PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 30th Floor New York, NY 10022
C&H Matter No. 1014-00001
DRAFT — May 1, 2023
PURCHASE AGREEMENT
$250,000,000
OPTIWAVE SEMICONDUCTOR CORP.
2.75% Convertible Senior Notes due 2028
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is dated as of [●], 2023, by and among:
(1) OPTIWAVE SEMICONDUCTOR CORP., a Delaware corporation (the "Company"), with its principal offices at 4800 Great America Parkway, Suite 1200, San Jose, California 95054 (Delaware Secretary of State file no. 5738291; Employer Identification Number 82-4917263);
(2) RIDGEPOINT CAPITAL MARKETS LLC, a Delaware limited liability company ("Ridgepoint"), acting as representative of the several Initial Purchasers named in Schedule I hereto (in such capacity, the "Representative"), with offices at 383 Madison Avenue, 22nd Floor, New York, New York 10179;
(3) HARBORSTONE SECURITIES INC., a Delaware corporation ("Harborstone"), with offices at 200 Vesey Street, Suite 3100, New York, New York 10281; and
(4) VELTHORN ZANTHOR & CO., a New York general partnership ("Velthorn Zanthor"), with offices at 750 Seventh Avenue, 18th Floor, New York, New York 10019.
Ridgepoint, Harborstone, and Velthorn Zanthor are referred to herein collectively as the "Initial Purchasers."
RECITALS
WHEREAS, the Company proposes to issue and sell $250,000,000 aggregate principal amount of its 2.75% Convertible Senior Notes due 2028 (the "Notes");
WHEREAS, the Notes will be issued pursuant to an Indenture (the "Indenture") to be entered into between the Company and Broadmere Trust Company, N.A., a national banking association, as trustee (the "Trustee");
WHEREAS, the Notes will be offered and sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 144A promulgated thereunder, to persons reasonably believed to be qualified institutional buyers ("QIBs") within the meaning of Rule 144A under the Securities Act;
WHEREAS, the Company proposes to grant to the Initial Purchasers an option to purchase up to an additional $37,500,000 aggregate principal amount of Notes (the "Option Notes") solely to cover over-allotments, if any;
WHEREAS, the Notes offered initially together with any Option Notes purchased pursuant to the exercise of the Over-Allotment Option (as defined below) are referred to herein collectively as the "Offered Notes";
WHEREAS, the Company intends to enter into privately negotiated capped call transactions (the "Capped Call Transactions") with certain financial institutions (the "Capped Call Counterparties") in connection with the offering of the Notes; and
WHEREAS, a preliminary offering memorandum (the "Preliminary Offering Memorandum") and a final offering memorandum (the "Final Offering Memorandum" and, together with the Preliminary Offering Memorandum, the "Offering Memorandum") will be prepared in connection with the offer and sale of the Notes.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF NOTES
(a) Purchase of Initial Notes. Subject to the terms and conditions set forth herein and in reliance upon the representations, warranties, and agreements of the parties herein contained, the Company agrees to issue and sell to the several Initial Purchasers, and each of the Initial Purchasers agrees, severally and not jointly, to purchase from the Company, the respective principal amount of Notes set forth opposite such Initial Purchaser's name in Schedule I hereto (as such Schedule I may be amended in accordance with Section 1(b) below). The aggregate principal amount of Notes to be purchased by the Initial Purchasers pursuant to this Section 1(a) shall be $250,000,000.
The purchase price for the Notes to be paid by each Initial Purchaser shall be 98.00% of the principal amount thereof (reflecting an initial purchasers' discount equal to 2.00% of the aggregate principal amount of such Notes). Based on the aggregate principal amount of $250,000,000, the total initial purchasers' discount payable on the initial Notes shall be $5,000,000. The allocation of the initial purchasers' discount among the several Initial Purchasers shall be in proportion to the respective principal amounts of Notes to be purchased by each Initial Purchaser as set forth in Schedule I hereto.
(b) Over-Allotment Option. The Company hereby grants to the Initial Purchasers an option (the "Over-Allotment Option"), exercisable by the Representative on behalf of the several Initial Purchasers, to purchase up to an additional $37,500,000 aggregate principal amount of Notes (the "Option Notes") at the same purchase price per $1,000 principal amount as the initial Notes described in Section 1(a) above (i.e., at a price equal to 98.00% of the principal amount thereof). The Over-Allotment Option may be exercised in whole or in part at any time and from time to time on or before the thirtieth (30th) day after the date of this Agreement, upon written notice from the Representative to the Company setting forth the aggregate principal amount of Option Notes to be purchased and the date on which such Option Notes are to be delivered. If the Over-Allotment Option is exercised with respect to fewer than all of the Option Notes, the Option Notes shall be purchased by the several Initial Purchasers in the same proportions as the initial Notes are to be purchased by such Initial Purchasers as set forth in Schedule I hereto (subject to such adjustments as the Representative may determine to eliminate fractional amounts).
If the Over-Allotment Option is exercised in full, the total aggregate principal amount of Notes to be purchased by the Initial Purchasers pursuant to this Agreement shall be $287,500,000, and the total initial purchasers' discount (including on the Option Notes) shall be $5,750,000.
(c) Structuring Fee. In addition to the initial purchasers' discount described in Section 1(a) and (b) above, the Company shall pay to Ridgepoint Capital Markets LLC a structuring fee equal to 0.25% of the base aggregate principal amount of $250,000,000, which structuring fee shall equal $625,000. The structuring fee shall be payable on the Closing Date (as defined in Section 2(a) below) by wire transfer of immediately available funds to an account designated by Ridgepoint Capital Markets LLC. The structuring fee shall be in addition to, and shall not reduce, the initial purchasers' discount payable to Ridgepoint Capital Markets LLC as set forth in Schedule I hereto.
SECTION 2. DELIVERY AND PAYMENT
(a) Closing. The closing for the purchase and sale of the initial Notes pursuant to Section 1(a) (the date of such closing, the "Closing Date") shall take place at 10:00 a.m., New York City time, on [●], 2023 (which is expected to be the third (3rd) business day following the date hereof), or at such other time and date as may be agreed upon in writing by the Company and the Representative. The closing shall take place at the offices of Calderwood & Harkness LLP, 600 Lexington Avenue, 30th Floor, New York, New York 10022, or remotely via electronic exchange of documents, as the Company and the Representative may mutually agree.
On the Closing Date, the Company shall deliver to the Initial Purchasers the Notes in global form (one or more "Global Notes") registered in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC"), through the facilities of DTC, against payment of the aggregate purchase price therefor by wire transfer of immediately available funds to an account at a bank acceptable to the Representative designated by the Company. The Notes shall bear the following identifiers: CUSIP No. 683742AA5; ISIN No. US683742AA53. The Global Notes shall be made available to the Representative for inspection and checking at least twenty-four (24) hours prior to the Closing Date at such location as shall be mutually agreed upon by the Company and the Representative.
(b) Option Closing. If and to the extent that the Over-Allotment Option is exercised in accordance with Section 1(b), the closing for the purchase and sale of the Option Notes (the date of each such closing, an "Option Closing Date") shall occur on a date specified by the Representative in the notice of exercise of the Over-Allotment Option, which date shall not be later than the third (3rd) business day after the date on which such notice of exercise is delivered to the Company. Delivery of, and payment for, the Option Notes shall be effected in the same manner as set forth in Section 2(a) above, with such modifications as the parties may reasonably agree in connection with the exercise of the Over-Allotment Option. All references in this Agreement to the "Closing Date" shall be deemed to include any Option Closing Date, and all representations, warranties, and conditions applicable to the Closing Date shall apply equally to any Option Closing Date, unless the context otherwise requires.
(c) Denominations. The Notes shall be issued in minimum denominations of $200,000 and integral multiples of $1,000 in excess thereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of the Initial Purchasers as of the date hereof and as of the Closing Date (and, if applicable, each Option Closing Date), as follows:
(a) Organization and Good Standing. The Company is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware (Secretary of State file no. 5738291). The Company has the requisite corporate power and authority to own, lease, and operate its properties and to conduct its business as presently conducted and as described in the Offering Memorandum. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased, or operated by it or the nature of its business makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Subsidiaries. Each subsidiary of the Company (as listed in the Offering Memorandum) is duly organized, validly existing, and in good standing under the laws of its respective jurisdiction of organization. Each such subsidiary has the requisite organizational power and authority to own, lease, and operate its properties and to conduct its business as presently conducted. Each such subsidiary is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where such qualification is necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All of the outstanding shares of capital stock or other equity interests of each subsidiary of the Company have been duly authorized, are validly issued, are fully paid and non-assessable, and are owned, directly or indirectly, by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim, or equity (except as described in the Offering Memorandum and except for liens arising under the Company's senior secured revolving credit facility with Crestline National Bank, N.A. as administrative agent). No outstanding options, warrants, or other rights exist to purchase any such capital stock or equity interests, other than as described in the Offering Memorandum.
(c) Capitalization. The authorized capital stock of the Company is as set forth in the Offering Memorandum under the caption "Description of Capital Stock." As of the most recent practicable date set forth in the Offering Memorandum, the Company had approximately 58.6 million diluted shares of common stock outstanding. The Company's shares of common stock are listed on The Nasdaq Stock Market under the ticker symbol "OWS." All outstanding shares of common stock of the Company have been duly authorized, are validly issued, fully paid, and non-assessable, and have been issued in compliance with all applicable federal and state securities laws. The shares of common stock issuable upon conversion of the Notes (up to approximately 2,645,500 shares based on the initial Notes, or approximately 3,042,325 shares assuming the exercise in full of the Over-Allotment Option) have been duly authorized and reserved for issuance by the Company and, when issued upon conversion of the Notes in accordance with the terms of the Notes and the Indenture, will be validly issued, fully paid, and non-assessable, and will not be subject to any preemptive or similar rights. No preemptive rights or other rights to subscribe for or purchase any shares of common stock of the Company exist with respect to the issuance and sale of the Notes or the shares of common stock issuable upon conversion thereof, by virtue of the Company's certificate of incorporation, bylaws, or any agreement or instrument to which the Company is a party or by which it is bound.
(d) Authorization. The Company has all requisite corporate power and authority to execute, deliver, and perform its obligations under this Agreement, the Indenture, the Notes, and the Capped Call Transactions (collectively, the "Transaction Documents"). The execution, delivery, and performance by the Company of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby (including the issuance and sale of the Notes, the issuance of shares of common stock upon conversion thereof, and the entry into the Capped Call Transactions), have been duly authorized by all necessary corporate action on the part of the Company, including resolutions of the Board of Directors of the Company (which resolutions are expected to be adopted on May 19, 2023) and resolutions of the Pricing Committee of the Board of Directors (which resolutions are expected to be adopted on the Pricing Date). This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws affecting the enforcement of creditors' rights generally, (ii) general principles of equity, whether enforcement is sought in a proceeding in equity or at law, and (iii) the discretion of the court before which any proceeding therefor may be brought (collectively, the "Enforceability Exceptions").
(e) The Indenture and the Notes. The Indenture has been duly authorized by the Company and, when executed and delivered by the Company and the Trustee, will constitute a legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Enforceability Exceptions. The Notes have been duly authorized by the Company and, when executed by the Company and authenticated and delivered by the Trustee in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, will constitute legal, valid, and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to the Enforceability Exceptions, and will be entitled to the benefits of the Indenture.
The Notes will be convertible into shares of common stock of the Company in accordance with the terms of the Indenture at an initial conversion rate of 10.5820 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $94.50 per share of common stock), representing an approximately 28.8% premium over the reference price of $73.38 per share of common stock. The Notes shall bear interest at the rate of 2.75% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2023. The Notes shall mature on June 1, 2028, unless earlier converted, redeemed, or repurchased.
(f) No Registration Required. Assuming the accuracy of the representations and warranties of the Initial Purchasers set forth in Section 4 of this Agreement, it is not necessary, in connection with the offer, sale, and delivery of the Notes to the Initial Purchasers and the initial resale of the Notes by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum, to register the Notes or the shares of common stock issuable upon conversion thereof under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(g) No Investment Company Act Registration. The Company is not, and after giving effect to the offering and sale of the Notes and the application of the net proceeds thereof as described in the Offering Memorandum under the caption "Use of Proceeds," will not be, required to register as an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission (the "SEC") promulgated thereunder.
(h) No Conflicts. The execution, delivery, and performance by the Company of this Agreement, the Indenture, the Notes, and the Capped Call Transactions, and the consummation of the transactions contemplated hereby and thereby (including the issuance and sale of the Notes, the issuance of shares of common stock upon conversion thereof, and the application of the net proceeds therefrom), will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, the certificate of incorporation (as amended) or bylaws (as amended) of the Company or any of its subsidiaries, (ii) result in a breach or violation of, constitute a default or an event of default under, result in the creation or imposition of any lien, charge, or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or require any consent or waiver under, any agreement, lease, license, indenture, mortgage, deed of trust, note, or other instrument to which the Company or any of its subsidiaries is a party or by which any of them is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject (including the $300,000,000 senior secured revolving credit facility, dated as of August 15, 2021, among the Company, certain subsidiaries of the Company as guarantors, the lenders party thereto, and Crestline National Bank, N.A. as administrative agent (the "Credit Agreement"), subject to receipt of the Limited Consent and Waiver described in Section 3(w) hereof), or (iii) violate any applicable statute, law, rule, regulation, judgment, order, writ, injunction, or decree of any court, regulatory body, administrative agency, or governmental body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, except in the case of clauses (ii) and (iii) above, for such conflicts, breaches, violations, defaults, liens, charges, encumbrances, or failures to obtain consent as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(i) Consents and Approvals. No consent, approval, authorization, order, registration, filing, or qualification of or with any court, governmental agency, or body is required for the execution, delivery, and performance by the Company of this Agreement, the Indenture, the Notes, or the Capped Call Transactions, or for the consummation of the transactions contemplated hereby and thereby (including the issuance and sale of the Notes and the issuance of shares of common stock upon conversion thereof), except (i) such consents, approvals, authorizations, orders, registrations, filings, or qualifications as have already been obtained or made, (ii) the filing of a supplemental listing application with The Nasdaq Stock Market LLC in connection with the listing of the shares of common stock issuable upon conversion of the Notes, and (iii) such consents, approvals, authorizations, orders, registrations, filings, or qualifications as may be required under state securities or "blue sky" laws in connection with the purchase and resale of the Notes by the Initial Purchasers.
(j) Offering Memorandum. The Preliminary Offering Memorandum, as of its date, and the Final Offering Memorandum, as of its date and as of the Closing Date (and, if applicable, each Option Closing Date), did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information furnished in writing by or on behalf of any Initial Purchaser through the Representative specifically for use in the Preliminary Offering Memorandum or the Final Offering Memorandum. The Company confirms that the statistical and market-related data included in the Offering Memorandum are based on or derived from sources that the Company believes to be reliable and accurate, and the Company has obtained the written consent of the owners of such data, to the extent required, for the use of such data in the Offering Memorandum.
(k) Financial Statements. The financial statements (including the related notes and schedules thereto) included in the Offering Memorandum comply in all material respects with the applicable requirements of Regulation S-X under the Securities Act and the Exchange Act and present fairly, in all material respects, the consolidated financial condition, results of operations, and cash flows of the Company and its consolidated subsidiaries as of the dates and for the periods indicated, in conformity with generally accepted accounting principles in the United States ("U.S. GAAP") applied on a consistent basis throughout the periods involved, except as may be otherwise stated therein or in the notes thereto. The other financial information included in the Offering Memorandum has been derived from the accounting records of the Company and its consolidated subsidiaries and presents fairly, in all material respects, the information shown thereby. For the fiscal year ended December 31, 2022, the Company reported revenue of $812.4 million and Adjusted EBITDA of $198.7 million, each as reflected in the Offering Memorandum.
Aldgate & Finch LLP, the Company's independent registered public accounting firm, is independent with respect to the Company within the meaning of the Securities Act, the Exchange Act, and the applicable rules and regulations adopted by the SEC and the Public Company Accounting Oversight Board (the "PCAOB").
(l) No Material Adverse Change. Since the date of the most recent financial statements included in the Offering Memorandum, except as otherwise disclosed in the Offering Memorandum, (i) there has been no change, development, or event that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, whether or not arising in the ordinary course of business, and (ii) the Company and its subsidiaries have conducted their respective businesses in all material respects in the ordinary course consistent with past practice.
(m) Exchange Act Reporting. The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and has timely filed all reports, schedules, forms, statements, and other documents required to be filed by it with the SEC pursuant to the Exchange Act for the twelve-month period preceding the date hereof (or for such shorter period as the Company was required to file such reports, schedules, forms, statements, or other documents). The Company's SEC Central Index Key (CIK) number is 0001823467. As of their respective filing dates (or, if amended or superseded by a subsequent filing, as of the date of such amendment or superseding filing), each of the Company's Exchange Act filings complied in all material respects with the applicable requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder.
(n) Listing. The shares of common stock of the Company are listed on The Nasdaq Stock Market under the symbol "OWS," and the Company is in compliance in all material respects with the applicable listing and maintenance requirements of The Nasdaq Stock Market. The Company has applied, or will apply prior to the Closing Date, for listing of the shares of common stock issuable upon conversion of the Notes on The Nasdaq Stock Market, and has no reason to believe that such shares will not be approved for listing, subject to official notice of issuance. The Company has not received any notification that The Nasdaq Stock Market is contemplating delisting or suspending the Company's common stock.
(o) Tax Matters. The Company and each of its subsidiaries have filed all federal, state, local, and foreign tax returns required to be filed through the date hereof (or have timely requested extensions thereof) and have paid all material taxes due and payable (whether or not shown on any such tax return), except for taxes being contested in good faith and for which adequate reserves have been established in accordance with U.S. GAAP. No material tax deficiency has been assessed or, to the knowledge of the Company, proposed against the Company or any of its subsidiaries by any taxing authority. There are no material tax liens on any assets of the Company or any of its subsidiaries.
(p) intellectual Property. The Company and its subsidiaries own, or possess adequate rights to use, all patents, patent applications, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, copyright registrations, licenses, know-how, trade secrets, domain names, and other intellectual property rights (collectively, "intellectual Property") necessary for the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to own or possess such rights would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, (i) the conduct of the business of the Company and its subsidiaries does not infringe, misappropriate, or otherwise violate the intellectual Property rights of any third party, and (ii) no third party is infringing, misappropriating, or otherwise violating any intellectual Property of the Company or its subsidiaries, in each case except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Litigation. Except as disclosed in the Offering Memorandum, there are no pending actions, suits, investigations, or proceedings (including any purported class action) against or affecting the Company or any of its subsidiaries, or any of their respective properties, before or by any court, arbitrator, or governmental agency or body, domestic or foreign, and, to the knowledge of the Company, no such actions, suits, investigations, or proceedings are threatened, that, individually or in the aggregate, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have a Material Adverse Effect, or that question the validity or enforceability of this Agreement or any of the other Transaction Documents, or that seek to restrain, enjoin, or otherwise prevent the consummation of the transactions contemplated hereby or thereby.
(r) Compliance with Laws. The Company and each of its subsidiaries are in compliance with all applicable federal, state, local, and foreign laws, statutes, rules, regulations, directives, ordinances, judgments, orders, decrees, and other legal requirements, including, without limitation, (i) all applicable environmental laws, (ii) all applicable export control and economic sanctions laws and regulations, and (iii) all applicable anti-corruption laws, including the Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), and the U.K. Bribery Act 2010, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any director, officer, employee, or agent of the Company or any of its subsidiaries, has made any unlawful payment or given, offered, promised, or authorized the giving of anything of value to any foreign official, foreign political party, or candidate for foreign political office for the purpose of (A) influencing any act or decision of such person in their official capacity, (B) inducing such person to do or omit to do any act in violation of the lawful duty of such person, or (C) obtaining any improper advantage, in connection with the business of the Company.
(s) Internal Controls and Disclosure Controls. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(t) No Stabilization or Manipulation. The Company has not taken, directly or indirectly, any action designed to, or that has constituted or that might reasonably be expected to, cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Notes or the shares of common stock issuable upon conversion thereof, in violation of Regulation M under the Exchange Act.
(u) Insurance. The Company and its subsidiaries maintain insurance coverage with reputable insurers of recognized financial responsibility in such amounts and covering such risks as is adequate and customary for companies of similar size engaged in similar businesses and operating in similar geographic areas. All policies of insurance maintained by or on behalf of the Company and its subsidiaries are in full force and effect, and all premiums with respect thereto have been paid when due (or within any applicable grace period). The Company has no reason to believe that it or any of its subsidiaries will not be able to renew any existing insurance coverage as and when such coverage expires, or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect.
(v) Capped Call Transactions. The Company has all requisite corporate power and authority to enter into the Capped Call Transactions. The Capped Call Transactions have been duly authorized by all necessary corporate action on the part of the Company (including resolutions of the Board of Directors of the Company expected to be adopted on May 19, 2023). The entry into the Capped Call Transactions will not violate or conflict with the certificate of incorporation (as amended) or bylaws (as amended) of the Company, or any applicable law, statute, rule, regulation, judgment, order, or decree, or any material agreement, lease, license, indenture, or instrument to which the Company is a party or by which it is bound, except for such conflicts, breaches, or violations as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(w) Revolving Credit Facility. As of the date hereof, $75,000,000 in aggregate principal amount is outstanding under the Company's $300,000,000 senior secured revolving credit facility governed by that certain Credit Agreement, dated as of August 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time), among the Company, certain subsidiaries of the Company as guarantors, the lenders party thereto, and Crestline National Bank, N.A. as administrative agent (the "Credit Agreement"), which facility matures on August 15, 2026. The Company expects to obtain, prior to the Closing Date, a Limited Consent and Waiver under Section 7.01(b) of the Credit Agreement (the "Limited Consent and Waiver") from the Required Lenders (as defined in the Credit Agreement) to permit the incurrence of the Notes as "Permitted Additional Indebtedness" (as defined in the Credit Agreement). Except as disclosed in the Offering Memorandum, no event of default (or event that, with the giving of notice or the passage of time, or both, would constitute an event of default) under the Credit Agreement has occurred and is continuing.
(x) ERISA. Each employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) maintained or contributed to by the Company or any of its subsidiaries or any member of its "controlled group" (as defined in Section 4001(a)(14) of ERISA) is in compliance in all material respects with the applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and all other applicable laws, rules, and regulations. No "reportable event" (as defined in Section 4043(c) of ERISA) has occurred with respect to any such plan that would reasonably be expected to have a Material Adverse Effect. No such plan is, or within the preceding six years has been, a "multiemployer plan" as defined in Section 3(37) of ERISA.
(y) Cybersecurity. The Company and its subsidiaries have implemented and maintain commercially reasonable information technology, information security, and data protection controls, policies, and procedures, including, without limitation, administrative, technical, and physical safeguards, designed to protect the integrity, continuous operation, redundancy, and security of all information technology systems and data (including all personal, personally identifiable, household, sensitive, confidential, or regulated data) used in connection with the operation of the businesses of the Company and its subsidiaries as currently conducted. To the knowledge of the Company, there have been no material security breaches, unauthorized access, or other compromises of or relating to such systems and data that have not been remediated, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(z) Sanctions and Anti-Money Laundering. Neither the Company nor any of its subsidiaries, nor any director or officer thereof, nor, to the knowledge of the Company, any employee, agent, or affiliate thereof, is a person currently the subject or target of any sanctions administered or enforced by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of State, the United Nations Security Council, the European Union, any member state of the European Union, or His Majesty's Treasury of the United Kingdom (collectively, "Sanctions"), nor is the Company or any of its subsidiaries located, organized, or resident in a country or territory that is, or whose government is, the subject or target of comprehensive Sanctions (currently, the Crimea region of Ukraine, Cuba, Iran, North Korea, and Syria). The Company will not, directly or indirectly, use the proceeds of the offering of the Notes, or lend, contribute, or otherwise make available such proceeds to any subsidiary, joint venture partner, or other person or entity, for the purpose of financing or facilitating any activities or business of or with any person or entity, or in any country or territory, that at the time of such financing or facilitation is the subject or target of Sanctions or in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor, or otherwise) of Sanctions. The Company and its subsidiaries are, and have been for the preceding five years, in compliance in all material respects with all applicable anti-money laundering laws, including the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, and the rules and regulations promulgated thereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INITIAL PURCHASERS
Each Initial Purchaser, severally and not jointly, hereby represents and warrants to the Company as of the date hereof and as of the Closing Date (and, if applicable, each Option Closing Date), as follows:
(a) QIB Resale. Such Initial Purchaser is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act. In connection with its purchase and resale of the Notes, such Initial Purchaser has offered and will offer and sell the Notes only to persons it reasonably believes to be QIBs in transactions pursuant to Rule 144A under the Securities Act. Such Initial Purchaser has informed each purchaser of the Notes from it that the Notes are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Notes have not been and will not be registered under the Securities Act. Each Initial Purchaser acknowledges that the Notes will bear a restrictive legend substantially to the effect set forth in the Indenture and the Offering Memorandum.
(b) No General Solicitation. Neither such Initial Purchaser nor any person acting on its behalf has engaged in, or will engage in, any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offering of the Notes, including, but not limited to, (i) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar medium or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
(c) Offering Restrictions. Such Initial Purchaser has complied and will comply with all applicable laws and regulations in each jurisdiction in which it purchases, offers, sells, or delivers Notes or distributes the Offering Memorandum or any other offering material. Such Initial Purchaser has not taken and will not take any action that would permit a public offering of the Notes in any country or jurisdiction where action for that purpose is required. The distribution of the Offering Memorandum and the offering and sale of the Notes in certain jurisdictions may be restricted by law, and such Initial Purchaser represents that it is aware of, and will comply with, all such restrictions.
SECTION 5. COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Initial Purchasers as follows:
(a) Offering Memorandum Delivery. The Company will furnish to the Initial Purchasers and to counsel for the Initial Purchasers, without charge, as many copies of the Preliminary Offering Memorandum and the Final Offering Memorandum (and any amendments or supplements thereto) as the Representative may reasonably request. The Company consents to the use of the Preliminary Offering Memorandum and the Final Offering Memorandum (and any amendments or supplements thereto) by the Initial Purchasers in connection with the offering and resale of the Notes. The Company will also deliver, without charge, to the Initial Purchasers electronic copies of the Preliminary Offering Memorandum and the Final Offering Memorandum and any amendments or supplements thereto in such format as may be requested by the Representative.
(b) Amendments and Supplements. During the period commencing on the date hereof and ending on the later of (i) the Closing Date (or, if the Over-Allotment Option is exercised, the latest Option Closing Date) and (ii) the date on which the distribution of the Notes by the Initial Purchasers has been completed (as determined by the Representative in its sole discretion), the Company will not prepare any amendment or supplement to the Offering Memorandum unless a copy thereof shall first have been submitted to the Representative and its counsel a reasonable time prior to the preparation thereof and the Representative shall not have objected thereto in writing within a reasonable period of time (it being understood that the consent of the Representative to any such amendment or supplement shall not be unreasonably withheld, conditioned, or delayed). If, during the period described in the preceding sentence, any event shall occur or condition shall exist as a result of which it is necessary, in the reasonable opinion of counsel for the Company or counsel for the Initial Purchasers, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Offering Memorandum is delivered to a purchaser, not misleading, the Company will promptly prepare, at its own expense, an appropriate amendment or supplement to the Offering Memorandum that will correct such statement or omission and will furnish to the Initial Purchasers, without charge, such number of copies of such amendment or supplement as the Representative may reasonably request.
(c) Blue Sky Compliance. The Company will use its reasonable best efforts to cooperate with the Initial Purchasers and counsel for the Initial Purchasers in connection with the qualification or registration (or the exemption from qualification or registration) of the Notes (and the shares of common stock issuable upon conversion thereof) for offer and sale under the securities or "blue sky" laws of such jurisdictions as the Representative may reasonably request and will continue such qualifications in effect so long as required for the distribution of the Notes; provided, however, that the Company shall not be obligated to (i) qualify as a foreign corporation or dealer in securities in any jurisdiction in which it is not otherwise so qualified, (ii) file a general consent to service of process in any jurisdiction, or (iii) subject itself to taxation in any jurisdiction in which it is not otherwise subject to taxation.
(d) Listing. The Company will use its reasonable best efforts to cause the shares of common stock issuable upon conversion of the Notes to be approved for listing on The Nasdaq Stock Market, subject to official notice of issuance, prior to the Closing Date. The Company expects to file a supplemental listing application with The Nasdaq Stock Market on or about May 25, 2023. The Company will use its reasonable best efforts to maintain the listing of its common stock on The Nasdaq Stock Market for so long as any Notes remain outstanding.
(e) Reporting. For so long as any of the Notes remain outstanding, the Company will furnish to the holders of the Notes, the Trustee, and the Initial Purchasers, without charge, copies of all annual reports, quarterly reports, current reports, and other documents and information that the Company is required to file with the SEC under Section 13 or Section 15(d) of the Exchange Act, within the time periods specified by the Exchange Act and the rules and regulations of the SEC promulgated thereunder. If the Company ceases to be subject to the reporting requirements of the Exchange Act, the Company will furnish to the holders of the Notes, the Trustee, and the Initial Purchasers, at the Company's expense, substantially the same information that would be required to be filed with the SEC if the Company were subject to such reporting requirements.
(f) Use of Proceeds. The Company will apply the net proceeds from the sale of the Notes (including any Option Notes) substantially as described in the Offering Memorandum under the caption "Use of Proceeds," including:
(i) the funding of the aggregate cost of the Capped Call Transactions in the amount of approximately $28,750,000;
(ii) the repayment of $75,000,000 outstanding under the revolving credit facility with Crestline National Bank, N.A. as administrative agent under the Credit Agreement; and
(iii) general corporate purposes, including working capital, potential acquisitions, and capital expenditures.
Assuming the exercise in full of the Over-Allotment Option, the estimated net proceeds available for general corporate purposes shall be approximately $251,800,000, calculated as follows: $287,500,000 gross proceeds, minus $5,750,000 in aggregate initial purchasers' discount, minus $28,750,000 aggregate cost of the Capped Call Transactions, minus approximately $1,200,000 in estimated offering expenses (excluding the initial purchasers' discount and the cost of the Capped Call Transactions).
(g) No Integration. The Company will not sell, offer for sale, solicit offers to buy, or otherwise negotiate in respect of, any security (as defined in the Securities Act) that would be integrated with the sale of the Notes in a manner that would require the registration of the Notes or the shares of common stock issuable upon conversion thereof under the Securities Act or that would be integrated with the offering of the Notes for purposes of the rules and regulations of any trading market applicable to the Company.
(h) No Stabilization. The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Notes, in violation of Regulation M under the Exchange Act.
(i) DTC Eligibility. The Company will use reasonable efforts to permit the Notes to be eligible for clearance and settlement through the facilities of DTC for so long as any of the Notes remain outstanding.
(j) Transfer Agent. Clearwater Transfer Services Inc., with offices at 6201 15th Avenue, Brooklyn, New York 11219, serves as transfer agent and registrar for the Company's common stock. The Company will maintain a transfer agent and registrar for its common stock at all times while the Notes remain outstanding or shares of common stock are issuable upon conversion of the Notes.
(k) Capped Call Transactions. The Company will use a portion of the net proceeds from the sale of the Notes to enter into the Capped Call Transactions with the Capped Call Counterparties (Ridgepoint Capital Markets LLC and Northvane Financial Products LP) on terms and conditions consistent with those described in the Offering Memorandum. The aggregate cost of the Capped Call Transactions shall be approximately $28,750,000, allocated as follows: (i) Ridgepoint Capital Markets LLC — approximately 60% ($17,250,000), and (ii) Northvane Financial Products LP — approximately 40% ($11,500,000). The Capped Call Transactions shall have a cap price of approximately $110.07 per share of common stock (representing an approximately 50.0% premium over the reference price of $73.38 per share of common stock). The Company will enter into the Capped Call Transactions on the Pricing Date, and such transactions will settle on the Closing Date.
SECTION 6. CONDITIONS TO THE OBLIGATIONS OF THE INITIAL PURCHASERS
The obligations of the several Initial Purchasers to purchase and pay for the Notes on the Closing Date (and, if applicable, the Option Notes on any Option Closing Date) shall be subject to the accuracy of the representations and warranties of the Company contained herein at and as of the date hereof and at and as of the Closing Date (or the Option Closing Date, as the case may be), the performance by the Company of its covenants and other obligations hereunder on or before such date, and the satisfaction of the following additional conditions:
(a) Opinions of Issuer's Counsel. The Initial Purchasers shall have received on the Closing Date (i) an opinion and (ii) a negative assurance letter of Calderwood & Harkness LLP, counsel to the Company, each dated the Closing Date and addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Representative and Prescott Whitfield LLP, counsel to the Initial Purchasers, covering the following matters, among others:
(i) the corporate existence and good standing of the Company under the laws of the State of Delaware;
(ii) the due authorization, execution, and delivery by the Company of this Agreement, the Indenture, and the Notes;
(iii) the enforceability of this Agreement, the Indenture, and the Notes against the Company, in each case subject to the Enforceability Exceptions;
(iv) the valid issuance of shares of common stock upon conversion of the Notes in accordance with the terms of the Indenture, and that such shares, when issued, will be fully paid and non-assessable;
(v) the absence of any requirement to register the Notes or the shares of common stock issuable upon conversion thereof under the Securities Act, assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 4 hereof, in connection with the offer and sale of the Notes as contemplated by this Agreement and the Offering Memorandum (based on Section 4(a)(2) of the Securities Act and Rule 144A thereunder);
(vi) the absence of any requirement for the Company to register as an investment company under the Investment Company Act of 1940, as amended;
(vii) the absence of any conflict with the Company's certificate of incorporation (as amended) or bylaws (as amended) or any material agreement of the Company described in the Offering Memorandum; and
(viii) a "10b-5" negative assurance statement with respect to the Final Offering Memorandum, to the effect that nothing has come to the attention of such counsel that caused them to believe that the Final Offering Memorandum, as of its date and as of the Closing Date, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (in each case, subject to customary assumptions, qualifications, and limitations).
(b) Opinion of Initial Purchasers' Counsel. The Initial Purchasers shall have received on the Closing Date an opinion of Prescott Whitfield LLP, counsel to the Initial Purchasers, dated the Closing Date and addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Representative. For purposes of this condition, the primary contacts at Prescott Whitfield LLP are Diana Castellano (partner) and Ryan Fujimoto (lead associate).
(c) Opinion of Issuer's Counsel to Trustee. The Trustee shall have received on the Closing Date an opinion of Calderwood & Harkness LLP, dated the Closing Date and addressed to Broadmere Trust Company, N.A. as Trustee, covering (i) the due authorization of the Indenture and the Notes by the Company, (ii) the enforceability of the Indenture and the Notes against the Company (subject to the Enforceability Exceptions), and (iii) the valid issuance of shares of common stock upon conversion of the Notes in accordance with the terms of the Indenture.
(d) Officers' Certificate. The Initial Purchasers shall have received on the Closing Date a certificate of the Company, signed by Marcus Harding, Chief Executive Officer of the Company, and Priya Nandakumar, Chief Financial Officer of the Company, dated the Closing Date, to the effect that:
(i) the representations and warranties of the Company set forth in Section 3 of this Agreement are true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the Closing Date with the same force and effect as though expressly made at and as of the Closing Date (except for representations and warranties that expressly relate to an earlier date, which shall be true and correct in all material respects as of such earlier date);
(ii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and
(iii) since the date of the most recent financial statements included in the Offering Memorandum, there has been no change, development, or event that, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect.
(e) Secretary's Certificate. The Initial Purchasers shall have received on the Closing Date a certificate of David Shih, General Counsel and Corporate Secretary of the Company, dated the Closing Date, certifying as to:
(i) attached true, correct, and complete copies of the certificate of incorporation (as amended) and the bylaws (as amended) of the Company, each as in effect on the Closing Date;
(ii) attached true, correct, and complete copies of the resolutions of the Board of Directors of the Company adopted on May 19, 2023, and the resolutions of the Pricing Committee of the Board of Directors adopted on the Pricing Date, in each case authorizing the execution, delivery, and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby; and
(iii) the incumbency and specimen signatures of the officers of the Company authorized to execute and deliver this Agreement and the other Transaction Documents.
(f) Comfort Letter. The Initial Purchasers shall have received (i) a "comfort letter" from Aldgate & Finch LLP (engagement partner: Robert Nishimura), the Company's independent registered public accounting firm, dated the date of the Preliminary Offering Memorandum, addressed to the Initial Purchasers, in form and substance satisfactory to the Representative, containing the information customarily provided in accountants' comfort letters to underwriters with respect to the financial statements and certain financial information contained in the Offering Memorandum, and (ii) a "bring-down" comfort letter from Aldgate & Finch LLP, dated the Closing Date (and, if applicable, each Option Closing Date), addressed to the Initial Purchasers, confirming, as of a date not more than three (3) business days prior to the Closing Date (or the Option Closing Date, as the case may be), the statements made in the comfort letter referred to in clause (i) above.
(g) Indenture. The Indenture shall have been duly executed and delivered by the Company and Broadmere Trust Company, N.A. as Trustee, and a fully executed copy thereof shall have been delivered to the Representative.
(h) Notes. The Notes shall have been duly executed by the Company, authenticated by the Trustee, and delivered through the facilities of DTC in accordance with Section 2 hereof.
(i) Listing Approval. The shares of common stock issuable upon conversion of the Notes shall have been approved for listing on The Nasdaq Stock Market, subject only to official notice of issuance, and the Representative shall have received evidence reasonably satisfactory to it of such approval.
(j) Capped Call Transactions. The Company shall have entered into the Capped Call Transactions with Ridgepoint Capital Markets LLC and Northvane Financial Products LP on terms and conditions consistent with those described in the Offering Memorandum, and the Representative shall have received evidence reasonably satisfactory to it (including copies of executed confirmations) that such transactions have been entered into.
(k) Revolving Credit Facility Consent. The Company shall have obtained the Limited Consent and Waiver under Section 7.01(b) of the Credit Agreement governing the $300,000,000 senior secured revolving credit facility with Crestline National Bank, N.A. as administrative agent, permitting the incurrence of the Notes as "Permitted Additional Indebtedness" under the Credit Agreement, and the Representative shall have received a copy of such fully executed Limited Consent and Waiver, in form and substance reasonably satisfactory to the Representative and its counsel.
(l) DTC Eligibility. The Notes shall be eligible for clearance and settlement through the facilities of DTC, and the Representative shall have received evidence reasonably satisfactory to it of such eligibility.
(m) No Material Adverse Change. There shall not have occurred, since the date of the most recent financial statements included in the Offering Memorandum, any change, development, or event that, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect, whether or not arising in the ordinary course of business.
(n) Legal Proceedings. No action, suit, or proceeding shall be pending before or threatened by any court, governmental agency, or body, domestic or foreign, that seeks to restrain, enjoin, or otherwise prevent the consummation of the transactions contemplated by this Agreement or any of the other Transaction Documents, or that questions the validity or enforceability of this Agreement or any of the other Transaction Documents.
(o) Additional Documents. The Company shall have furnished to the Representative and Prescott Whitfield LLP such further certificates, opinions, documents, and information as the Representative may reasonably request in order to evidence the accuracy and completeness of any of the representations and warranties, or the fulfillment of any of the conditions, contained in this Agreement. All opinions, letters, evidence, and certificates referred to above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to the Representative and to Prescott Whitfield LLP, counsel to the Initial Purchasers.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION
(a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Initial Purchaser, each of its affiliates (as defined in Rule 501(b) under the Securities Act), each of its directors, officers, employees, and agents, and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an "Indemnified Person"), against any and all losses, claims, damages, liabilities, and expenses (including, without limitation, reasonable and documented costs of investigation and reason