Item 1.01
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Entry into a Material Definitive Agreement.
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Purchase Agreement
On September 10, 2020, RingCentral, Inc. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLC, as representatives of the several initial purchasers named therein (collectively, the “Initial Purchasers”), to issue and sell $650 million aggregate principal amount of 0% Convertible Senior Notes due 2026 (the “notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The notes were issued to the Initial Purchasers pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act.
In addition, the Company granted the Initial Purchasers a 13-day option to purchase up to an additional $100 million aggregate principal amount of notes on the same terms and conditions.
The Company intends to use a portion of the net proceeds of the offering of the notes (i) to pay the cost of the Capped Call Transactions (as defined below), (ii) for the 2023 Note Repurchase (as defined below) and (iii) for general corporate purposes, which may include working capital, capital expenditures, repayment of debt, including through the redemption of the Company’s outstanding 0% Convertible Senior Notes due 2023 (the “2023 Notes”), potential acquisitions and strategic transactions.
The Purchase Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the Initial Purchasers against certain liabilities.
The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Capped Call Transactions
In connection with the offering of the notes, on September 10, 2020, the Company also entered into capped call transactions (the “Capped Calls”) with Goldman Sachs & Co. LLC, Jefferies International Limited, Deutsche Bank AG, London Branch, Nomura Global Financial Products Inc. and Royal Bank of Canada (collectively, the “Counterparties”). The Capped Calls each have an initial strike price of approximately $424.03 per share, subject to certain adjustments, which corresponds to the initial conversion price of the notes. The Capped Calls have initial cap prices of $556.1000 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 1.5 million shares of the Company’s Class A common stock, par value $0.0001 (“Common Stock”). The Capped Calls are generally intended to reduce or offset the potential dilution to the Common Stock upon any conversion of the notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The Company expects to pay $41.8 million from the net proceeds from the issuance and sale of the notes to purchase the Capped Calls. The Capped Calls settle in components with the last component scheduled to expire on March 13, 2025. The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event; a tender offer; and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including changes in law; insolvency filings; and hedging disruptions.
The summary of the foregoing transactions is qualified in its entirety by reference to the text of the Capped Calls, a form of which is attached as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Indenture
On September 15, 2020, the Company entered into an Indenture relating to the issuance of the notes (the “Indenture”),
by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The notes will not bear regular interest, and the principal amount of the notes will not accrete. The notes may bear special interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the notes are not freely tradeable as required by the Indenture. The notes will mature on March 15, 2026, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms.