the conversion agent (if other than the trustee) of the weighted average as soon as reasonably practicable after such determination is made. If the holders of
our common stock receive only cash in such transaction, then for all conversions that occur after the effective date of such transaction (i) the consideration due upon conversion of each $1,000 principal amount of notes shall be solely cash in
an amount equal to the conversion rate in effect on the conversion date (as may be increased as described under Increase in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change), multiplied
S-50
by the cash price paid per share of common stock in such transaction and (ii) we will satisfy our conversion obligation by paying cash to converting holders on or before the second business
day immediately following the conversion date. We will agree in the indenture not to become a party to any such transaction unless its terms are consistent with the foregoing.
The supplemental indenture providing that the notes will be convertible as provided above will also provide for anti-dilution and other
adjustments that are as nearly equivalent as possible to the adjustments described under Conversion Rate Adjustments above in a manner that we reasonably deem appropriate to preserve the economic interests of holders of the notes.
If the reference property in respect of any such transaction includes shares of stock, securities or other property or assets of a company other than us or the successor or purchasing corporation, as the case may be, in such transaction, such other
company will also execute such supplemental indenture, and such supplemental indenture will contain such additional provisions to protect the interests of the holders, including the right of holders to require us to repurchase their notes upon a
fundamental change as described under Fundamental Change Permits Holders to Require Us to Repurchase Notes below, as we reasonably consider necessary by reason of the foregoing.
Adjustments of Prices
Whenever any provision of the indenture requires us to calculate the last reported sale prices, the daily VWAPs, the daily conversion values or
the daily settlement amounts over a span of multiple days (including an observation period and the stock price for purposes of a make-whole fundamental change), we will make appropriate adjustments to each to account for any adjustment
to the conversion rate that becomes effective, or any event requiring an adjustment to the conversion rate where the ex-dividend date, effective date or expiration date of the event occurs, at any time during
the period when the last reported sale prices, the daily VWAPs, the daily conversion values or the daily settlement amounts are to be calculated.
For the avoidance of doubt, the adjustments made pursuant to the foregoing paragraph will be made, solely to the extent we determine in our
good faith judgment that any such adjustment is necessary, without duplication of any adjustment made pursuant to the provision set forth under Conversion Rate Adjustments.
Increase in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change
If the effective date (as defined below) of a fundamental change (as defined below and determined after giving effect
to any exceptions to or exclusions from such definition, but without regard to the proviso in clause (2) of the definition thereof, a make-whole fundamental change) occurs prior to the maturity date of the notes and a holder elects
to convert its notes in connection with such make-whole fundamental change, we will, under certain circumstances, increase the conversion rate for the notes so surrendered for conversion by a number of additional shares of common stock (the
additional shares), as described below. A conversion of notes will be deemed for these purposes to be in connection with such make-whole fundamental change if the relevant notice of conversion of the notes is received by the
conversion agent from, and including, the effective date of the make-whole fundamental change up to, and including, the business day immediately prior to the related fundamental change repurchase date (or, in the case of a make-whole fundamental
change that would have been a fundamental change but for the proviso in clause (2) of the definition thereof, the 35th trading day immediately following the effective date of such make-whole fundamental change) (such period, the
make-whole fundamental change period).
Upon surrender of notes for conversion in connection with a make-whole fundamental
change, we will, at our option, satisfy our conversion obligation by physical settlement, cash settlement or combination settlement, as described under Conversion RightsSettlement upon Conversion. However, if the
consideration for our common stock in any make-whole fundamental change described in clause (2) of the definition of fundamental change is composed entirely of cash, for any conversion of notes following the effective date of such make-whole
fundamental change, the conversion obligation will be calculated based solely on the stock price (as
S-51
defined below) for the transaction and will be deemed to be an amount of cash per $1,000 principal amount of converted notes equal to the conversion rate (including any increase to reflect the
additional shares as described in this section), multiplied by such stock price. In such event, the conversion obligation will be determined and paid to holders in cash on the second business day following the conversion date. We will notify
holders, the trustee and the conversion agent of the effective date of any make-whole fundamental change no later than five business days after such effective date.
The number of additional shares, if any, by which the conversion rate will be increased will be determined by reference to the table below,
based on the date on which the make-whole fundamental change occurs or becomes effective (the effective date) and the price (the stock price) paid (or deemed to be paid) per share of our common stock in the make-whole
fundamental change. If the holders of our common stock receive in exchange for their common stock only cash in a make-whole fundamental change described in clause (2) of the definition of fundamental change, the stock price will be the cash
amount paid per share. Otherwise, the stock price will be the average of the last reported sale prices of our common stock over the five consecutive trading day period ending on, and including, the trading day immediately preceding the effective
date of the make-whole fundamental change.
The stock prices set forth in the column headings of the table below will be adjusted as of
any date on which the conversion rate of the notes is otherwise adjusted. The adjusted stock prices will equal the stock prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the conversion rate
immediately prior to the adjustment giving rise to the stock price adjustment and the denominator of which is the conversion rate as so adjusted. The number of additional shares as set forth in the table below will be adjusted in the same manner and
at the same time as the conversion rate as set forth under Conversion Rate Adjustments.
The following table sets forth
the number of additional shares by which the conversion rate will be increased per $1,000 principal amount of notes for each stock price and effective date set forth below:
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Stock Price
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Effective Date
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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April , 2020
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April 1, 2021
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April 1, 2022
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April 1, 2023
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April 1, 2024
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April 1, 2025
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The exact stock prices and effective dates may not be set forth in the table above, in which case If the stock
price is between two stock prices in the table or the effective date is between two effective dates in the table, the number of additional shares by which the conversion rate will be increased will be determined by a straight-line interpolation
between the number of additional shares set forth for the higher and lower stock prices and the earlier and later effective dates, as applicable, based on a 365-day year.
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If the stock price is greater than $ per share (subject to
adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate.
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If the stock price is less than $ per share (subject to
adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate.
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Notwithstanding the foregoing, in no event will the conversion rate per $1,000 principal amount of notes exceed
shares of common stock, subject to adjustment in the same manner as the conversion rate as set forth under Conversion Rate Adjustments.
S-52
Our obligation to increase the conversion rate for notes converted in connection with a
make-whole fundamental change could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.
Exchange in Lieu of Conversion
When a
holder surrenders its notes for conversion, we may, at our election (an exchange election), cause such notes to be delivered, on or prior to the second business day following the conversion date, to a financial institution designated by
us for exchange in lieu of conversion. In order to accept any notes surrendered for conversion, the designated institution must agree to timely deliver, in exchange for such notes, cash, shares of our common stock or a combination of cash and shares
of our common stock, at our election, that would otherwise be due upon conversion as described above under Conversion RightsSettlement upon Conversion or such other amount agreed to by such holder and the designated financial
institution(s) (the conversion consideration). If we make an exchange election, we will, by the close of business on the second business day following the relevant conversion date, notify in writing the holder surrendering its notes for
conversion, the trustee and the conversion agent (if other than the trustee) that we have made the exchange election and we will notify the designated financial institution of the relevant deadline for delivery of the conversion consideration. We,
the holder surrendering the notes for conversion, the designated financial institution and the conversion agent shall cooperate to cause such notes to be delivered to the designated financial institution and the conversion agent shall be entitled to
conclusively rely upon our instruction in connection with effecting any exchange election and shall have no liability for such exchange election outside its control.
Any notes exchanged by the designated institution will remain outstanding notwithstanding the surrender of such notes, and will be, subject to
applicable DTC procedures. If the designated institution agrees to accept any notes for exchange but does not timely deliver the related conversion consideration, or if such designated financial institution does not accept the notes for exchange, we
shall notify the conversion agent and the holder surrendering their notes for conversion and we will deliver the relevant conversion consideration as if we had not made an exchange election.
Our designation of a financial institution to which the notes may be submitted for exchange does not require such institution to accept any
notes.
Fundamental Change Permits Holders to Require Us to Repurchase Notes
If a fundamental change (as defined below in this section) occurs at any time, holders will have the right, at their option, to
require us to repurchase for cash all of their notes, or any portion of the principal thereof that is equal to minimum denominations of $1,000 or a multiple of $1,000 in excess thereof. The fundamental change repurchase date will be a date specified
by us that is not less than 20 or more than 35 calendar days following the date of our fundamental change notice as described below. The fundamental change purchase date shall be subject to postponement in order to allow us to comply with applicable
law as a result of changes to such applicable law occurring after the date of the indenture.
The fundamental change repurchase price we
are required to pay will be equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (unless the fundamental change repurchase date falls after a
regular record date but on or prior to the interest payment date to which such regular record date relates, in which case we will instead pay the full amount of accrued and unpaid interest to the holder of record on such regular record date, and the
fundamental change repurchase price will be equal to 100% of the principal amount of the notes to be repurchased).
S-53
A fundamental change will be deemed to have occurred at the time after the notes are
originally issued if any of the following occurs:
(1) a person or group within the meaning of
Section 13(d) of the Exchange Act, other than us, our wholly owned subsidiaries and our and their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act that discloses that such person or group has
become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of our common equity representing more than 50% of the voting power of our common equity;
(2) the consummation of (A) any recapitalization, reclassification or change of our common stock (other than changes
resulting from a subdivision or combination) as a result of which our common stock would be converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or merger of us pursuant to
which our common stock will be converted into or exchanged for cash, securities or other property or assets; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated
assets of us and our subsidiaries, taken as a whole, to any person other than one of our wholly owned subsidiaries; provided, however, that a transaction described in clause (B) in which the holders of all classes of our common equity
immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction in substantially the
same proportions as such ownership immediately prior to such transaction shall not be a fundamental change pursuant to this clause (2);
(3) our stockholders approve any plan or proposal for the liquidation or dissolution of us; or
(4) our common stock (or other common stock underlying the notes) ceases to be listed or quoted on any of The New York Stock
Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors).
A transaction or
transactions described in clauses (1) or (2) above will not constitute a fundamental change, however, if at least 90% of the consideration received or to be received by our common stockholders, excluding cash payments for fractional shares and
cash payments made pursuant to dissenters statutory appraisal rights, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global
Select Market or The NASDAQ Global Market (or any of their respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction or transactions the
notes become convertible into such consideration, excluding cash payments for fractional shares and cash payments made pursuant to dissenters statutory appraisal rights (subject to the provisions set forth above under Conversion
RightsSettlement upon Conversion).
If any transaction in which our common stock is replaced by the securities of another
entity occurs, following completion of any related make-whole fundamental change period (or, in the case of a transaction that would have been a fundamental change or a make-whole fundamental change but for the immediately preceding paragraph,
following the effective date of such transaction), references to us in the definition of fundamental change above shall instead be references to such other entity.
For purposes of the definition of fundamental change above, any transaction that constitutes a fundamental change pursuant to both
clause (1) and clause (2) (excluding the proviso to such clause (2)) of such definition will be deemed to be a fundamental change solely under clause (2) of such definition (subject to such proviso).
On or before the 20th day after the occurrence of a fundamental change, we will provide to all holders of the notes and the trustee,
conversion agent (if other than the trustee) and paying agent (in the case of a paying agent
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other than the trustee) a written notice of the occurrence of the fundamental change and of the resulting repurchase right. Such notice shall state:
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the events causing the fundamental change;
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the effective date of the fundamental change;
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the last date on which a holder may exercise the repurchase right;
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the fundamental change repurchase price;
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the fundamental change repurchase date;
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54.1
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the name and address of the paying agent and the conversion agent, if applicable;
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if applicable, the conversion rate and any adjustments to the conversion rate as a result of the fundamental
change;
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that the notes with respect to which a fundamental change repurchase notice has been delivered by a holder may be
converted only if the holder withdraws the fundamental change repurchase notice in accordance with the terms of the indenture; and
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the procedures that holders must follow to require us to repurchase their notes.
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Notwithstanding the foregoing, we will not be required to repurchase, or to make an offer to repurchase, the notes upon a fundamental change
if a third party makes such an offer in the same manner, at the same time and otherwise in compliance with the requirements for an offer made by us as set forth above and such third party purchases all notes properly surrendered and not validly
withdrawn under its offer in the same manner, at the same time and otherwise in compliance with the requirements for an offer made by us as set forth above.
Notwithstanding the foregoing, we will not be required to give such notice or repurchase the notes as described above upon a fundamental
change pursuant to clause (2) of the definition thereof (or a fundamental change pursuant to clause (2) which also results in a fundamental change pursuant to clause (1)) if (1) such fundamental change results in the notes becoming
convertible (pursuant to the provisions described above under Recapitalizations, Reclassifications and Changes of Our Common Stock) into an amount of cash per note greater than the fundamental change repurchase price (assuming the
maximum amount of accrued interest would be payable based on the latest possible fundamental change repurchase date) and (2) we provide timely notice of the holders right to convert their notes based on such fundamental change as
described above under Conversion RightsConversion upon Specified Corporate Events.
To exercise the fundamental
change repurchase right for certificated notes, you must deliver, on or before the business day immediately preceding the fundamental change repurchase date, the notes to be repurchased, duly endorsed for transfer, together with a written repurchase
notice, to the paying agent. Each repurchase notice must state:
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if certificated, the certificate numbers of your notes to be delivered for repurchase;
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the portion of the principal amount of notes to be repurchased, which must be $1,000 or a multiple thereof; and
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that the notes are to be repurchased by us pursuant to the applicable provisions of the notes and the indenture.
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If the notes are not in certificated form, such repurchase notice must comply with appropriate DTC procedures.
Holders of certificated notes may withdraw any repurchase notice (in whole or in part) by a written notice of withdrawal delivered to holders,
the trustee and the paying agent prior to the close of business on the business day immediately preceding the fundamental change repurchase date. The notice of withdrawal shall state:
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the principal amount of the withdrawn notes which must be $1,000 or a multiple thereof;
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if certificated notes have been issued, the certificate numbers of the withdrawn notes; and
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the principal amount, if any, which remains subject to the repurchase notice, which must be $1,000 or a multiple
thereof.
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If the notes are not in certificated form, such notice of withdrawal must comply with appropriate DTC
procedures.
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We will be required to repurchase the notes on the fundamental change repurchase date. Holders
who have exercised the repurchase right will receive payment of the fundamental change repurchase price on the later of (i) the fundamental change repurchase date and (ii) the time of book-entry transfer or the delivery of the notes. If
the paying agent holds money sufficient to pay the fundamental change repurchase price of the notes on the fundamental change repurchase date, then, with respect to the notes that have been properly surrendered for repurchase and have not been
validly withdrawn:
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the notes will cease to be outstanding and interest will cease to accrue (whether or not book-entry transfer of
the notes is made or whether or not the notes are delivered to the paying agent); and
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all other rights of the holder will terminate (other than the right to receive the fundamental change repurchase
price).
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In connection with any repurchase offer pursuant to a fundamental change repurchase notice, we will, if
required:
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comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act that may then be applicable;
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file a Schedule TO or any other required schedule under the Exchange Act; and
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otherwise comply with all federal and state securities laws in connection with any offer by us to repurchase the
notes,
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in each case, so as to permit the rights and obligations under this Fundamental Change Permits
Holders to Require Us to Repurchase Notes to be exercised in the time and in the manner specified in the indenture. However, to the extent that our obligations to offer to repurchase and to repurchase notes pursuant to the provisions described
above conflict with any law or regulation adopted after the date on which the notes are first issued and that is applicable to us, our compliance with such law or regulation will not be considered to be a default of those obligations.
No notes may be repurchased on any date at the option of holders upon a fundamental change if the principal amount of the notes has been
accelerated, and such acceleration has not been rescinded, on or prior to such date (except in the case of an acceleration resulting from a default by us in the payment of the fundamental change repurchase price with respect to such notes).
Notwithstanding anything to the contrary, we will be deemed to satisfy our obligations to repurchase notes pursuant to the provisions
described above if one or more third parties conduct the repurchase offer and repurchase tendered notes in a manner that would have satisfied our obligations to do the same if conducted directly by us.
The repurchase rights of the holders could discourage a potential acquirer of us. The fundamental change repurchase feature, however, is not
the result of managements knowledge of any specific effort to obtain control of us by any means or part of a plan by management to adopt a series of anti-takeover provisions.
The term fundamental change is limited to specified transactions and may not include other events that might adversely affect our financial
condition. In addition, the requirement that we offer to repurchase the notes upon a fundamental change may not protect holders in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving us.
Furthermore, holders may not be entitled to require us to repurchase their notes upon a fundamental change or entitled to an increase in the
conversion rate upon conversion as described under Increase in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change in certain circumstances involving a significant change in the composition of our board, unless
such change is in connection with a fundamental change or a make-whole fundamental change as described herein.
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The definition of fundamental change includes a phrase relating to the sale, lease or other
transfer of all or substantially all of our consolidated assets. There is no precise, established definition of the phrase substantially all under applicable law. Accordingly, the ability of a holder of the notes to require
us to repurchase its notes as a result of the sale, lease or other transfer of less than all of our assets may be uncertain.
If a
fundamental change were to occur, we may not have enough funds to pay the fundamental change repurchase price. Our ability to repurchase the notes for cash may be limited by restrictions on our ability to obtain funds for such repurchase through
dividends from our subsidiaries, the terms of our then existing borrowing arrangements or otherwise. See Risk FactorsRisks Related to the NotesWe may not have the ability to raise the funds necessary to repurchase the notes or the
outstanding 2021 Notes for cash upon a fundamental change or to settle for cash conversions of the notes or the outstanding 2021 Notes, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes
or the outstanding 2021 Notes. If we fail to repurchase the notes when required following a fundamental change, we will be in default under the indenture. In addition, we have, and may in the future incur, other indebtedness with similar
change in control provisions permitting our holders to accelerate or to require us to repurchase our indebtedness upon the occurrence of similar events or on some specific dates.
Consolidation, Merger and Sale of Assets
The indenture will provide that we shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially
all of our properties and assets to, another person, unless (i) the resulting, surviving or transferee person (if not us) 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 us) expressly assumes by supplemental indenture all of our obligations under the 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. Upon any such consolidation, merger or sale, conveyance, transfer or lease, the resulting, surviving or transferee person (if not us) shall succeed to, and may exercise every right and power of, ours
under the indenture, and we shall be discharged from our obligations under the notes and the indenture except in the case of any such lease.
Although these types of transactions will be permitted under the indenture, certain of the foregoing transactions could constitute a
fundamental change permitting each holder to require us to repurchase the notes of such holder as described above.
Events of Default
Each of the following is an event of default with respect to the notes:
(1) default in any payment of interest on any note when due and payable and the default continues for a period of 30 days;
(2) default 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) our 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 five business days;
(4) our failure to give (i) a fundamental change notice as described under Fundamental Change Permits Holders
to Require Us to Repurchase Notes, or (ii) notice of a make-whole fundamental change as described under Increase in Conversion Rate upon Conversion upon a Make-Whole Fundamental Change, or (iii) notice of a
specified corporate transaction as described under Conversion RightsConversion upon Specified Corporate Events, in each case when due and (in the case of clause (i) or (ii) only) such failure continues for five business
days;
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(5) our failure to comply with our obligations under Consolidation,
Merger and Sale of Assets;
(6) our failure for 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 our other agreements contained in the notes or indenture;
(7) default by us or any of our significant subsidiaries (as defined below) 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 $30,000,000 (or its foreign currency equivalent) in the aggregate of us and/or any such
subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt
when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, in each case after the expiration of any applicable grace period, if such default is not cured or waived, or such acceleration is
not rescinded within 30 days after written notice to us by the trustee or to us and the trustee by holders of at least 25% in aggregate principal amount of notes then outstanding, in accordance with the indenture;
(8) certain events of bankruptcy, insolvency, or reorganization of us or any of our significant subsidiaries, as defined in
Article 1, Rule 1-02 of Regulation S-X; or
(9) a final judgment or judgments for the payment of $30,000,000 (or its foreign currency equivalent) or more (excluding any
amounts covered by insurance) in the aggregate rendered against us or any of our subsidiaries, which judgment is not discharged, bonded, paid, waived 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.
Significant
subsidiary of any person means any subsidiary of that person that constitutes a significant subsidiary (as defined in Rule 1-02(w) of Regulation S-X
under the Exchange Act) of that person; provided, however, that, if a subsidiary meets the criteria of clause (3) of the definition of significant subsidiary in Rule 1-02(w) but
not clause (1) or (2) thereof, then such subsidiary will not be deemed not to be a significant subsidiary of that person unless such subsidiarys income from continuing operations before income taxes, exclusive of amounts attributable to
any non-controlling interests, for the last completed fiscal year before the date of determination exceeds $30,000,000.
If an event of default occurs and is continuing, the trustee by notice to us, or the holders of at least 25% in principal amount of the
outstanding notes by notice to us and the trustee, may declare 100% of the principal of and accrued and unpaid interest, if any, on all the notes to be due and payable. In case of certain events of bankruptcy, insolvency or reorganization, involving
us, 100% of the principal of and accrued and unpaid interest on the notes will automatically become due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable
immediately.
Notwithstanding the foregoing, the indenture will provide that, to the extent we elect, the sole remedy for an event of
default relating to (i) our failure to file with the trustee pursuant to Section 314(a)(1) of the Trust Indenture Act any documents or reports that we are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act or (ii) our failure to comply with our obligations as set forth under Reports below, will after the occurrence of such an event of default consist exclusively of the right to receive additional interest on the notes at a
rate equal to (i) 0.25% per annum of the principal amount of the notes outstanding for the first 180 days during which such event of default has occurred and is continuing, beginning on, and including, the date on which such an event of default
first occurs and (ii) 0.50% per annum of the principal amount of the notes outstanding for each day during the next 185-day period during which such event of default is continuing beginning on, and including,
the 181st day after such an event of default first occurred. However, in no event will additional interest exceed an aggregate rate of 0.50% per annum on any note.
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If we so elect, such additional interest will be payable in the same manner and on the same dates
as the stated interest payable on the notes. On the 366th day after such event of default (if the event of default relating to the reporting obligations is not cured or waived prior to such 366th day), the notes will be subject to acceleration as provided above. The provisions of the indenture described in this paragraph will not affect the rights of holders of notes in the event of the
occurrence of any other event of default. In the event we do not elect to pay the additional interest following an event of default in accordance with this paragraph or we elected to make such payment but do not pay the additional interest when due,
the notes will be immediately subject to acceleration as provided above.
In order to elect to pay the additional interest as the sole
remedy during the first 365 days after the occurrence of an event of default relating to the failure to comply with the reporting obligations in accordance with the immediately preceding paragraph, we must notify all holders of notes, the trustee
and the paying agent of such election prior to the beginning of such 365-day period. Upon our failure to timely give such notice, the notes will be immediately subject to acceleration as provided above.
If any portion of the amount payable on the notes upon acceleration is considered by a court to be unearned interest (through the allocation
of the value of the instrument to the embedded warrant or otherwise), the court could disallow recovery of any such portion.
The holders
of a majority in principal amount of the outstanding notes may waive all past defaults (except with respect to nonpayment of principal or interest or with respect to the failure to deliver the consideration due upon conversion) and rescind any such
acceleration with respect to the notes and its consequences if (i) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (ii) all existing events of default, other than the nonpayment of the
principal of and interest on the notes that have become due solely by such declaration of acceleration, have been cured or waived.
Each
holder shall have the right to receive payment or delivery, as the case may be, of:
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the principal (including the fundamental change repurchase price, if applicable) of;
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accrued and unpaid interest, if any, on; and
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the consideration due upon conversion of,
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its notes, on or after the respective due dates expressed or provided for in the indenture, or to institute suit for the enforcement of any
such payment or delivery, as the case may be, and such right to receive such payment or delivery, as the case may be, on or after such respective dates shall not be impaired or affected without the consent of such holder.
If an event of default occurs and is continuing, the trustee will be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders unless such holders have offered, and if requested, provided to the trustee indemnity or security satisfactory to it against any loss, liability or expense. Except to enforce the right to
receive payment of principal or interest when due, or the right to receive payment or delivery of the consideration due upon conversion, no holder may pursue any remedy with respect to the indenture or the notes unless:
(1) such holder has previously given the trustee notice that an event of default is continuing;
(2) holders of at least 25% in principal amount of the outstanding notes have requested the trustee to pursue the remedy;
(3) such holders have offered, and if requested, provided the trustee security or indemnity satisfactory to it against any
loss, liability or expense;
(4) the trustee has not complied with such request within 60 days after the receipt of the
request and the offer of such security or indemnity; and
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(5) the holders of a majority in principal amount of the outstanding notes have
not given the trustee a direction that, in the opinion of the trustee, is inconsistent with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount of the outstanding notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to the trustee or of exercising any trust or power conferred on the trustee.
The indenture will provide that in the event an event of default has occurred and is continuing, the trustee will be required in the exercise
of its powers to use the degree of care that a prudent person would use in the conduct of its own affairs. The trustee, however, may refuse to follow any direction that conflicts with law or the indenture or that the trustee determines is unduly
prejudicial to the rights of any other holder or that would involve the trustee in personal liability (it being understood that the trustee does not have an affirmative duty to determine whether any direction is prejudicial to any holder). Prior to
taking any action under the indenture, the trustee will be entitled to indemnification satisfactory to it against any loss, liability or expense caused by taking or not taking such action.
The indenture will provide that if a default occurs and is continuing and is actually known to a responsible officer of the trustee, the
trustee must mail to each holder notice of the default within 90 days after it obtains actual knowledge thereof. Except in the case of a default in the payment of principal of or interest on any note or a default in the payment or delivery of the
consideration due upon conversion, the trustee may withhold notice if and so long as responsible officers of the trustee in good faith determines that withholding notice is in the interests of the holders. In addition, we are required to deliver to
the trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any default that occurred during the previous year. We are also required to deliver to the trustee, within 30 days after the
occurrence thereof, written notice of any events which would constitute certain defaults, their status and what action we are taking or proposing to take in respect thereof.
Payments of the fundamental change repurchase price, principal and interest that are not made when due will accrue interest per annum at the
then-applicable interest rate from the required payment date.
This Events of Default section replaces the section of
the accompanying prospectus under the heading Description of Debt SecuritiesEvents of Default in its entirety.
Modification and
Amendment
Subject to certain exceptions, the indenture or the notes may be amended with the consent of the holders of at least a
majority in principal amount of the notes then outstanding (including without limitation, consents obtained in connection with a repurchase of, or tender or exchange offer for, notes) and, subject to certain exceptions, any past default or
compliance with any provisions may be waived with the consent of the holders of a majority in principal amount of the notes then outstanding (including, without limitation, consents obtained in connection with a repurchase of, or tender or exchange
offer for, notes). However, without the consent of each holder of an outstanding note affected, no amendment may, among other things:
(1) reduce the amount of notes whose holders must consent to an amendment;
(2) reduce the rate of or extend the stated time for payment of interest on any note;
(3) reduce the principal of or extend the stated maturity of any note;
(4) make any change that adversely affects the conversion rights of any notes;
(5) reduce the fundamental change repurchase price of any note or amend or modify in any manner adverse to the holders of notes
our obligation to make such payments, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise;
(6) make any note payable in money, or at a place of payment, other than that stated in the note;
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(7) change the ranking of the notes;
(8) impair the right of any holder to receive payment of principal and interest on such holders notes on or after the due
dates therefor or to institute suit for the enforcement of any payment on or with respect to such holders notes; or
(9) make any change in the amendment provisions that require each holders consent or in the waiver provisions.
Without the consent of any holder, we and the trustee may amend the indenture to:
(1) cure any ambiguity, omission, defect or inconsistency;
(2) provide for the assumption by a successor corporation of our obligations under the indenture;
(3) add guarantees with respect to the notes;
(4) secure the notes;
(5) add to our covenants or events of default for the benefit of the holders or surrender any right or power conferred upon us;
(6) make any change that does not adversely affect the rights of any holder in any material respect;
(7) in connection with any transaction described under Conversion RightsRecapitalizations, Reclassifications
and Changes of Our Common Stock above, provide that the notes are convertible into reference property, subject to the provisions described under Conversion RightsSettlement upon Conversion above, and make certain
related changes to the terms of the notes to the extent expressly required by the indenture;
(8) comply with any
requirement of the SEC in connection with the qualification of the indenture under the Trust Indenture Act;
(9) appoint a
successor trustee with respect to the notes;
(10) conform the provisions of the indenture to the Description of
Notes section in the preliminary prospectus supplement, as supplemented by the related pricing term sheet;
(11)
comply with the rules of any applicable securities depositary, including DTC, so long as such amendment does not adversely affect the rights of any holder in any material respect;
(12) irrevocably elect a settlement method or a specified dollar amount, or eliminate our right to elect a settlement method;
provided, however, that no such election or elimination will affect any settlement method theretofore elected (or deemed to be elected) with respect to any note pursuant to the provisions described above under the caption
Conversion RightsSettlement upon Conversion;
(13) provide for the issuance of additional notes; or
(14) increase the conversion rate as provided in the indenture.
Holders do not need to approve the particular form of any proposed amendment. It will be sufficient if such holders approve the substance of
the proposed amendment. After an amendment under the indenture becomes effective, we are required to send to the holders a notice briefly describing such amendment. However, the failure to give such notice to all the holders, or any defect in the
notice, will not impair or affect the validity of the amendment.
This Modification and Amendment section replaces the
section of the accompanying prospectus under the heading Description of Debt SecuritiesModification and Waiver in its entirety.
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Discharge
We may satisfy and discharge our obligations under the indenture (other than our obligations with respect to certain surviving rights of the
trustee) by delivering to the securities registrar for cancellation all outstanding notes or by depositing with the trustee or delivering to the holders, as applicable, after the notes have become due and payable, whether at maturity, at any
fundamental change repurchase date, upon conversion or otherwise, cash or cash and/or shares of common stock (or, if applicable, reference property), solely to satisfy outstanding conversions, as applicable, sufficient to pay all of the outstanding
notes and paying all other sums payable under the indenture by us. Such discharge is subject to terms contained in the indenture.
Calculations in
Respect of Notes
We will be responsible for making all calculations called for under the notes. These calculations include, but are
not limited to, determinations of the stock price, the last reported sale prices of our common stock, the daily VWAPs, the daily conversion values, the daily settlement amounts, accrued interest payable on the notes and the conversion rate of the
notes. We will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders of notes. We will provide a schedule of our calculations to each of the trustee and the conversion agent, and
each of the trustee and the conversion agent is entitled to rely conclusively upon the accuracy of our calculations without independent verification. We will forward our calculations to any holder of notes upon the request of that holder. The
trustee and conversion agent shall have no obligation to review or verify such calculations.
Reports
The indenture will provide that any documents or reports that we are required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act must be filed by us with the trustee within 15 days after the same are required to be filed with the SEC (giving effect to any grace period provided by Rule 12b-25 under the Exchange Act or any
similar or successor grace period). Documents filed by us with the SEC via the EDGAR system will be deemed to be filed with the trustee as of the time such documents are filed via EDGAR. Notwithstanding anything to the contrary, we shall in no event
be required to file with, or otherwise provide or disclose to, the trustee or any holder any information for which we are requesting (assuming such request has not been denied), or have received, confidential treatment from the SEC.
Trustee
Wilmington Trust, National
Association is the trustee, security registrar, bid solicitation agent, paying agent and conversion agent. Wilmington Trust, National Association, in each of its capacities, including without limitation as trustee, security registrar, bid
solicitation agent, paying agent and conversion agent, assumes no responsibility for the accuracy or completeness of the information concerning us or our affiliates or any other party contained in this document or the related documents or for any
failure by us or any other party to disclose events that may have occurred and may affect the significance or accuracy of such information.
We maintain banking relationships in the ordinary course of business with the trustee and its affiliates.
Governing Law
The indenture will provide
that it and the notes, and any claim, controversy or dispute arising under or related to the indenture or the notes, will be governed by and construed in accordance with the laws of the State of New York.
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Book-Entry, Settlement and Clearance
The Global Notes
The notes will be initially issued in the form of one or more registered notes in global form, without interest coupons (the global
notes). Upon issuance, each of the global notes will be deposited with the trustee as custodian for DTC and registered in the name of Cede & Co., as nominee of DTC.
Ownership of beneficial interests in a global note will be limited to persons who have accounts with DTC (DTC participants) or
persons who hold interests through DTC participants. We expect that under procedures established by DTC:
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upon deposit of a global note with DTCs custodian, DTC will credit portions of the principal amount of the
global note to the accounts of the DTC participants designated by the underwriters; and
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ownership of beneficial interests in a global note will be shown on, and transfer of ownership of those interests
will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the global note).
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Beneficial interests in global notes may not be exchanged for notes in physical, certificated form except in the limited circumstances
described below.
Book-Entry Procedures for the Global Notes
All interests in the global notes will be subject to the operations and procedures of DTC and, therefore, you must allow for sufficient time in
order to comply with these procedures if you wish to exercise any of your rights with respect to the notes. We provide the following summary of those operations and procedures solely for the convenience of investors. The operations and procedures of
DTC are controlled by that settlement system and may be changed at any time. Neither we nor the underwriters are responsible for those operations or procedures.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the State of New York;
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a banking organization within the meaning of the New York State Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of the Uniform Commercial Code; and
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a clearing agency registered under Section 17A of the Exchange Act.
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DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its
participants through electronic book-entry changes to the accounts of its participants. DTCs participants include securities brokers and dealers, including the underwriters; banks and trust companies; clearing corporations and other
organizations. Indirect access to DTCs system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a DTC participant, either
directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.
So long as DTCs nominee is the registered owner of a global note, that nominee will be considered the sole owner or holder of the notes
represented by that global note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a global note:
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will not be entitled to have notes represented by the global note registered in their names;
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will not receive or be entitled to receive physical, certificated notes; and
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will not be considered the owners or holders of the notes under the indenture for any purpose, including with
respect to the giving of any direction, instruction or approval to the trustee under the indenture.
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As a result, each
investor who owns a beneficial interest in a global note must rely on the procedures of DTC to exercise any rights of a holder of notes under the indenture (and, if the investor is not a participant or an indirect participant in DTC, on the
procedures of the DTC participant through which the investor owns its interest).
Payments of principal and interest with respect to the
notes represented by a global note will be made by the paying agent to DTCs nominee as the registered holder of the global note. Neither we nor the trustee nor the paying agent will have any responsibility or liability for the payment of
amounts to owners of beneficial interests in a global note, for any aspect of the records relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests.
Payments by participants and indirect participants in DTC to the owners of beneficial interests in a global note will be governed by
standing instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC.
Transfers between participants in DTC will be effected under DTCs procedures and will be settled in same- day funds.
Certificated Notes
Unless we agree otherwise, notes in physical, certificated form will be issued and delivered to each person that DTC identifies as a beneficial
owner of the related notes only if:
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DTC notifies us at any time that it is unwilling or unable to continue as depositary for the global notes and a
successor depositary is not appointed within 90 days;
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DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days; or
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an event of default with respect to the notes has occurred and is continuing and a holder requests that its notes
be issued in physical, certificated form.
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DESCRIPTION OF CONVERTIBLE NOTE HEDGE AND WARRANT TRANSACTIONS
In connection with the pricing of the notes, we expect to enter into convertible note hedge transactions with one or more of the underwriters
and/or their respective affiliates and/or other financial institutions (the option counterparties). The convertible note hedge transactions will cover, subject to anti-dilution adjustments substantially similar to those applicable to the
notes, the number of shares of our common stock underlying the notes. Concurrently with entering into the convertible note hedge transactions, we also expect to enter into warrant transactions with the option counterparties whereby we will sell to
the option counterparties warrants to purchase, subject to customary anti-dilution adjustments, up to the same number of shares of our common stock. The warrants will be settled on a net-share or net cash
basis at our election.
We intend to use approximately $
million of the net proceeds from this offering to pay the cost of the convertible note hedge transactions (after such cost is partially offset by the
proceeds to us from the sale of the warrant transactions). If the underwriters exercise their over-allotment option, we expect to sell additional warrants to the option counterparties and use a portion of the proceeds from the sale of the additional
notes, together with the proceeds from the sale of the additional warrants, to enter into additional convertible note hedge transactions with the option counterparties.
The convertible note hedge transactions are expected generally to reduce the potential dilution upon conversion of the notes and/or offset any
cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, in the event that the market price per share of our common stock, as measured under the terms of the convertible note hedge transactions,
is greater than the strike price of the convertible note hedge transactions, which initially corresponds to the conversion price of the notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion
rate of the notes. If, however, the market price per share of our common stock, as measured under the terms of the warrant transactions, exceeds the strike price of the warrants, there could nevertheless be dilution to the extent that such market
price exceeds the strike price of the warrants.
We will not be required to make any cash payments to the option counterparties or their
affiliates upon the exercise of the options that are a part of the convertible note hedge transactions, but we will be entitled to receive from them a number of shares of our common stock, an amount of cash or a combination thereof generally based
on the amount by which the market price per share of our common stock, as measured under the terms of the convertible note hedge transactions, is greater than the strike price of the convertible note hedge transactions during the relevant valuation
period under the convertible note hedge transactions. Additionally, if the market price per share of our common stock, as measured under the terms of the warrant transactions, exceeds the strike price of the warrants during the measurement period at
the maturity of the warrants, we will owe the option counterparties a number of shares of our common stock or, at our election, an amount of cash, in either case in an amount based on the excess of such market price per share of our common stock
over the strike price of the warrants.
The convertible note hedge transactions and the warrant transactions are separate transactions
entered into by us with the option counterparties, are not part of the terms of the notes and will not change the holders rights under the notes. As a holder of the notes, you will not have any rights with respect to the convertible note hedge
transactions or the warrant transactions.
For a discussion of the potential impact of any market or other activity by the option
counterparties or their respective affiliates in connection with these convertible note hedge and warrant transactions, see UnderwritingConvertible Note Hedge and Warrant Transactions and Risk FactorsRisks Related to
the NotesThe convertible note hedge and warrant transactions may affect the value of the notes and our common stock.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS
The following discussion is a summary of material U.S. federal income tax
considerations of the purchase, ownership and disposition of notes and the shares of our common stock into which the notes may be converted, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S.
federal tax laws, such as estate and gift tax laws, and any applicable state, local or foreign tax laws are not discussed. This summary is based upon provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable U.S. Treasury
regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may change or be
subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of the notes or the shares of our common stock into which the notes may be converted. We
have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase,
ownership and disposition of the notes and the shares of our common stock into which the notes may be converted.
Except where noted, this
summary addresses only a note or common stock held as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment) by a beneficial owner who purchased the note on original issuance for
cash at its issue price (i.e., the first price at which a substantial portion of the notes is sold for cash to persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers). In addition, this summary does not address any beneficial owner of the notes that participates in a repurchase of the 2021 Notes. This discussion does not address all U.S. federal income tax consequences relevant to holders
of a note or common stock (including the potential application of the Medicare contribution tax), nor does it address all tax consequences that may be relevant to such holders in light of their personal circumstances or particular situations, such
as:
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tax consequences to holders who may be subject to special tax treatment, including dealers in securities or
currencies, banks, financial institutions, regulated investment companies, real estate investment trusts, tax-exempt entities, insurance companies or traders in securities that elect to use a mark-to-market method of tax accounting for their securities;
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tax consequences to persons holding notes or common stock as a part of a hedging, integrated or conversion
transaction or a straddle, or persons deemed to sell notes or common stock under the constructive sale provisions of the Code;
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tax consequences to U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
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tax consequences to partnerships or other pass-through entities or arrangements, or investors that hold notes or
common stock through partnerships or other pass-through entities or arrangements;
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persons subject to special tax accounting rules as a result of any item of gross income with respect to the notes
or common stock being taken into account in an applicable financial statement;
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alternative minimum tax consequences, if any;
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any state, local or foreign tax consequences; and
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U.S. estate or gift tax consequences, if any.
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If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds notes or common stock, the tax treatment of
such partnership and a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding notes or common stock and the
partners in such partnerships should consult their tax advisors.
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THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. YOU SHOULD CONSULT
YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND COMMON STOCK ARISING UNDER OTHER U.S. FEDERAL
TAX LAWS (INCLUDING ESTATE AND GIFT TAX LAWS), UNDER THE LAWS OF ANY STATE,
LOCAL OR
NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
As used herein, a U.S.
holder is a beneficial owner of a note or common stock received upon conversion of a note that is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust, if it (i) is subject to the primary supervision of a court within the United States and one or more
U.S. persons have the authority to control all substantial decisions of the trust, or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
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A non-U.S. holder is a beneficial owner of a note or common stock received upon conversion
of a note that is an individual, corporation, estate or trust that is not a U.S. holder. Special rules may apply to certain non-U.S. holders such as corporations that accumulate earnings to avoid U.S. federal
income tax or, in certain circumstances, individuals who are U.S. expatriates. Consequently, non-U.S. holders should consult their tax advisors to determine the U.S. federal, state, local, foreign and other
tax consequences that may be relevant to them in light of their particular circumstances.
Consequences to U.S. Holders
Interest on the Notes
Stated interest on a note generally will be taxable to a U.S. holder as ordinary income at the time it is paid or accrued in accordance with
the U.S. holders usual method of accounting for tax purposes. It is anticipated, and this discussion assumes, that the notes will be issued with less than de minimis original issue discount for U.S. federal income tax purposes.
Additional Payments
In certain circumstances, we may be obligated to make payments on the notes in excess of stated principal and interest. We intend to take the
position that the foregoing contingencies should not cause the notes to be treated as contingent payment debt instruments under the applicable U.S. Treasury regulations. Assuming such position is respected, a U.S. holder would be required to include
in income the amount of any such additional payments at the time such payments are received or accrued in accordance with such U.S. holders method of accounting for U.S. federal income tax purposes. Our position is binding on a holder, unless
the holder discloses in the proper manner to the IRS that it is taking a different position. If the IRS successfully challenged our position, and the notes were treated as contingent payment debt instruments, U.S. holders would be required to accrue
interest income at a rate higher than the stated interest rate of the notes, regardless of the holders method of accounting, and to treat as ordinary income, rather than capital gain, any gain recognized on a sale, exchange, retirement or
redemption of a note (including all gain realized upon conversion, even if the U.S. holder receives shares of our common stock). This discussion assumes that the notes will not be considered contingent payment debt instruments. U.S. holders are
urged to consult their tax advisors regarding the potential application to the notes of the contingent payment debt instrument rules and the consequences thereof.
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Sale, Exchange, Redemption or Other Taxable Disposition of Notes
Except as provided below under Conversion of Notes, a U.S. holder generally will recognize gain or loss upon the sale,
exchange, redemption or other taxable disposition of a note (including an exchange with a designated financial institution in lieu of conversion, as described in Description of NotesExchange in Lieu of Conversion) equal to the
difference between the amount realized (less accrued but unpaid interest which will be treated as described above under Interest on the Notes) and such U.S. holders adjusted tax basis in the note. A U.S. holders
adjusted tax basis in a note generally will be equal to the amount that the U.S. holder paid for the note as increased by the amount of any constructive distribution included in income as described below under Constructive
Distributions..
Any gain or loss recognized on a taxable disposition of a note will be capital gain or loss. If, at the time of the
sale, exchange, redemption or other taxable disposition of a note, a U.S. holder held the note for more than one year, such gain or loss will be long-term capital gain or loss. Otherwise, such gain or loss will be short-term capital gain or loss. In
the case of certain non-corporate U.S. holders (including individuals) long-term capital gains are generally subject to a reduced rate of U.S. federal income tax. A U.S. holders ability to deduct capital
losses may be limited.
Conversion of Notes
If a U.S. holder presents a note for conversion, a U.S. holder may receive solely cash, solely common stock, or a combination of cash and
common stock in exchange for the note depending upon our chosen settlement method.
If a U.S. holder receives solely cash in exchange for
a note upon conversion, the U.S. holders gain or loss will be determined in the same manner as if the U.S. holder disposed of the notes in a taxable disposition (as described above under Sale, Exchange, Redemption or Other Taxable
Disposition of Notes).
If a U.S. holder receives solely common stock in exchange for notes upon conversion (excluding an exchange
with a designated financial institution in lieu of conversion, as described in Description of NotesExchange in Lieu of Conversion, which would be taxable as described above, under Sale, Exchange, Redemption or Other
Taxable Disposition of Notes), the U.S. holder generally will not recognize gain or loss upon the conversion of the notes into common stock except to the extent of (i) cash received in lieu of a fractional share and (ii) amounts
received with respect to accrued but unpaid interest (which will be treated as described above under Interest on the Notes).
The amount of gain or loss a U.S. holder will recognize on the receipt of cash in lieu of a fractional share will be equal to the difference
between the amount of cash the U.S. holder receives in respect of the fractional share and the pro rata portion of the U.S. holders adjusted tax basis in the note that is allocable to the fractional share. Any such gain or loss generally would
be capital gain or loss and would be long-term capital gain or loss, if at the time of the conversion, the note has been held for more than one year. The tax basis of shares of common stock received upon a conversion (other than shares attributable
to accrued but unpaid interest, the tax basis of which will equal their fair market value) will equal the adjusted tax basis of the note that was converted (excluding the portion of the adjusted tax basis that is allocable to any fractional share).
The U.S. holders holding period for the shares of common stock will include the period during which the U.S. holder held the notes, except that the holding period of any shares received with respect to accrued but unpaid interest will commence
on the day after the date of receipt.
As described below, the tax treatment of a conversion of a note into cash and common stock is
uncertain and subject to different characterizations, and U.S. holders should consult their tax advisors regarding the consequences of such a conversion.
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Treatment as a Recapitalization. If a combination of cash and common stock is received by
a U.S. holder upon conversion of a note (excluding an exchange with a designated financial institution in lieu of conversion, as described in Description of NotesExchange in Lieu of Conversion, which would be taxable as described
above, under Sale, Exchange, Redemption or Other Taxable Disposition of Notes), we intend to take the position that the notes are securities for U.S. federal income tax purposes and that the conversion should be treated as a
recapitalization for U.S. federal income tax purposes. In such case, gain, but not loss, would be recognized by the U.S. holder equal to the excess of the fair market value of our common stock and cash received (other than amounts attributable to
accrued but unpaid interest, which will be treated as described above under Interest on the Notes) over the U.S. holders adjusted tax basis in the note, but in no event would the gain recognized exceed the amount of cash
received (excluding any cash received in lieu of a fractional share or attributable to accrued but unpaid interest). The amount of gain or loss recognized on the receipt of cash in lieu of a fractional share would be equal to the difference between
the amount of cash received and the pro rata portion of the U.S. holders tax basis in our common stock received that is allocable to the fractional share, as described in the following paragraph. Any gain or loss recognized by a U.S. holder on
conversion of a note generally would be capital gain or loss and would be long-term capital gain or loss if, at the time of the conversion, the note has been held for more than one year.
The tax basis of our common stock received upon such a conversion (including any fractional share deemed to be received by the U.S. holder,
but excluding any common stock attributable to accrued but unpaid interest, the tax basis of which would equal its fair market value) would equal the adjusted tax basis of the note that was converted, reduced by the amount of any cash received
(excluding cash received in lieu of a fractional share or attributable to accrued but unpaid interest), and increased by the amount of gain, if any, recognized (other than gain recognized on any cash received with respect to a fractional share). A
U.S. holders holding period for common stock would include the period during which the U.S. holder held the note, except that the holding period of any common stock received with respect to accrued but unpaid interest would commence on the day
after our common stock is received.
Alternative Treatment as Part Conversion and Part Redemption. If the conversion of a note into
cash and common stock (excluding an exchange with a designated financial institution in lieu of conversion, as described in Description of NotesExchange in Lieu of Conversion, which would be taxable as described above, under
Sale, Exchange, Redemption or Other Taxable Disposition of Notes) were not treated as a recapitalization as discussed above, the cash payment received may be treated as proceeds from the sale of a portion of the note and taxed in the
manner described above under Sale, Exchange, Redemption or Other Taxable Disposition of Notes, in which case our common stock received on such a conversion would be treated as received upon a conversion of the other portion of the
note, which generally would not be taxable to a U.S. holder except to the extent of any common stock received with respect to accrued but unpaid interest. In that case, the U.S. holders adjusted tax basis in the note would generally be
allocated pro rata among our common stock received and the portion of the note that is treated as sold for cash based on the fair market value of our common stock and the cash. The holding period for our common stock received in the conversion would
include the holding period for the note, except that the holding period of any common stock received with respect to accrued but unpaid interest would commence on the day after our common stock is received.
Distributions
Distributions, if any, made on our common stock, other than certain pro rata distributions of common stock, generally will be included in
income of a U.S. holder of our common stock as ordinary dividend income to the extent of our current or accumulated earnings and profits. Distributions in excess of our current and accumulated earnings and profits will be treated as a return of
capital to the extent of a U.S. holders tax basis in our common stock and thereafter as capital gain from the sale or exchange of such common stock. Dividends received by a corporate U.S. holder may be eligible for a dividends received
deduction, subject to applicable limitations. Dividends received by certain non-corporate U.S. holders (including individuals), are generally taxed at the lower applicable long-term capital gains rates,
provided certain holding period and other requirements are satisfied.
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Constructive Distributions
The conversion rate of the notes will be adjusted in certain circumstances. Adjustments (or failures to make adjustments) that have the effect
of increasing a U.S. holders proportionate interest in our assets or earnings and profits may, in some circumstances, result in a deemed distribution to the U.S. holder for U.S. federal income tax purposes even though no cash is received.
Adjustments to the conversion rate made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing the dilution of the interest of the holders of the notes, however, will generally not result in a deemed distribution to
a U.S. holder.
Certain of the conversion rate adjustments provided in the notes (including, without limitation, adjustments in respect of
taxable dividends to holders of our common stock) will not qualify as being pursuant to a bona fide reasonable adjustment formula. If such adjustments are made, a U.S. holder will be deemed to have received a distribution even though the U.S. holder
has not received any cash as a result of such conversion rate adjustment. In addition, an adjustment to the conversion rate in connection with a make-whole fundamental change may be treated as a deemed distribution. Any deemed distribution will be
taxable as a dividend, return of capital or capital gain to the extent thereof as described above under Distributions.
However, it is unclear whether a constructive dividend deemed paid to a non-corporate U.S. holder
would be eligible for the lower applicable long-term capital gains rates as described above under Distributions. It is also unclear whether corporate holders would be entitled to claim the dividends received deduction with respect
to any such constructive dividends. Generally, a U.S. holders adjusted tax basis in a note will be increased to the extent any such constructive distribution is treated as a dividend. U.S. holders should consult their tax advisors on
the impact a constructive distribution may have on their holding period in the notes.
We are currently required to report the amount of
any deemed distributions on our website or to the IRS and holders of notes not exempt from reporting. The IRS proposed regulations addressing the amount and timing of deemed distributions, obligations of withholding agents and filing and notice
obligations of issuers. If adopted as proposed, the regulations would generally provide that (i) the amount of a deemed distribution is the excess of the fair market value of the right to acquire stock immediately after the conversion rate
adjustment over the fair market value of the right to acquire stock without the adjustment, (ii) the deemed distribution occurs at the earlier of the date the adjustment occurs under the terms of the note and the date of the actual distribution
of cash or property that results in the deemed distribution, (iii) subject to certain limited exceptions, a withholding agent is required to impose any applicable withholding on deemed distributions to a
non-U.S. holder and, if there is no associated cash payment, may set off its withholding obligations against payments on the notes (or, in some circumstances, any payments on our common stock) or sales
proceeds received by or other funds or assets of such holder and (iv) we are required to report the amount of any deemed distributions on our website or to the IRS and all holders of notes (including holders of notes that would otherwise be
exempt from reporting). The final regulations will be effective for deemed distributions occurring on or after the date of adoption, but holders of notes and withholding agents may rely on them prior to that date under certain circumstances.
Sale, Certain Redemptions or Other Taxable Dispositions of Common Stock
Upon the sale, certain redemptions or other taxable dispositions of our common stock, a U.S. holder generally will recognize gain or loss equal
to the difference between the amount realized and the U.S. holders tax basis in our common stock. Any gain or loss recognized on a taxable disposition of common stock will be capital gain or loss. Such capital gain or loss will be long-term
capital gain or loss if a U.S. holders holding period at the time of the sale, redemption or other taxable disposition of our common stock is more than one year. Long-term capital gains recognized by certain
non-corporate U.S. holders (including individuals) are generally subject to a reduced rate of U.S. federal income tax. The deductibility of capital losses is subject to limitations.
Possible Effect of the Change in Conversion Consideration After a Change in Control
In certain situations, the notes may become convertible or exchangeable into shares of an acquirer.
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Depending on the circumstances, such an adjustment could result in a deemed taxable exchange of the notes to a U.S. holder and the modified notes could be treated as newly issued at that time,
potentially resulting in the recognition of taxable gain or loss. Furthermore, depending on the circumstances, the U.S. federal income tax consequences of the exchange or conversion of the notes as well as the ownership of the notes and the shares
may be different from the U.S. federal income tax consequences addressed in this discussion.
Consequences to
Non-U.S. Holders
Interest on the Notes
Subject to the discussion below under Information Reporting and Backup WithholdingNon-U.S. Holders
and Foreign Account Tax Compliance Act, U.S. federal withholding tax will not be applied to any payment of interest on a note to a non-U.S. holder provided that:
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the non-U.S. holder does not actually or constructively own 10% or more
of the total combined voting power of all classes of our stock that are entitled to vote;
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the non-U.S. holder is not a controlled foreign corporation that is
related to us (actually or constructively) through stock ownership; and
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the non-U.S. holder provides its name and address, and certifies, under
penalties of perjury, that it is not a U.S. person (which certification may be made on an IRS Form W-8BEN or W-8BEN-E (or other
applicable form)) or (b) the non-U.S. holder holds the notes through certain foreign intermediaries and the non-U.S. holder and the foreign intermediaries satisfy
the certification requirements of applicable U.S. Treasury regulations.
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If a
non-U.S. holder cannot satisfy the requirements described above, payments of interest will be subject to the 30% U.S. federal withholding tax, unless the non-U.S. holder
provides the applicable withholding agent with a properly executed (i) IRS Form W-8BEN or W-8BEN-E (or other applicable
form) claiming an exemption from or reduction in withholding under an applicable income tax treaty or (ii) IRS Form W-8ECI (or other applicable form) stating that interest paid on the notes is not subject
to withholding tax because it is effectively connected with the non-U.S. holders conduct of a trade or business in the United States. If a non-U.S. holder is
engaged in a trade or business in the United States and interest on a note is effectively connected with the conduct of that trade or business and, if required by an applicable income tax treaty, is attributable to a permanent establishment, then
(although the non-U.S. holder will be exempt from the 30% withholding tax provided the certification requirements discussed above are satisfied) the non-U.S. holder will
be subject to U.S. federal income tax on that interest on a net income basis generally in the same manner as if the non-U.S. holder were a U.S. holder. In addition, if the
non-U.S. holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% (or lesser rate under an applicable income tax treaty) of its earnings and profits for the taxable year, subject
to adjustments, that are effectively connected with its conduct of a trade or business in the United States.
Dividends and
Constructive Distributions
Any dividends paid to a non-U.S. holder with respect to common
stock (and any deemed dividends resulting from certain adjustments, or failures to make adjustments, to the conversion rate of the notes, as discussed above under Consequences to U.S. HoldersConstructive Distributions) will be
subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business in the United States and, if required by an
applicable income tax treaty, are attributable to a U.S. permanent establishment, are not subject to the withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates.
Certain certification and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. Any such effectively connected income received
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by a foreign corporation also may, under certain circumstances, be subject to a branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Any
applicable withholding taxes (including backup withholding) with respect to deemed dividends may be withheld from interest and payments upon conversion, repurchase or maturity of the notes or if any withholding taxes (including backup withholding)
are paid on behalf of a holder, those withholding taxes may be set off against payments of cash or common stock, if any, payable on the notes (or, in some circumstances, any payments on our common stock) or sales proceeds received by, or other funds
or assets of such holder.
A non-U.S. holder of common stock or notes who wishes to claim the
benefit of an applicable income tax treaty rate is required to satisfy applicable certification and other requirements. If a non-U.S. holder is eligible for an exemption or a reduced rate of U.S. federal
withholding tax pursuant to an income tax treaty, it may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
Sale, Exchange, Certain Redemptions, Conversion or Other Taxable Dispositions of Notes or Common Stock
Subject to the discussion below under Information Reporting and Backup WithholdingNon-U.S.
Holders and Foreign Account Tax Compliance Act, any gain recognized by a non-U.S. holder on the sale, exchange (including an exchange with a designated financial institution in lieu of
conversion, as described in Description of NotesExchange in Lieu of Conversion), certain redemptions, conversion or other taxable disposition of a note or common stock will not be subject to U.S. federal income tax unless:
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that gain is effectively connected with the non-U.S. holders
conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment);
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the non-U.S. holder is an individual who is present in the United States
for 183 days or more in the taxable year of disposition, and certain other conditions are met; or
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we are or have been a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax
purposes during the shorter of the non-U.S. holders holding period or the five-year period ending on the date of disposition of the note or common stock, as the case may be.
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If you are a non-U.S. holder and you realize gain described in the first bullet point above, you will
be subject to tax at regular graduated U.S. federal income tax rates on the net gain derived from the sale, exchange, redemption, conversion or other taxable disposition of a note or common stock, generally in the same manner as if you were a U.S.
holder, and, if you are a foreign corporation, you additionally may be subject to a branch profits tax equal to 30% of your effectively connected earnings and profits, or at such lower rate as may be specified by an applicable income tax treaty. If
you are described in the second bullet point above, you will be subject to a flat 30% tax (or lower applicable income tax treaty rate) on the gain recognized on the sale, exchange, redemption, conversion or other taxable disposition of a note or
common stock (which gain may be offset by certain U.S.-source capital losses), even though you are not considered a resident of the United States. We believe we are not, and we do not anticipate becoming, a USRPHC for U.S. federal income tax
purposes.
Any amounts (including common stock) which a non-U.S. holder receives on a sale,
exchange, redemption, conversion or other taxable disposition of a note which are attributable to accrued but unpaid interest will be subject to U.S. federal income tax in accordance with the rules described above under Consequences to Non-U.S. HoldersInterest on the Notes.
Information Reporting and Backup Withholding
U.S. Holders
Information reporting requirements generally will apply to payments of interest (including additional
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interest, if any) and deemed dividends on the notes, dividends on our common stock and the proceeds of a sale of a note or common stock paid to a U.S. holder unless the U.S. holder is an exempt
recipient, and if requested, certifies as to that status. Backup withholding generally will apply to those payments if the U.S. holder fails to provide an appropriate certification with its correct taxpayer identification number or certification of
exempt status. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a U.S. holders U.S. federal income tax liability provided the required
information is timely furnished to the IRS.
Non-U.S. Holders
Generally, the amount of interest (including additional interest, if any) and deemed dividends on the notes and dividends on common stock to non-U.S. holders and the amount of tax, if any, withheld with respect to those payments must be reported annually to the IRS and to the non-U.S. holders. Copies of the
information returns reporting such interest, deemed dividends, dividends and withholding may also be made available to the tax authorities in a country in which the non-U.S. holder resides under the provisions
of an applicable income tax treaty. In general, a non-U.S. holder will not be subject to backup withholding with respect to payments of interest or deemed dividends on a note or dividends on common stock,
provided the statement described above in the last bullet point under Consequences to Non-U.S. HoldersInterest on the Notes has been received or the non-U.S. holder otherwise establishes an
exemption. In addition, a non-U.S. holder will be subject to information reporting and, depending on the circumstances, backup withholding with respect to payments of the proceeds of the sale of a note or
common stock conducted within the United States or through certain U.S.-related financial intermediaries, unless the statement described above has been received, or the non-U.S. holder otherwise establishes an
exemption. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a non-U.S. holders U.S. federal income tax liability, if any, provided the required
information is timely furnished to the IRS.
Foreign Account Tax Compliance Act
Sections 1471 through 1474 of the Code (commonly referred to as FATCA) generally impose withholding at a rate of 30% on interest
and dividends (including deemed dividends) paid on, and (subject to the proposed U.S. Treasury regulations discussed below) the gross proceeds of a disposition of, debt obligations or stock in a United States corporation paid to (i) a foreign
financial institution, or FFI, whether as a beneficial owner or intermediary, unless such institution enters into an agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S.
account holders of such institution (which would include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners), or qualifies for an exemption from these rules, and
(ii) a foreign entity that is not a financial institution (whether as a beneficial owner or intermediary for another foreign entity that is not a financial institution) unless such entity provides the withholding agent or U.S. tax authorities
with a certification identifying the substantial U.S. owners of the entity, which generally includes any U.S. person who directly or indirectly owns more than 10% of the entity, or qualifies for an exemption from these rules. A person that receives
payments through one or more FFIs may receive reduced payments as a result of FATCA withholding taxes if (i) any such FFI does not enter into such an agreement with the U.S. government and does not otherwise establish an exemption, or
(ii) such person is (a) a recalcitrant account holder or (b) itself an FFI that fails to enter into such an agreement or establish an exemption. FFIs located in jurisdictions that have an intergovernmental agreement with
the United States governing FATCA may be subject to different rules.
The applicable U.S. Treasury regulations and administrative guidance
provide that the FATCA withholding rules will apply to payments of interest and dividends (including deemed dividends) regardless of when they are made (or deemed made). While withholding under FATCA would have applied also to payments of gross
proceeds from a sale or other disposition of notes or stock on or after January 1, 2019, proposed U.S. Treasury regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed U.S.
Treasury regulations until final U.S. Treasury regulations are issued. Investors are encouraged to consult with their tax advisors regarding the implications of these rules on their investment in our notes and common stock.
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