Item 1.01 Entry into a Material Agreement.
Convertible Notes and the Indenture
On June 9, 2020, Okta, Inc. (the "Company") priced its private offering of
$1.0 billion in aggregate principal amount of 0.375% Convertible Senior Notes
due 2026 (the "Notes"). The Notes are senior unsecured obligations of the
Company. The Notes were issued pursuant to an Indenture, dated June 12, 2020
(the "Indenture"), between the Company and Wilmington Trust, National
Association, as trustee. The Indenture includes customary covenants and sets
forth certain events of default after which the Notes may be declared
immediately due and payable and sets forth certain types of bankruptcy or
insolvency events of default involving the Company after which the Notes become
automatically due and payable. The Company also granted the initial purchasers
of the Notes a 13-day option to purchase up to an additional $150.0 million
aggregate principal amount of the Notes (the "Additional Notes"), which option
has not been exercised as of the time of filing of this Current Report on Form
8-K.
The Notes will mature on June 15, 2026, unless earlier redeemed, repurchased or
converted. The Notes will bear interest from June 12, 2020, at a rate of 0.375%
per year payable semiannually in arrears on June 15 and December 15 of each
year, beginning on December 15, 2020. The Notes will be convertible at the
option of the noteholders at any time prior to the close of business on the
business day immediately preceding March 15, 2026, only under the following
circumstances: (1) during any fiscal quarter commencing after the fiscal quarter
ending on October 31, 2020 (and only during such fiscal quarter), if the last
reported sale price of the Company's Class A common stock, par value $0.0001 per
share (the "Class A Common Stock"), for at least 20 trading days (whether or not
consecutive) during a period of 30 consecutive trading days ending on, and
including, the last trading day of the immediately preceding fiscal quarter is
greater than or equal to 130% of the conversion price on each applicable trading
day; (2) during the five business day period after any five consecutive trading
day period (the "measurement period") in which the trading price (as defined in
the Indenture) per $1,000 principal amount of Notes for each trading day of the
measurement period was less than 98% of the product of the last reported sale
price of the Class A Common Stock and the conversion rate on each such trading
day; (3) if the Company calls the Notes for redemption, at any time prior to the
close of business on the second scheduled trading day immediately preceding the
redemption date; and (4) upon the occurrence of specified corporate events. On
or after March 15, 2026, 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, in multiples of $1,000 principal amount, at the
option of the holder regardless of the foregoing circumstances. Upon conversion,
the Company may satisfy its conversion obligation by paying and/or delivering,
as the case may be, cash, shares of the Class A Common Stock or a combination of
cash and shares of the Class A Common Stock, at the Company's election, in the
manner and subject to the terms and conditions provided in the Indenture. The
conversion rate for the Notes will initially be 4.1912 shares of the Class A
Common Stock per $1,000 principal amount of Notes, which is equivalent to an
initial conversion price of approximately $238.60 per share of the Class A
Common Stock. The initial conversion price of the Notes represents a premium of
approximately 32.5% to the $180.07 per share closing price of the Class A Common
Stock on June 9, 2020. The conversion rate is subject to adjustment under
certain circumstances in accordance with the terms of the Indenture.
The Company may not redeem the Notes prior to June 20, 2023. The Company may
redeem for cash all or any portion of the Notes, at its option, on or after
June 20, 2023, if the last reported sale price of the Class A Common Stock has
been at least 130% of the conversion price then in effect for at least 20
trading days (whether or not consecutive), including the trading day immediately
preceding the date on which the Company provides notice of redemption, during
any 30 consecutive trading day period ending on and including the trading day
preceding the date on which the Company provides notice of redemption at a
redemption price equal to 100% of the principal amount of the Notes to be
redeemed, plus any accrued and unpaid interest to, but excluding, the redemption
date. No sinking fund is provided for the Notes, which means that the Company is
not required to redeem or retire the Notes periodically.
A copy of the Indenture (including the form of the Note) is attached as an
exhibit to this report and is incorporated herein by reference (and this
description is qualified in its entirety by reference to such document).
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The net proceeds from this offering were approximately $986.8 million, after
deducting the initial purchasers' discounts and commissions and the Company's
estimated offering expenses related to the offering. The Company used
approximately $116.5 million of the net proceeds from the offering to pay the
cost of the Capped Call Transactions (as defined below). If the initial
purchasers exercise their option to purchase Additional Notes, the Company
expects to use a portion of the net proceeds from the sale of such Additional
Notes to enter into additional Capped Call Transactions with the Option
Counterparties (as defined below). The Company intends to use the remainder of
the net proceeds from the offering for general corporate purposes.
Capped Call Transactions
On June 9, 2020, in connection with the pricing of the Notes, the Company
entered into privately negotiated capped call transactions (the "Capped Call
Transactions") with one of the initial purchasers and certain other financial
institutions (the "Option Counterparties"). The Capped Call Transactions will
cover, subject to anti-dilution adjustments, the number of shares of Class A
Common Stock underlying the Notes sold in the offering. The Capped Call
Transactions are generally expected to reduce potential dilution to the Class A
Common Stock upon any conversion of Notes and/or offset any cash payments the
Company is required to make in excess of the principal amount of converted
Notes, as the case may be, with such reduction and/or offset subject to a cap.
The cap price of the Capped Call Transactions will initially be $360.14 per
share, which represents a premium of 100.0% over the last reported sale price of
the Class A Common Stock of $180.07 per share on June 9, 2020, and is subject to
certain adjustments under the terms of the capped call transactions.
The Capped Call Transactions are separate transactions entered into by the
Company with the Option Counterparties, and are not part of the terms of the
Notes and will not affect any holder's rights under the Notes. Holders of the
Notes will not have any rights with respect to the Capped Call Transactions.
The foregoing descriptions of the Capped Call Transactions are qualified in
. . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference.
Item 3.02 Unregistered Sale of Equity Securities.
The information set forth under Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference.
The Company offered and sold the Notes to the initial purchasers 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 for resale by the initial
purchasers to qualified institutional buyers pursuant to the exemption from
registration provided by Rule 144A under the Securities Act. The Company relied
on these exemptions from registration based in part on representations made by
the initial purchasers in the purchase agreement pursuant to which the Company
sold the Notes to the initial purchasers. The shares of the Class A Common Stock
issuable upon conversion of the Notes, if any, have not been registered under
the Securities Act and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
To the extent that any shares of the Class A Common Stock are issued upon
conversion of the Notes, they will be issued in transactions anticipated to be
exempt from registration under the Securities Act by virtue of Section 3(a)(9)
thereof, because no commission or other remuneration is expected to be paid in
connection with conversion of the Notes and any resulting issuance of shares of
the Class A Common Stock.
The Company issued the shares of Class A Common Stock to holders of the 2023
Notes that participated in the 2023 Notes Exchanges in reliance on the exemption
from registration provided by Section 4(a)(2) of the Securities Act. The Company
relied on this exemption from registration based in part on representations made
by the holders of the 2023 Notes in the exchange agreements pursuant to which
the shares of Class A Common Stock were issued.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description
4.1 Indenture, dated as of June 12, 2020, between Okta, Inc., and
Wilmington Trust, National Association, as trustee.
4.2 Form of 0.375% Convertible Senior Notes due 2026 (included in
Exhibit 4.1).
10.1 Form of Capped Call Transaction Confirmation.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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