10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

______________________

FORM 10-Q

______________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2019.

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 0-27544

______________________________________

OPEN TEXT CORPORATION

(Exact name of Registrant as specified in its charter)  

______________________

Canada	98-0154400
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

275 Frank Tompa Drive,			N2L 0A1
Waterloo,	Ontario	Canada
(Address of principal executive offices)			(Zip code)

Registrant's telephone number, including area code: (519) 888-7111

Securities registered pursuant to Section 12(b) of the Act:  

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock without par value	OTEX	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒  Accelerated filer  ☐ Non-accelerated filer  ☐ Smaller reporting company ☐ Emerging growth company ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ☐   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ☒

At January 27, 2020, there were 270,771,591 outstanding Common Shares of the registrant.

    1

OPEN TEXT CORPORATION

TABLE OF CONTENTS

		Page No
Part I Financial Information
Item 1. Financial Statements
	Condensed Consolidated Balance Sheets as of December 31, 2019 (unaudited) and June 30, 2019	3
	Condensed Consolidated Statements of Income - Three and Six Months Ended December 31, 2019 and 2018 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income - Three and Six Months Ended December 31, 2019 and 2018 (unaudited)	5
	Condensed Consolidated Statements of Shareholders' Equity - Three and Six Months Ended December 31, 2019 and 2018 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows - Six Months Ended December 31, 2019 and 2018 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		42
Item 3. Quantitative and Qualitative Disclosures about Market Risk		73
Item 4. Controls and Procedures		74
Part II Other Information
Item 1A. Risk Factors		75
Item 6. Exhibits		76
Signatures		77

    2

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)

	December 31, 2019			June 30, 2019
ASSETS	(unaudited)
Cash and cash equivalents	$	675,403		$	941,009
Accounts receivable trade, net of allowance for doubtful accounts of $17,937 as of December 31, 2019 and $17,011 as of June 30, 2019 (note 4)	526,020			463,785
Contract assets (note 3)	22,794			20,956
Income taxes recoverable (note 15)	24,615			38,340
Prepaid expenses and other current assets	104,962			97,238
Total current assets	1,353,794			1,561,328
Property and equipment (note 5)	273,448			249,453
Operating lease right of use assets (note 6)	253,387			—
Long-term contract assets (note 3)	17,975			15,386
Goodwill (note 7)	4,656,492			3,769,908
Acquired intangible assets (note 8)	1,808,072			1,146,504
Deferred tax assets (note 15)	930,856			1,004,450
Other assets (note 9)	158,058			148,977
Long-term income taxes recoverable (note 15)	46,151			37,969
Total assets	$	9,498,233		$	7,933,975
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities (note 10)	$	417,611		$	329,903
Current portion of long-term debt (note 11)	913,631			10,000
Operating lease liabilities (note 6)	66,579			—
Deferred revenues (note 3)	718,861			641,656
Income taxes payable (note 15)	51,298			33,158
Total current liabilities	2,167,980			1,014,717
Long-term liabilities:
Accrued liabilities (note 10)	14,977			49,441
Pension liability (note 12)	73,678			75,239
Long-term debt (note 11)	2,600,386			2,604,878
Long-term operating lease liabilities (note 6)	218,681			—
Deferred revenues (note 3)	77,335			46,974
Long-term income taxes payable (note 15)	180,507			202,184
Deferred tax liabilities (note 15)	165,457			55,872
Total long-term liabilities	3,331,021			3,034,588
Shareholders’ equity:
Share capital and additional paid-in capital (note 13)
270,608,627 and 269,834,442 Common Shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively; authorized Common Shares: unlimited	1,803,663			1,774,214
Accumulated other comprehensive income	24,690			24,124
Retained earnings	2,201,653			2,113,883
Treasury stock, at cost (847,369 shares at December 31, 2019 and 802,871 shares at June 30, 2019, respectively)	(32,066		)	(28,766		)
Total OpenText shareholders' equity	3,997,940			3,883,455
Non-controlling interests	1,292			1,215
Total shareholders’ equity	3,999,232			3,884,670
Total liabilities and shareholders’ equity	$	9,498,233		$	7,933,975

Guarantees and contingencies (note 14)

Related party transactions (note 22)

Subsequent events (note 23)

See accompanying Notes to Condensed Consolidated Financial Statements

    3

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

(unaudited)

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Revenues (note 3):
License	$	138,095		$	132,756		$	215,993		$	209,643
Cloud services and subscriptions	248,340			219,233			485,605			427,316
Customer support	315,508			310,354			627,806			621,905
Professional service and other	69,614			72,888			139,041			143,524
Total revenues	771,557			735,231			1,468,445			1,402,388
Cost of revenues:
License	3,050			3,655			5,373			7,527
Cloud services and subscriptions	103,644			88,698			205,806			176,401
Customer support	29,788			31,273			59,175			61,738
Professional service and other	53,604			56,030			107,942			112,826
Amortization of acquired technology-based intangible assets (note 8)	42,299			48,366			82,597			95,843
Total cost of revenues	232,385			228,022			460,893			454,335
Gross profit	539,172			507,209			1,007,552			948,053
Operating expenses:
Research and development	80,283			75,753			161,461			153,223
Sales and marketing	137,310			126,193			265,928			246,375
General and administrative	54,595			52,198			106,130			103,122
Depreciation	20,712			23,834			40,989			47,688
Amortization of acquired customer-based intangible assets (note 8)	51,460			45,919			100,618			91,795
Special charges (recoveries) (note 18)	10,072			9,380			15,173			32,691
Total operating expenses	354,432			333,277			690,299			674,894
Income from operations	184,740			173,932			317,253			273,159
Other income (expense), net	1,972			378			(813		)	1,900
Interest and other related expense, net	(32,376		)	(33,613		)	(64,586		)	(68,144		)
Income before income taxes	154,336			140,697			251,854			206,915
Provision for (recovery of) income taxes (note 15)	46,818			36,236			69,909			66,086
Net income for the period	$	107,518		$	104,461		$	181,945		$	140,829
Net (income) loss attributable to non-controlling interests	(51		)	(29		)	(77		)	(73		)
Net income attributable to OpenText	$	107,467		$	104,432		$	181,868		$	140,756
Earnings per share—basic attributable to OpenText (note 21)	$	0.40		$	0.39		$	0.67		$	0.52
Earnings per share—diluted attributable to OpenText (note 21)	$	0.40		$	0.39		$	0.67		$	0.52
Weighted average number of Common Shares outstanding—basic (in '000's)	270,450			268,524			270,232			268,276
Weighted average number of Common Shares outstanding—diluted (in '000's)	271,590			269,400			271,328			269,396

See accompanying Notes to Condensed Consolidated Financial Statements

    4

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Net income for the period	$	107,518		$	104,461		$	181,945		$	140,829
Other comprehensive income (loss)—net of tax:
Net foreign currency translation adjustments	4,875			(3,418		)	(736		)	(6,938		)
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) - net of tax expense (recovery) effect of $301 and ($677) for the three months ended December 31, 2019 and 2018, respectively; $95 and ($496) for the six months ended December 31, 2019 and 2018, respectively	833			(1,877		)	261			(1,375		)
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of ($26) and $169 for the three months ended December 31, 2019 and 2018, respectively; ($23) and $301 for the six months ended December 31, 2019 and 2018, respectively	(72		)	467			(64		)	833
Actuarial gain (loss) relating to defined benefit pension plans:
Actuarial gain (loss) - net of tax expense (recovery) effect of $1,308 and ($519) for the three months ended December 31, 2019 and 2018, respectively; $59 and ($213) for the six months ended December 31, 2019 and 2018, respectively	3,698			(1,521		)	614			(324		)
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $97 and $72 for the three months ended December 31, 2019 and 2018, respectively; $243 and $145 for the six months ended December 31, 2019 and 2018, respectively	260			64			491			130
Total other comprehensive income (loss) net, for the period	9,594			(6,285		)	566			(7,674		)
Total comprehensive income	117,112			98,176			182,511			133,155
Comprehensive (income) loss attributable to non-controlling interests	(51		)	(29		)	(77		)	(73		)
Total comprehensive income attributable to OpenText	$	117,061		$	98,147		$	182,434		$	133,082

See accompanying Notes to Condensed Consolidated Financial Statements

    5

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars and shares)

(unaudited)

	Three Months Ended December 31, 2019
	Common Shares and Additional Paid in Capital				Treasury Stock					Retained Earnings			Accumulated  Other Comprehensive Income		Non-Controlling Interests		Total
	Shares	Amount			Shares		Amount
Balance as of September 30, 2019	270,190	$	1,791,689		(1,103	)	$	(41,190	)	$	2,141,278		$	15,096	$	1,241	$	3,908,114
Issuance of Common Shares
Under employee stock option plans	231	6,783			—		—			—			—		—		6,783
Under employee stock purchase plans	188	6,532			—		—			—			—		—		6,532
Share-based compensation	—	7,783			—		—			—			—		—		7,783
Issuance of treasury stock	—	(9,124		)	256		9,124			—			—		—		—
Dividends declared ($0.1746 per Common Share)	—	—			—		—			(47,092		)	—		—		(47,092		)
Other comprehensive income (loss) - net	—	—			—		—			—			9,594		—		9,594
Net income for the quarter	—	—			—		—			107,467			—		51		107,518
Balance as of December 31, 2019	270,609	$	1,803,663		(847	)	$	(32,066	)	$	2,201,653		$	24,690	$	1,292	$	3,999,232

	Three Months Ended December 31, 2018
	Common Shares and Additional Paid in Capital				Treasury Stock					Retained Earnings			Accumulated  Other Comprehensive Income			Non-Controlling Interests		Total
	Shares	Amount			Shares		Amount
Balance as of September 30, 2018	268,332	$	1,730,933		(992	)	$	(30,381	)	$	1,993,099		$	32,256		$	1,123	$	3,727,030
Issuance of Common Shares
Under employee stock option plans	62	1,740			—		—			—			—			—		1,740
Under employee stock purchase plans	175	5,696			—		—			—			—			—		5,696
Share-based compensation	—	6,885			—		—			—			—			—		6,885
Purchase of treasury stock	—	—			(370	)	(12,815		)	—			—			—		(12,815		)
Issuance of treasury stock	—	(13,955		)	545		13,955			—			—			—		—
Dividends ($0.1518 per Common Share)	—	—			—		—			(40,700		)	—			—		(40,700		)
Other comprehensive income (loss) - net	—	—			—		—			—			(6,285		)	—		(6,285		)
Net income for the quarter	—	—			—		—			104,432			—			29		104,461
Balance as of December 31, 2018	268,569	$	1,731,299		(817	)	$	(29,241	)	$	2,056,831		$	25,971		$	1,152	$	3,786,012

	Six Months Ended December 31, 2019
	Common Shares and Additional Paid in Capital				Treasury Stock					Retained Earnings			Accumulated  Other Comprehensive Income		Non-Controlling Interests		Total
	Shares	Amount			Shares		Amount
Balance as of June 30, 2019	269,834	$	1,774,214		(803	)	$	(28,766	)	$	2,113,883		$	24,124	$	1,215	$	3,884,670
Issuance of Common Shares
Under employee stock option plans	415	11,359			—		—			—			—		—		11,359
Under employee stock purchase plans	360	12,540			—		—			—			—		—		12,540
Share-based compensation	—	14,674			—		—			—			—		—		14,674
Purchase of treasury stock	—	—			(300	)	(12,424		)	—			—		—		(12,424		)
Issuance of treasury stock	—	(9,124		)	256		9,124			—			—		—		—
Dividends declared ($0.3492 per Common Share)	—	—			—		—			(94,098		)	—		—		(94,098		)
Other comprehensive income (loss) - net	—	—			—		—			—			566		—		566
Net income for the quarter	—	—			—		—			181,868			—		77		181,945
Balance as of December 31, 2019	270,609	$	1,803,663		(847	)	$	(32,066	)	$	2,201,653		$	24,690	$	1,292	$	3,999,232

    6

	Six Months Ended December 31, 2018
	Common Shares and Additional Paid in Capital				Treasury Stock					Retained Earnings			Accumulated  Other Comprehensive Income			Non-Controlling Interests		Total
	Shares	Amount			Shares		Amount
Balance as of June 30, 2018	267,651	$	1,707,073		(691	)	$	(18,732	)	$	1,994,235		$	33,645		$	1,037	$	3,717,258
Adoption of ASU 2016-16 - cumulative effect	—	—			—		—			(26,780		)	—			—		(26,780		)
Adoption of Topic 606 - cumulative effect	—	—			—		—			29,786			—			—		29,786
Issuance of Common Shares
Under employee stock option plans	556	14,171			—		—			—			—			—		14,171
Under employee stock purchase plans	362	11,265			—		—			—			—			—		11,265
Share-based compensation	—	13,440			—		—			—			—			—		13,440
Purchase of treasury stock	—	—			(674	)	(24,534		)	—			—			—		(24,534		)
Issuance of treasury stock	—	(14,025		)	548		14,025			—			—			—		—
Dividends declared ($0.3036 per Common Share)	—	—			—		—			(81,166		)	—			—		(81,166		)
Other comprehensive income - net	—	—			—		—			—			(7,674		)	—		(7,674		)
Non-controlling interest	—	(625		)	—		—			—			—			42		(583		)
Net income for the year	—	—			—		—			140,756			—			73		140,829
Balance as of December 31, 2018	268,569	$	1,731,299		(817	)	$	(29,241	)	$	2,056,831		$	25,971		$	1,152	$	3,786,012

See accompanying Notes to Condensed Consolidated Financial Statements

    7

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)

	Six Months Ended December 31,
	2019			2018
Cash flows from operating activities:
Net income for the period	$	181,945		$	140,829
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets	224,204			235,326
Share-based compensation expense	14,674			13,440
Pension expense	2,895			2,254
Amortization of debt issuance costs	2,276			2,157
Loss on sale and write down of property and equipment	—			9,428
Deferred taxes	34,168			8,909
Share in net (income) loss of equity investees	(1,948		)	(7,863		)
Changes in operating assets and liabilities:
Accounts receivable	2,598			33,548
Contract assets	(17,659		)	(13,400		)
Prepaid expenses and other current assets	(501		)	12,532
Income taxes	(891		)	17,324
Accounts payable and accrued liabilities	(33,235		)	(29,748		)
Deferred revenue	(64,093		)	(69,151		)
Other assets	2,357			4,919
Operating lease assets and liabilities, net	(2,105		)	—
Net cash provided by operating activities	344,685			360,504
Cash flows from investing activities:
Additions of property and equipment	(38,212		)	(33,464		)
Purchase of Carbonite, Inc., net of cash and restricted cash acquired	(1,216,639		)	—
Purchase of Dynamic Solutions Group Inc.	(4,149		)	—
Purchase of Liaison Technologies, Inc.	—			(311,285		)
Purchase of Guidance Software, Inc., net of cash acquired	—			(2,279		)
Other investing activities	(5,541		)	(6,373		)
Net cash used in investing activities	(1,264,541		)	(353,401		)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP	23,117			24,286
Proceeds from long-term debt and Revolver	750,000			—
Repayment of long-term debt and Revolver	(5,000		)	(5,000		)
Debt issuance costs	(979		)	(322		)
Purchase of Treasury Stock	(12,424		)	(24,534		)
Purchase of non-controlling interests	—			(583		)
Payments of dividends to shareholders	(94,098		)	(81,166		)
Net cash provided by (used in) financing activities	660,616			(87,319		)
Foreign exchange gain (loss) on cash held in foreign currencies	(4,071		)	(5,901		)
Increase (decrease) in cash, cash equivalents and restricted cash during the period	(263,311		)	(86,117		)
Cash, cash equivalents and restricted cash at beginning of the period	943,543			683,991
Cash, cash equivalents and restricted cash at end of the period	$	680,232		$	597,874

Reconciliation of cash, cash equivalents and restricted cash:	December 31, 2019		December 31, 2018
Cash and cash equivalents	$	675,403	$	595,069
Restricted cash included in Other assets	4,829		2,805
Total cash, cash equivalents and restricted cash	$	680,232	$	597,874

Supplemental cash flow disclosures (note 20)

See accompanying Notes to Condensed Consolidated Financial Statements

    8

OPEN TEXT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended December 31, 2019

(Tabular amounts in thousands of U.S. dollars, except share and per share data)

(unaudited)

NOTE 1—BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements include the accounts of Open Text Corporation and our subsidiaries, collectively referred to as "OpenText" or the "Company". We wholly own all of our subsidiaries with the exception of Open Text South Africa Proprietary Ltd. (OT South Africa) and EC1 Pte. Ltd. (GXS Singapore), which as of December 31, 2019, were 70% and 81% owned, respectively, by OpenText. All inter-company balances and transactions have been eliminated.

Throughout this Quarterly Report on Form 10-Q: (i) the term “Fiscal 2020” means our fiscal year beginning on July 1, 2019 and ending June 30, 2020; (ii) the term “Fiscal 2019” means our fiscal year beginning on July 1, 2018 and ended June 30, 2019; (iii) the term “Fiscal 2018” means our fiscal year beginning on July 1, 2017 and ended June 30, 2018; (iv) the term “Fiscal 2017” means our fiscal year beginning on July 1, 2016 and ended June 30, 2017; and (v) the term “Fiscal 2016” means our fiscal year beginning on July 1, 2015 and ended June 30, 2016.

These Condensed Consolidated Financial Statements are expressed in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The information furnished reflects all adjustments necessary for a fair presentation of the results for the periods presented and includes certain assets and liabilities of Dynamic Solutions Group Inc. (The Fax Guys), with effect from December 2, 2019, and the financial results of Carbonite, Inc. (Carbonite), with effect from December 24, 2019 (see note 19 "Acquisitions").

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. In particular, key estimates, judgments and assumptions include those related to: (i) revenue recognition, (ii) accounting for income taxes, (iii) testing of goodwill for impairment, (iv) the valuation of acquired intangible assets, (v) the valuation of long-lived assets, (vi) the recognition of contingencies, (vii) restructuring accruals, (viii) acquisition accruals and pre-acquisition contingencies, (ix) the realization of investment tax credits, (x) the valuation of stock options granted and obligations related to share-based payments, including the valuation of our long-term incentive plans, and (xi) the valuation of pension obligations.

Impact of Recently Adopted Accounting Pronouncements

Leases

Effective July 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02 “Leases (Topic 842)” (Topic 842) using the modified retrospective transition approach. In accordance with this adoption method, results for reporting periods as of July 1, 2019 are presented under the new standard, while prior period results continue to be reported under the previous standard. Additionally, we elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to (i) carry forward the historical lease classification for any expired or existing leases, (ii) not reassess whether any expired or existing contracts contain leases and (iii) not reassess any initial direct cost for existing leases. We did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date. As a result of this adoption, we recorded the following adjustments as of July 1, 2019 on the Consolidated Balance Sheets:

• An increase in operating lease right of use assets of approximately $217.5 million;

• An increase in total operating lease liabilities of approximately $253.5 million;

• A decrease in prepaid expenses and other current assets of approximately $6.6 million in connection with lease fair value adjustments and prepaid rent;

• A decrease in other assets of approximately $0.2 million in connection with lease fair value adjustments; and

    9

• A decrease in total accrued liabilities of approximately $42.8 million in connection with tenant allowances, deferred rent, lease fair value adjustments, and amounts payable in respect of restructured facilities.

The adoption of Topic 842 had no impact to the Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statement of Shareholders' Equity or Condensed Consolidated Statements of Cash Flows. Please refer to Note 6, “Leases,” for additional information.

NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted in Fiscal 2020

During Fiscal 2020, we have adopted the following ASUs, in addition to those discussed in note 1 "Basis of Presentation". The ASUs listed below did not have a material impact to our reported financial position, results of operations or cash flows:

• ASU No. 2017-12 “Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities” (ASU 2017-12)

• ASU No. 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”

Accounting Pronouncements Not Yet Adopted

Retirement Benefits

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-14 “Compensation-Retirement Benefits-Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (ASU 2018-14), which modifies the disclosure requirements for defined benefit pension plans and other post retirement plans. ASU 2018-14 is effective for us in the first quarter of our fiscal year ending June 30, 2021. We are currently evaluating the impact of our pending adoption of ASU 2018-14 on our consolidated financial statements.

Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward looking information to calculate credit loss estimates. Topic 326 is effective for us in our first quarter of our fiscal year ending June 30, 2021. Topic 326 must be adopted by applying a cumulative effect adjustment to retained earnings. We are currently evaluating Topic 326, including its potential impact to our process and controls. We believe the effect on our consolidated financial statements will largely depend on the composition and credit quality of our financial assets and the economic conditions at the time of adoption.

NOTE 3—REVENUES

In accordance with Accounting Standards Codification (ASC) Topic 606 "Revenue from Contracts with Customers" (Topic 606), we account for a customer contract when we obtain written approval, the contract is committed, the rights of the parties, including the payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Revenue is recognized when, or as, control of a promised product or service is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for our products and services (at its transaction price). Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based on readily available information, which may include historical, current and forecasted information, taking into consideration the type of customer, the type of transaction and specific facts and circumstances of each arrangement. We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue producing transactions.

We have four revenue streams: license, cloud services and subscriptions, customer support, and professional service and other.

License revenue

Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premises (on-premise).

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Perpetual licenses: We sell perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which is generally paid at contract inception. Our perpetual licenses provide a right to use intellectual property (IP) that is functional in nature and have significant stand-alone functionality. Accordingly, for perpetual licenses of functional IP, revenue is recognized at the point-in-time when control has been transferred to the customer, which normally occurs once software activation keys have been made available for download.

Term licenses and Subscription licenses: We sell both term and subscription licenses which provide customers the right to use software for a specified period in exchange for a fee, which may be paid at contract inception or paid in installments over the period of the contract. Like perpetual licenses, both our term licenses and subscription licenses are functional IP that have significant stand-alone functionality. Accordingly, for both term and subscription licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.

Cloud services and subscriptions revenue

Cloud services and subscriptions revenue are from hosting arrangements where in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements). The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis. Our cloud arrangements can be broadly categorized as "platform as a service" (PaaS), "software as a service" (SaaS), cloud subscriptions and managed services.

PaaS/ SaaS/ Cloud Subscriptions (collectively referred to here as cloud-based solutions): We offer cloud-based solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. These services are made available to the customer continuously throughout the contractual period, however, the extent to which the customer uses the services may vary at the customer’s discretion. The payment for cloud-based solutions may be received either at inception of the arrangement, or over the term of the arrangement.

These cloud-based solutions are considered to have a single performance obligation where the customer simultaneously receives and consumes the benefit, and as such we recognize revenue for these cloud-based solutions ratably over the term of the contractual agreement. For example, revenue related to cloud-based solutions that are provided on a usage basis, such as the number of users, is recognized based on a customer’s utilization of the services in a given period.

Additionally, a software license is present in a cloud-based solutions arrangement if all of the following criteria are met:

(i) The customer has the contractual right to take possession of the software at any time without significant penalty; and

(ii) It is feasible for the customer to host the software independent of us.

In these cases where a software license is present in a cloud-based solutions arrangement it is assessed to determine if it is distinct from the cloud-based solutions arrangement. The revenue allocated to the distinct software license would be recognized at the point in time the software license is transferred to the customer, whereas the revenue allocated to the hosting performance obligation would be recognized ratably on a monthly basis over the contractual term unless evidence suggests that revenue is earned, or obligations are fulfilled in a different pattern over the contractual term of the arrangement.

Managed services: We provide comprehensive B2B process outsourcing services for all day-to-day operations of a customers’ B2B integration program. Customers using these managed services are not permitted to take possession of our software and the contract is for a defined period, where customers pay a monthly or quarterly fee. Our performance obligation is satisfied as we provide services of operating and managing a customer's electronic data interchange (EDI) environment. Revenue relating to these services is recognized using an output method based on the expected level of service we will provide over the term of the contract.

In connection with cloud subscription and managed service contracts, we often agree to perform a variety of services before the customer goes live, such as for example, converting and migrating customer data, building interfaces and providing training. These services are considered an outsourced suite of professional services which can involve certain project-based activities. These services can be provided at the initiation of a contract, during the implementation or on an ongoing basis as part of the customer life cycle. These services can be charged separately on a fixed fee or time and materials basis, or the costs associated may be recovered as part of the ongoing cloud subscription or managed services fee. These outsourced professional services are considered to be distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements. The obligation to provide outsourced professional services is satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance

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obligations. For outsourced professional services, we recognize revenue by measuring progress toward the satisfaction of our performance obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we recognize revenue at that amount.

Customer support revenue

Customer support revenue is associated with perpetual, term license and on-premise subscription arrangements. As customer support is not critical to the customer's ability to derive benefit from its right to use our software, customer support is considered as a distinct performance obligation when sold together in a bundled arrangement along with the software.

Customer support consists primarily of technical support and the provision of unspecified updates and upgrades on a when-and-if-available basis. Customer support for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Customer support for term and subscription licenses is renewable concurrently with such licenses for the same duration of time. Payments for customer support are generally made at the inception of the contract term or in installments over the term of the maintenance period. Our customer support team is ready to provide these maintenance services, as needed, to the customer during the contract term. As the elements of customer support are delivered concurrently and have the same pattern of transfer, customer support is accounted for as a single performance obligation. The customer benefits evenly throughout the contract period from the guarantee that the customer support resources and personnel will be available to them, and that any unspecified upgrades or unspecified future products developed by us will be made available. Revenue for customer support is recognized ratably over the contract period based on the start and end dates of the maintenance term, in line with how we believe services are provided.

Professional service and other revenue

Our professional services, when offered along with software licenses, consists primarily of technical services and training services. Technical services may include installation, customization, implementation or consulting services. Training services may include access to online modules or delivering a training package customized to the customer’s needs. At the customer’s discretion, we may offer one, all, or a mix of these services. Payment for professional services is generally a fixed fee or is a fee based on time and materials.

Professional services can be arranged in the same contract as the software license or in a separate contract.

As our professional services do not significantly change the functionality of the license and our customers can benefit from our professional services on their own or together with other readily available resources, we consider professional services as distinct within the context of the contract.

Professional service revenue is recognized over time so long as: (i) the customer simultaneously receives and consumes the benefits as we perform them, (ii) our performance creates or enhances an asset the customer controls as we perform, and (iii) our performance does not create an asset with alternative use and we have enforceable right to payment.

If all of the above criteria are met, we use an input-based measure of progress for recognizing professional service revenue. For example we may consider total labor hours incurred compared to total expected labor hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we will recognize revenue at that amount.

Material rights

To the extent that we grant our customer an option to acquire additional products or services in one of our arrangements, we will account for the option as a distinct performance obligation in the contract only if the option provides a material right to the customer that the customer would not receive without entering into the contract. For example if we give the customer an option to acquire additional goods or services in the future at a price that is significantly lower than the current price, this would be a material right as it allows the customer to, in effect, pay in advance for the option to purchase future products or services. If a material right exists in one of our contracts then revenue allocated to the option is deferred and we would recognize revenue only when those future products or services are transferred or when the option expires.

Based on history, our contracts do not typically contain material rights and when they do, the material right is not significant to our consolidated financial statements.

Arrangements with multiple performance obligations

Our contracts generally contain more than one of the products and services listed above. Determining whether goods and services are considered distinct performance obligations that should be accounted for separately or as a single performance obligation may require judgment, specifically when assessing whether both of the following two criteria are met:

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• the customer can benefit from the product or service either on its own or together with other resources that are readily available to the customer; and

• our promise to transfer the product or service to the customer is separately identifiable from other promises in the contract.

If these criteria are not met, we determine an appropriate measure of progress based on the nature of our overall promise for the single performance obligation.

If these criteria are met, each product or service is separately accounted for as a distinct performance obligation and the total transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis.

Standalone selling price

The SSP reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers. In most cases we are able to establish the SSP based on observable data. We typically establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in facts and circumstances warrant a review.

If the SSP is not directly observable, then we estimate the amount using either the expected cost plus a margin or residual approach. Estimating SSP requires judgment that could impact the amount and timing of revenue recognized. SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or regional specific factors, competitive positioning, internal costs, profit objectives, and pricing practices.

Transaction Price Allocation

In bundled arrangements, where we have more than one distinct performance obligation, we must allocate the transaction price to each performance obligation based on its relative SSP. However, in certain bundled arrangements, the SSP may not always be directly observable. For instance, in bundled arrangements with license and customer support, we allocate the transaction price between the license and customer support performance obligations using the residual approach because we have determined that the SSP for licenses in these arrangements are highly variable. We use the residual approach only for our license arrangements. When the SSP is observable but contractual pricing does not fall within our established SSP range, then an adjustment is required and we will allocate the transaction price between license and customer support at a constant ratio reflecting the mid-point of the established SSP range.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly.

Sales to resellers

We execute certain sales contracts through resellers, distributors and channel partners (collectively referred to as resellers). For these type of agreements, we assess whether we are considered the principal or the agent in the arrangement. We consider factors such as, but not limited to, whether or not the reseller has the ability to set the price for which they sell our software products to end users and whether or not resellers distribution rights are limited such that any potential sales are subject to OpenText’s review and approval before delivery of the software product can be made. If we determine that we are the principal in the arrangement, then revenue is recognized based on the transaction price for the sale of the software product to the end user at the gross amount. If that is not known, then the net amount received from the reseller is the transaction price. If we determine that we are the agent in the agreement, then revenue is recognized based on the transaction price for the sale of the software product to the reseller, less any applicable commissions paid or discounts or rebates, if offered. Costs or commissions paid to the reseller would be recognized as a reduction of revenue unless we received a distinct good or service in return. Similarly, any discounts or rebates offered by the reseller would be recognized as a reduction of revenue.

Typically, we conclude that we are the principal in our reseller agreements, as we have control over the service and products prior to being transferred to the end customer.

We also assess the creditworthiness of each reseller and if they are newly formed, undercapitalized or in financial difficulty, we defer any revenues expected to emanate from such reseller and recognize revenue only when cash is received, and all other revenue recognition criteria under Topic 606 are met.

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Rights of return and other incentives

We do not generally offer rights of return or any other incentives such as concessions, product rotation, or price protection and, therefore, do not provide for or make estimates of rights of return and similar incentives. However, we do offer consumers who purchase certain of our products on-line directly from us an unconditional full 70-days money-back guarantee. Distributors and resellers are also permitted to return the consumer products, subject to certain limitations. Revenue is reduced for such rights based on the estimate of future returns originating from contractual agreements with these customers.

Additionally, in some contracts, however, discounts may be offered to the customer for future software purchases and other additional products or services. Such arrangements grant the customer an option to acquire additional goods or services in the future at a discount and therefore are evaluated under guidance related to “material rights” as discussed above.

Other policies

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice date. In certain arrangements, we will receive payment from a customer either before or after the performance obligation to which the invoice relates has been satisfied. As a practical expedient, we do not account for significant financing components if the period between when we transfer the promised good or service to the customer and when the customer pays for the product or service will be one year or less. On that basis, our contracts for license and maintenance typically do not contain a significant financing component, however, in determining the transaction price we consider whether we need to adjust the promised consideration for the effects of the time value of money if the timing of payments provides either the customer or OpenText with a significant benefit of financing. Our managed services contracts may not include an upfront charge for outsourced professional services performed as part of an implementation and are recovered through an ongoing fee. Therefore, these contracts may be expected to have a financing component associated with revenue being recognized in advance of billings.

We may modify contracts to offer customers additional products or services. The additional products and services will be considered distinct from those products or services transferred to the customer before the modification and will be accounted for as a separate contract. We evaluate whether the price for the additional products and services reflects the SSP adjusted as appropriate for facts and circumstances applicable to that contract. In determining whether an adjustment is appropriate, we evaluate whether the incremental consideration is consistent with the prices previously paid by the customer or similar customers.

Certain of our subscription services and product support arrangements generally contain performance response time guarantees. For subscription services arrangements, we estimate variable consideration using a portfolio approach because performance penalties are tied to standard response time requirements. For product support arrangements, we estimate variable consideration on a contract basis because such arrangements are customer-specific. For both subscription services and product support arrangements, we use an expected value approach to estimate variable consideration based on historical business practices and current and future performance expectations to determine the likelihood of incurring penalties.

Performance Obligations

A summary of our typical performance obligations and when the obligations are satisfied are as follows:

Performance Obligation	When Performance Obligation is Typically Satisfied
License revenue:
Software licenses (Perpetual,Term, Subscription)	When software activation keys have been made available for download (point in time)
Cloud services and subscriptions revenue:
Outsourced Professional Services	As the services are provided (over time)
Managed Services / Ongoing Hosting / SaaS	Over the contract term, beginning on the date that service is made available (i.e. "Go live") to the customer (over time)
Customer support revenue:
When and if available updates and upgrades and technical support	Ratable over the course of the service term (over time)
Professional service and other revenue:
Professional services	As the services are provided (over time)

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Disaggregation of Revenue

The following table disaggregates our revenue by significant geographic area, based on the location of our end customer, and by type of performance obligation and timing of revenue recognition for the periods indicated:

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Total Revenues by Geography:
Americas (1)	$	450,691	$	420,696	$	870,401	$	810,036
EMEA (2)	252,268		243,937		462,435		458,412
Asia Pacific (3)	68,598		70,598		135,609		133,940
Total Revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Total Revenues by Type of Performance Obligation:
Recurring revenue (4)
Cloud services and subscriptions revenue	$	248,340	$	219,233	$	485,605	$	427,316
Customer support revenue	315,508		310,354		627,806		621,905
Total recurring revenues	$	563,848	$	529,587	$	1,113,411	$	1,049,221
License revenue (perpetual, term and subscriptions)	138,095		132,756		215,993		209,643
Professional service and other revenue	69,614		72,888		139,041		143,524
Total revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388
Total Revenues by Timing of Revenue Recognition
Point in time	138,095		132,756		215,993		209,643
Over time (including professional service and other revenue)	633,462		602,475		1,252,452		1,192,745
Total revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388

⁽¹⁾ Americas consists of countries in North, Central and South America.

⁽²⁾ EMEA primarily consists of countries in Europe, the Middle East and Africa.

⁽³⁾ Asia Pacific primarily consists of the countries Japan, Australia, China, Korea, Philippines, Singapore and New Zealand.

⁽⁴⁾ Recurring revenue is defined as the sum of cloud services and subscriptions revenue and customer support revenue.

Contract Balances

A contract asset will be recorded if we have recognized revenue but do not have an unconditional right to the related consideration from the customer. For example, this will be the case if implementation services offered in a cloud arrangement are identified as a separate performance obligation and are provided to a customer prior to us being able to bill the customer. In addition, a contract asset may arise in relation to subscription licenses if the license revenue that is recognized upfront exceeds the amount that we are able to invoice the customer at that time. Contract assets are reclassified to accounts receivable when the rights become unconditional.

The balance for our contract assets and contract liabilities (i.e. deferred revenues) for the periods indicated below were as follows:

	As of December 31, 2019		As of June 30, 2019
Short-term contract assets	$	22,794	$	20,956
Long-term contract assets	$	17,975	$	15,386
Short-term deferred revenue	$	718,861	$	641,656
Long-term deferred revenue	$	77,335	$	46,974

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The difference in the opening and closing balances of our contract assets and deferred revenues primarily results from the timing difference between our performance and the customer’s payments. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. During the six months ended December 31, 2019, we reclassified $13.3 million of contract assets to receivables as a result of the right to the transaction consideration becoming unconditional. During the three and six months ended December 31, 2019, respectively, there was no significant impairment loss recognized related to contract assets.

We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer for future obligations to transfer products or services. Our deferred revenues primarily relate to customer support agreements which have been paid for by customers prior to the performance of those services. The amount of revenue that was recognized during the six months ended December 31, 2019 that was included in the deferred revenue balances at June 30, 2019 was approximately $491 million.

Incremental Costs of Obtaining a Contract with a Customer

Incremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not have incurred if the contract had not been obtained, such as sales commissions. We have determined that certain of our commission programs meet the requirements to be capitalized. Some commission programs are not subject to capitalization as the commission expense is paid and recognized as the related revenue is recognized. In assessing costs to obtain a contract, we apply a practical expedient that allows us to assess our incremental costs on a portfolio of contracts with similar characteristics instead of assessing the incremental costs on each individual contract. We do not expect the financial statement effects of applying this practical expedient to the portfolio of contracts to be materially different than if we were to apply the new standard to each individual contract.

We pay commissions on the sale of new customer contracts as well as for renewals of existing contracts to the extent the renewals generate incremental revenue. Commissions paid on renewal contracts are limited to the incremental new revenue and therefore these payments are not commensurate with the commission paid on the original sale. We allocate commission costs to the performance obligations in an arrangement consistent with the allocation of the transaction price. Commissions allocated to the license performance obligation are expensed at the time the license revenue is recognized. Commissions allocated to professional service performance obligations are expensed as incurred, as these contracts are generally for one year or less and we apply a practical expedient to expense costs as incurred if the amortization period would have been one year or less. Commissions allocated to maintenance, managed services, on-going hosting arrangements or other recurring services, are capitalized and amortized consistent with the pattern of transfer to the customer of the services over the period expected to benefit from the commission payment. As commissions paid on renewals are not commensurate with the original sale, the period of benefit considers anticipated renewals. The benefit period is estimated to be approximately six years which is based on our customer contracts and the estimated life of our technology.

Expenses for incremental costs associated with obtaining a contract are recorded within sales and marketing expense in the Condensed Consolidated Statements of Income.

Our short term capitalized costs to obtain a contract are included in "Prepaid expenses and other assets", while our long-term capitalized costs to obtain a contract are included in "Other assets" on our Condensed Consolidated Balance Sheets.

The following table summarizes the changes in total capitalized costs since June 30, 2019:

Capitalized costs to obtain a contract as of June 30, 2019	$	48,284
New capitalized costs incurred	10,590
Amortization of capitalized costs	(7,715		)
Adjustments on account of foreign exchange	(228		)
Capitalized costs to obtain a contract as of December 31, 2019	$	50,931

During the three and six months ended December 31, 2019, respectively, there was no significant impairment loss recognized in relation to costs capitalized.

Transaction Price Allocated to the Remaining Performance Obligations

As of December 31, 2019, approximately $1.3 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts. We expect to recognize approximately 50% of this amount over the next 12 months and the remaining balance thereafter. We apply the practical expedient and do not disclose performance obligations that have original expected durations of one year or less.

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NOTE 4—ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance as of June 30, 2019	$	17,011
Bad debt expense	3,450
Write-off /adjustments	(2,524		)
Balance as of December 31, 2019	$	17,937

Included in accounts receivable are unbilled receivables in the amount of $80.5 million as of December 31, 2019 (June 30, 2019—$56.1 million).

NOTE 5—PROPERTY AND EQUIPMENT

	As of December 31, 2019
	Cost		Accumulated Depreciation			Net
Furniture and fixtures	$	45,392	$	(29,191	)	$	16,201
Office equipment	2,152		(1,244		)	908
Computer hardware	286,043		(186,562		)	99,481
Computer software	125,736		(95,262		)	30,474
Capitalized software development costs	102,560		(62,420		)	40,140
Leasehold improvements	125,155		(73,802		)	51,353
Land and buildings	49,547		(14,656		)	34,891
Total	$	736,585	$	(463,137	)	$	273,448

 

	As of June 30, 2019
	Cost		Accumulated Depreciation			Net
Furniture and fixtures	$	40,260	$	(26,492	)	$	13,768
Office equipment	1,993		(1,576		)	417
Computer hardware	258,802		(177,402		)	81,400
Computer software	119,018		(87,240		)	31,778
Capitalized software development costs	95,729		(56,205		)	39,524
Leasehold improvements	113,510		(66,520		)	46,990
Land and buildings	49,557		(13,981		)	35,576
Total	$	678,869	$	(429,416	)	$	249,453

NOTE 6—LEASES

We enter into operating leases, both domestically and internationally, for certain facilities, automobiles, data centers and equipment for use in the ordinary course of business. The duration of the majority of these leases generally range from 1 to 10 years, some of which include options to extend for an additional 3 to 5 years after the initial term. Additionally, the land upon which our headquarters in Waterloo, Ontario Canada is located, is leased from the University of Waterloo for a period of 49 years beginning in December 2005, with an option to renew for an additional term of 49 years. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets and we do not have any material finance leases.

We account for a contract as a lease when we have the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine the initial classification and measurement of our right of use (ROU) assets and lease liabilities at the lease commencement date and thereafter if modified.

ROU assets represent our right to control the underlying assets under lease, and the lease liability is our obligation to make the lease payments related to the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are recognized on the Consolidated Balance Sheets based on the present value of future minimum lease payments to be made over the lease term. When available, we will use the rate implicit in the lease to discount lease payments to present value. However, real estate leases generally do not provide a readily determinable implicit rate, therefore, we must estimate our incremental borrowing rate to discount the lease payments. We estimate our incremental borrowing rate based on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located.

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The ROU asset equals the lease liability, adjusted for any initial direct costs, prepaid rent and lease incentives. Fixed lease costs are included in the recognition of ROU assets and lease liabilities. Variable lease costs are not included in the measurement of the lease liability. These variable lease payments are recognized in the Consolidated Statements of Income in the period in which the obligation for those payments is incurred. Consistent with previous lease accounting rules under ASC Topic 840, lease expense for minimum lease payments continue to be recognized in the Consolidated Statements of Income on a straight-line basis over the lease term.

We have not elected the practical expedient to combine lease and non-lease components in the determination of lease costs for our facility leases. For all other asset classes, we have elected the practical expedient to combine the lease and the non-lease components. The lease liability includes lease payments related to options to extend or renew the lease term only if we are reasonably certain we will exercise those options. Our leases typically do not contain any material residual value guarantees or restrictive covenants.

In certain circumstances, we sublease all or a portion of a leased facility, to various other companies through a sublease agreement.

Lease Costs and Other Information

The following illustrates the various components of operating lease costs, lease term and discount rate for the period indicated:

	Three Months Ended December 31, 2019			Six Months Ended December 31, 2019
Operating lease cost	$	15,955		$	32,102
Short-term lease cost	190			288
Variable lease cost	764			1,507
Sublease income	(1,583		)	(3,137		)
Total lease cost	$	15,326		$	30,760
Weighted-average remaining lease term	6.05 years			6.05 years
Weighted-average discount rate	3.28		%	3.28		%

Supplemental Cash Flow Information

The following table presents supplemental information relating to cash flows arising from lease transactions. Cash payment made for variable lease cost and short-term lease are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below:

	Three Months Ended December 31, 2019		Six Months Ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities:	$	18,461	$	36,070
Right of use assets obtained in exchange for new operating lease liabilities	$	10,557	$	15,417

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Maturity of Lease Liabilities

The following table presents the future minimum lease payments under our operating leases liabilities as of December 31, 2019:

Fiscal years ending June 30,
2020 (six months ended June 30)	$	39,817
2021	66,295
2022	54,406
2023	41,187
2024	30,844
Thereafter	81,161
Total Lease payments	$	313,710
Less: Imputed interest	(28,450		)
Total	$	285,260
Reported as
Current operating lease liabilities	66,579
Non-current operating lease liabilities	218,681
Total	$	285,260

Operating lease maturity amounts included in the table above do not include sublease income expected to be received under our various sublease agreements with third parties. Under these agreements, we expect to receive sublease income of approximately $3.7 million over the remainder of Fiscal 2020, and approximately $27.2 million thereafter.

The following table presents the future minimum lease payments under our operating leases, based on the expected due dates of the various agreements as of June 30, 2019, as previously reported in our Annual Report on Form 10-K for the year ended June 30, 2019, prior to the adoption of Topic 842:

Fiscal years ending June 30,
2020	$	72,853
2021	59,451
2022	46,943
2023	33,871
2024	25,570
Thereafter	80,163
Total minimum lease payments (1)	$	318,851

⁽¹⁾ Net of $30.7 million of sublease income to be received from properties which we have subleased to third parties.

NOTE 7—GOODWILL

Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net tangible and intangible assets. The following table summarizes the changes in goodwill since June 30, 2019:

Balance as of June 30, 2019	$	3,769,908
Acquisition of Carbonite (note 19)	885,547
Acquisition of The Fax Guys (note 19)	2,180
Adjustments relating to acquisitions prior to Fiscal 2020 that had open measurement periods (note 19)	842
Adjustments on account of foreign exchange	(1,985		)
Balance as of December 31, 2019	$	4,656,492

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NOTE 8—ACQUIRED INTANGIBLE ASSETS

	As of December 31, 2019
	Cost		Accumulated Amortization			Net
Technology assets	$	1,126,601	$	(431,856	)	$	694,745
Customer assets	1,951,617		(838,290		)	1,113,327
Total	$	3,078,218	$	(1,270,146	)	$	1,808,072
	As of June 30, 2019
	Cost		Accumulated Amortization			Net
Technology assets	$	835,498	$	(349,259	)	$	486,239
Customer assets	1,397,937		(737,672		)	660,265
Total	$	2,233,435	$	(1,086,931	)	$	1,146,504

The weighted average amortization periods for acquired technology and customer intangible assets are approximately five years and seven years, respectively.

The following table shows the estimated future amortization expense for the fiscal years indicated. This calculation assumes no future adjustments to acquired intangible assets:

Fiscal years ending June 30,
2020 (six months ended June 30)	$	239,877
2021	424,138
2022	384,751
2023	299,585
2024	220,855
2025 and beyond	238,866
Total	$	1,808,072

 

NOTE 9—OTHER ASSETS

	As of December 31, 2019		As of June 30, 2019
Deposits and restricted cash	$	13,527	$	13,671
Capitalized costs to obtain a contract	37,692		35,593
Investments	69,712		67,002
Long-term prepaid expenses and other long-term assets	37,127		32,711
Total	$	158,058	$	148,977

Deposits and restricted cash primarily relate to security deposits provided to landlords in accordance with facility lease agreements and cash restricted per the terms of certain contractual-based agreements.

Capitalized costs to obtain a contract relate to incremental costs of obtaining a contract, such as sales commissions, which are eligible for capitalization on contracts to the extent that such costs are expected to be recovered (see note 3 "Revenues").

Investments relate to certain non-marketable equity securities in which we are a limited partner. Our interests in each of these investees range from 4% to below 20%. These investments are accounted for using the equity method. Our share of net income or losses based on our interest in these investments is recorded as a component of other income (expense), net in our Condensed Consolidated Statements of Income. During the three and six months ended December 31, 2019, our share of income (loss) from these investments was $1.3 million and $1.9 million, respectively, (three and six months ended December 31, 2018 — $5.5 million and $7.9 million, respectively).

Long-term prepaid expenses and other long-term assets includes advance payments on long-term licenses that are being amortized over the applicable terms of the licenses and other miscellaneous assets.

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NOTE 10—ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Current liabilities

Accounts payable and accrued liabilities are comprised of the following:

 

	As of December 31, 2019		As of June 30, 2019
Accounts payable—trade	$	45,285	$	46,323
Accrued salaries and commissions	113,901		131,430
Accrued liabilities(1)(2)	229,414		117,551
Accrued interest on Senior Notes	24,786		24,786
Amounts payable in respect of restructuring and other Special charges(1)	1,111		8,153
Asset retirement obligations	3,114		1,660
Total	$	417,611	$	329,903

Long-term accrued liabilities 

	As of December 31, 2019		As of June 30, 2019
Amounts payable in respect of restructuring and other Special charges(1)	$	—	$	4,804
Other accrued liabilities(1)	2,186		30,338
Asset retirement obligations	12,791		14,299
Total	$	14,977	$	49,441

⁽¹⁾ Previously, in Fiscal 2019, tenant allowances, deferred rent, lease fair value adjustments and amounts payable relating to restructured facilities were included in total accrued liabilities. Effective July 1, 2019, these balances were reclassified to operating lease right of use assets in accordance with the adoption of Topic 842. See note 1 "Basis of Presentation" and note 6 "Leases" for more information.

⁽²⁾ Includes approximately $89 million of Carbonite purchase consideration that was accrued and unpaid as of December 31, 2019, in accordance with the purchase agreement (see note 19 "Acquisitions").

Asset retirement obligations

We are required to return certain of our leased facilities to their original state at the conclusion of our lease. As of December 31, 2019, the present value of this obligation was $15.9 million (June 30, 2019—$16.0 million), with an undiscounted value of $17.3 million (June 30, 2019—$17.6 million).

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NOTE 11—LONG-TERM DEBT

Long-term debt

Long-term debt is comprised of the following:

	As of December 31, 2019			As of June 30, 2019
Total debt
Senior Notes 2026	$	850,000		$	850,000
Senior Notes 2023	800,000			800,000
Notes due 2022	143,750			—
Term Loan B	982,500			987,500
Revolver	750,000			—
Total principal payments due	3,526,250			2,637,500
Premium on Senior Notes 2026	5,085			5,405
Make-whole premium on Notes due 2022(1)	9,881			—
Debt issuance costs	(27,199		)	(28,027		)
Total amount outstanding	3,514,017			2,614,878
Less:
Current portion of long-term debt
Notes due 2022 including make-whole premium	153,631			—
Term Loan B	10,000			10,000
Revolver	750,000			—
Total current portion of long-term debt	913,631			10,000
Non-current portion of long-term debt	$	2,600,386		$	2,604,878

⁽¹⁾ Represents the total value of the make-whole premium, assuming all holders convert at the temporarily increased conversion rate.

Senior Unsecured Fixed Rate Notes

Senior Notes 2026

On May 31, 2016, we issued $600 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (Securities Act), and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2026 bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016. Senior Notes 2026 will mature on June 1, 2026, unless earlier redeemed, in accordance with their terms, or repurchased.

On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%. The additional notes have identical terms, are fungible with and are a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026. The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, is $850 million.

For the three and six months ended December 31, 2019, we recorded interest expense of $12.5 million and $25.0 million, respectively, relating to Senior Notes 2026 (three and six months ended December 31, 2018— $12.5 million and $25.0 million, respectively).

Senior Notes 2023

On January 15, 2015, we issued $800 million in aggregate principal amount of 5.625% Senior Notes due 2023 (Senior Notes 2023) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2023 bear interest at a

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rate of 5.625% per annum, payable semi-annually in arrears on January 15 and July 15, commencing on July 15, 2015. Senior Notes 2023 will mature on January 15, 2023, unless earlier redeemed, in accordance with their terms, or repurchased.

For the three and six months ended December 31, 2019, we recorded interest expense of $11.2 million and $22.5 million, respectively, relating to Senior Notes 2023 (three and six months ended December 31, 2018— $11.2 million and $22.5 million, respectively).

Notes due 2022

As part of our acquisition of Carbonite, our consolidated debt reflects $143.8 million of principal debt convertible notes (Notes due 2022). Notes due 2022 were originally issued by Carbonite, on April 4, 2017, in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Notes due 2022 were issued under an Indenture (the 2022 Notes Indenture) between Carbonite and U.S. Bank National Association, as trustee (the 2022 Notes Trustee). The Notes due 2022 accrue interest at 2.5% per year, payable semiannually in arrears on April 1 and October 1 of each year. The Notes due 2022 will mature on April 1, 2022, unless earlier repurchased, redeemed or converted. Carbonite, now a subsidiary of OpenText, remains the sole obligor on the Notes due 2022.

In connection with our acquisition of Carbonite, and as required by the 2022 Notes Indenture, Carbonite and the 2022 Notes Trustee entered into a first supplemental indenture, dated as of December 24, 2019 (the 2022 Notes Supplemental Indenture). The 2022 Notes Supplemental Indenture provides that, at and after the effective time of our acquisition of Carbonite, the right to convert each $1,000 principal amount of the Notes due 2022 was changed into the right to convert such principal amount of the Notes due 2022 solely into cash in an amount equal to the Conversion Rate (as defined in the 2022 Notes Indenture) in effect on the Conversion Date (as defined in the 2022 Notes Indenture) multiplied by $23.00, which was the price per share we paid in connection with our acquisition of Carbonite.

As a result of our acquisition of Carbonite, the Conversion Rate for the Notes due 2022 was temporarily increased by 7.7633 per $1,000 principal amount of Notes due 2022 to yield a Conversion Rate of 46.4667 per $1,000 principal amount of Notes due 2022.  The increased Conversion Rate will remain in effect until the close of business (5:00 P.M. New York City time) on February 27, 2020.  During the period between our acquisition of Carbonite and that date, each $1,000 principal amount of Notes due 2022 surrendered for conversion will be converted into $1,068.7341 in cash. 

Term Loan B

On May 30, 2018, we refinanced our existing term loan facility, by entering into a new $1 billion term loan facility (Term Loan B), whereby we borrowed $1 billion on that day and repaid in full the loans under our prior $800 million term loan facility originally entered into on January 16, 2014. Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver (defined below).

Term Loan B has a seven year term, maturing in May 2025, and repayments made under Term Loan B are equal to 0.25% of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity. Borrowings under Term Loan B currently bear a floating rate of interest equal to 1.75% plus LIBOR. As of December 31, 2019, the outstanding balance on the Term Loan B bears an interest rate of approximately 3.45%.

For the three and six months ended December 31, 2019, we recorded interest expense of $9.0 million and $19.1 million, respectively, relating to Term Loan B (three and six months ended December 31, 2018—$10.3 million and $20.1 million).

Revolver

On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total commitments under the Revolver from $450 million to $750 million as well as to extend the maturity from May 5, 2022 to October 31, 2024. Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B. The Revolver has no fixed repayment date prior to the end of the term. Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%. As of December 31, 2019, the outstanding balance on the Revolver bears an interest rate of approximately 3.29%.

During the three months ended December 31, 2019 we drew down $750 million from the Revolver to partially fund the acquisition of Carbonite. As of December 31, 2019, the full amount drawn remained outstanding (June 30, 2019—nil). During the three and six months ended December 31, 2019, we recorded interest expense relating to amounts drawn of approximately $0.6 million, respectively.

As of December 31, 2018, we had no outstanding balance on the Revolver. There was no activity during the three and six months ended December 31, 2018 and we recorded no interest expense.

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Debt Issuance Costs and Premium on Senior Notes

Debt issuance costs relate primarily to costs incurred for the purpose of obtaining our credit facilities and issuing our Senior Notes 2023 and Senior Notes 2026 (collectively referred to as the Senior Notes) and are being amortized over the respective terms of the Senior Notes and Term Loan B and the Revolver using the effective interest method.

The premium on Senior Notes 2026 represents the excess of the proceeds received over the face value of Senior Notes 2026. This premium is amortized as a reduction to interest expense over the term of Senior Notes 2026 using the effective interest method.

NOTE 12—PENSION PLANS AND OTHER POST RETIREMENT BENEFITS

The following table provides details of our defined benefit pension plans and long-term employee benefit obligations for Open Text Document Technologies GmbH (CDT), GXS GmbH (GXS GER), GXS Philippines, Inc. (GXS PHP) and other plans as of December 31, 2019 and June 30, 2019:

	As of December 31, 2019
	Total benefit obligation		Current portion of benefit obligation*		Non-current portion of benefit obligation
CDT defined benefit plan	$	35,221	$	700	$	34,521
GXS GER defined benefit plan	25,650		986		24,664
GXS PHP defined benefit plan	7,113		93		7,020
Other plans	7,964		491		7,473
Total	$	75,948	$	2,270	$	73,678

	As of June 30, 2019
	Total benefit obligation		Current portion of benefit obligation*		Non-current portion of benefit obligation
CDT defined benefit plan	$	35,836	$	675	$	35,161
GXS GER defined benefit plan	26,739		1,012		25,727
GXS PHP defined benefit plan	6,904		124		6,780
Other plans	8,052		481		7,571
Total	$	77,531	$	2,292	$	75,239

* The current portion of the benefit obligation has been included within "Accrued salaries and commissions", all within "Accounts payable and accrued liabilities" in the Condensed Consolidated Balance Sheets (see note 10 "Accounts Payable and Accrued Liabilities").

Defined Benefit Plans

CDT Plan

CDT sponsors an unfunded defined benefit pension plan covering substantially all CDT employees (CDT plan) which provides for old age, disability and survivors’ benefits. Benefits under the CDT plan are generally based on age at retirement, years of service and the employee’s annual earnings. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. No contributions have been made since the inception of the plan. Actuarial gains or losses in excess of 10% of the projected benefit obligation are being amortized and recognized as a component of net periodic benefit costs over the average remaining service period of the plan's active employees. As of December 31, 2019, there is approximately $0.5 million in accumulated other comprehensive income related to the CDT plan that is expected to be recognized as a component of net periodic benefit costs over the remainder of Fiscal 2020.

GXS GER Plan

As part of our acquisition of GXS Group, Inc. (GXS) in Fiscal 2014, we assumed an unfunded defined benefit pension plan covering certain German employees which provides for old age, disability and survivors' benefits. The GXS GER plan has been closed to new participants since 2006. Benefits under the GXS GER plan are generally based on a participant’s remuneration, date of hire, years of eligible service and age at retirement. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the

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discount rate and estimated service costs. No contributions have been made since the inception of the plan. Actuarial gains or losses in excess of 10% of the projected benefit obligation are being amortized and recognized as a component of net periodic benefit costs over the average remaining service period of the plan’s active employees. As of December 31, 2019, there is approximately $0.1 million in accumulated other comprehensive income related to the GXS GER plan that is expected to be recognized as a component of net periodic benefit costs over the remainder of Fiscal 2020.

GXS PHP Plan

As part of our acquisition of GXS in Fiscal 2014, we assumed a primarily unfunded defined benefit pension plan covering substantially all of the GXS Philippines employees which provides for retirement, disability and survivors' benefits. Benefits under the GXS PHP plan are generally based on a participant’s remuneration, years of eligible service and age at retirement. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. Aside from an initial contribution which has a fair value of approximately $0.03 million as of December 31, 2019, no additional contributions have been made since the inception of the plan. Actuarial gains or losses in excess of 10% of the projected benefit obligation are being amortized and recognized as a component of net periodic benefit costs over the average remaining service period of the plan’s active employees. As of December 31, 2019, there is approximately $0.1 million in accumulated other comprehensive income related to the GXS PHP plan that is expected to be recognized as a component of net periodic benefit costs over the remainder of Fiscal 2020.

The following are the details of the change in the benefit obligation for each of the above mentioned pension plans for the periods indicated: 

	As of December 31, 2019												As of June 30, 2019
	CDT			GXS GER			GXS PHP			Total			CDT			GXS GER			GXS PHP			Total
Benefit obligation—beginning of period	$	35,836		$	26,739		$	6,904		$	69,479		$	32,651		$	25,382		$	3,853		$	61,886
Service cost	286			159			609			1,054			550			566			771			1,887
Interest cost	229			168			173			570			642			489			300			1,431
Benefits paid	(313		)	(472		)	(115		)	(900		)	(626		)	(996		)	(140		)	(1,762		)
Actuarial (gain) loss	90			(269		)	(559		)	(738		)	3,365			1,872			1,957			7,194
Foreign exchange (gain) loss	(907		)	(675		)	101			(1,481		)	(746		)	(574		)	163			(1,157		)
Benefit obligation—end of period	35,221			25,650			7,113			67,984			35,836			26,739			6,904			69,479
Less: Current portion	(700		)	(986		)	(93		)	(1,779		)	(675		)	(1,012		)	(124		)	(1,811		)
Non-current portion of benefit obligation	$	34,521		$	24,664		$	7,020		$	66,205		$	35,161		$	25,727		$	6,780		$	67,668

The following are details of net pension expense relating to the following pension plans:

	Three Months Ended December 31,
	2019									2018
Pension expense:	CDT		GXS GER		GXS PHP			Total		CDT		GXS GER		GXS PHP			Total
Service cost	$	144	$	80	$	310		$	534	$	136	$	140	$	159		$	435
Interest cost	115		84		88			287		159		121		72			352
Amortization of actuarial (gains) and losses	235		61		(72		)	224		175		33		(139		)	69
Net pension expense	$	494	$	225	$	326		$	1,045	$	470	$	294	$	92		$	856

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	Six Months Ended December 31,
	2019									2018
Pension expense:	CDT		GXS GER		GXS PHP			Total		CDT		GXS GER		GXS PHP			Total
Service cost	$	286	$	159	$	609		$	1,054	$	277	$	285	$	335		$	897
Interest cost	229		168		173			570		324		247		140			711
Amortization of actuarial (gains) and losses	469		122		(143		)	448		351		66		(279		)	138
Net pension expense	$	984	$	449	$	639		$	2,072	$	952	$	598	$	196		$	1,746

In determining the fair value of the pension plan benefit obligations as of December 31, 2019 and June 30, 2019, respectively, we used the following weighted-average key assumptions:

	As of December 31, 2019			As of June 30, 2019
	CDT	GXS GER	GXS PHP	CDT	GXS GER	GXS PHP
Assumptions:
Salary increases	2.50%	2.50%	6.50%	2.50%	2.50%	6.50%
Pension increases	2.00%	2.00%	N/A	2.00%	2.00%	N/A
Discount rate	1.30%	1.30%	5.25%	1.32%	1.32%	5.00%
Normal retirement age	65-67	65-67	60	65-67	65-67	60
Employee fluctuation rate:
to age 20	—%	—%	12.19%	—%	—%	12.19%
to age 25	—%	—%	16.58%	—%	—%	16.58%
to age 30	1.00%	—%	13.97%	1.00%	—%	13.97%
to age 35	0.50%	—%	10.77%	0.50%	—%	10.77%
to age 40	—%	—%	7.39%	—%	—%	7.39%
to age 45	0.50%	—%	3.28%	0.50%	—%	3.28%
to age 50	0.50%	—%	—%	0.50%	—%	—%
from age 51	1.00%	—%	—%	1.00%	—%	—%

Anticipated pension payments under the pension plans for the fiscal years indicated below are as follows:

	Fiscal years ending June 30,
	CDT		GXS GER		GXS PHP
2020 (six months ended June 30)	$	331	$	493	$	31
2021	739		985		268
2022	810		1,017		266
2023	909		1,017		222
2024	1,014		1,023		278
2025 to 2029	5,851		5,171		2,890
Total	$	9,654	$	9,706	$	3,955

Other Plans

Other plans include defined benefit pension plans that are offered by certain of our foreign subsidiaries. Many of these plans were assumed through our acquisitions or are required by local regulatory requirements. These other plans are primarily unfunded, with the aggregate projected benefit obligation included in our pension liability. The net periodic costs of these plans are determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs.

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NOTE 13—SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS

Cash Dividends

For the three and six months ended December 31, 2019, pursuant to the Company’s dividend policy, we declared total non-cumulative dividends of $0.1746 and $0.3492, respectively, per Common Share in the aggregate amount of $47.1 million and $94.1 million, respectively, which we paid during the same period.

For the three and six months ended December 31, 2018, pursuant to the Company’s dividend policy, we paid total non-cumulative dividends of $0.1518 and $0.3036, respectively, per Common Share in the aggregate amount of $40.7 million and $81.2 million, respectively.

Share Capital

Our authorized share capital includes an unlimited number of Common Shares and an unlimited number of Preference Shares. No Preference Shares have been issued.

Treasury Stock

Repurchase

From time to time we may provide funds to an independent agent to facilitate repurchases of our Common Shares in connection with the settlement of awards under the Long-Term Incentive Plans (LTIP) or other plans.

During the three and six months ended December 31, 2019, we repurchased nil and 300,000, respectively, of our Common Shares in the open market, at a cost of approximately nil and $12.4 million, respectively, for potential reissuance under our LTIP or other plans (three and six months ended December 31, 2018—370,265 and 674,265, respectively, Common Shares at a cost of $12.8 million and $24.5 million, respectively). See below for more details on our various plans.

Reissuance

During the three and six months ended December 31, 2019, we reissued 255,502 Common Shares, respectively, from treasury stock (three and six months ended December 31, 2018—544,929 and 547,897 Common Shares, respectively), in connection with the settlement of awards.

Share-Based Payments

Total share-based compensation expense for the periods indicated below is detailed as follows: 

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Stock options	$	2,667	$	2,319	$	4,677	$	4,921
Performance Share Units (issued under LTIP)	1,521		851		2,921		1,694
Restricted Share Units (issued under LTIP)	1,309		1,626		2,969		3,011
Restricted Share Units (other)	10		52		20		133
Deferred Share Units (directors)	1,124		1,032		1,875		1,693
Employee Share Purchase Plan	1,152		1,005		2,212		1,988
Total share-based compensation expense	$	7,783	$	6,885	$	14,674	$	13,440

Summary of Outstanding Stock Options

As of December 31, 2019, an aggregate of 7,511,605 options to purchase Common Shares were outstanding and an additional 8,573,945 options to purchase Common Shares were available for issuance under our stock option plans. Our stock options generally vest over four years and expire between seven and ten years from the date of the grant. Currently we also have options outstanding that vest over five years, as well as options outstanding that vest based on meeting certain market conditions. The exercise price of all our options is set at an amount that is not less than the closing price of our Common Shares on the NASDAQ on the trading day immediately preceding the applicable grant date.

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A summary of activity under our stock option plans for the six months ended December 31, 2019 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic  Value ($’000s)
Outstanding at June 30, 2019	7,102,753		$	31.82
Granted	982,440		39.33
Exercised	(414,682	)	27.39
Forfeited or expired	(158,906	)	34.48
Outstanding at December 31, 2019	7,511,605		$	32.99	4.02	$	83,257
Exercisable at December 31, 2019	2,855,956		$	28.42	2.55	$	44,688

We estimate the fair value of stock options using the Black-Scholes option-pricing model or, where appropriate, the Monte Carlo Valuation Method, consistent with the provisions of ASC Topic 718, "Compensation—Stock Compensation" (Topic 718) and SEC Staff Accounting Bulletin No. 107. The option-pricing models require input of subjective assumptions, including the estimated life of the option and the expected volatility of the underlying stock over the estimated life of the option. We use historical volatility as a basis for projecting the expected volatility of the underlying stock and estimate the expected life of our stock options based upon historical data.

We believe that the valuation techniques and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair value of our stock option grants. Estimates of fair value are not intended, however, to predict actual future events or the value ultimately realized by employees who receive equity awards.

For the periods indicated, the weighted-average fair value of options and weighted-average assumptions were as follows:

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Weighted–average fair value of options granted	$	6.74		$	7.37		$	6.49		$	8.55
Weighted-average assumptions used:
Expected volatility	22.03		%	25.95		%	22.09		%	26.05		%
Risk–free interest rate	1.55		%	2.97		%	1.65		%	2.82		%
Expected dividend yield	1.64		%	1.73		%	1.67		%	1.49		%
Expected life (in years)	4.11			4.32			4.11			4.32
Forfeiture rate (based on historical rates)	7		%	6		%	7		%	6		%
Average exercise share price	$	41.13		$	33.97		$	39.33		$	38.56

As of December 31, 2019, the total compensation cost related to the unvested stock option awards not yet recognized was approximately $24.5 million, which will be recognized over a weighted-average period of approximately 2.9 years.

No cash was used by us to settle equity instruments granted under share-based compensation arrangements in any of the periods presented.

We have not capitalized any share-based compensation costs as part of the cost of an asset in any of the periods presented.

For the three and six months ended December 31, 2019, cash in the amount of $6.8 million and $11.4 million, respectively, was received as the result of the exercise of options granted under share-based payment arrangements. The tax benefit realized by us during the three and six months ended December 31, 2019 from the exercise of options eligible for a tax deduction was $0.6 million and $0.9 million, respectively.

For the three and six months ended December 31, 2018, cash in the amount of $1.8 million and $14.2 million, respectively, was received as the result of the exercise of options granted under share-based payment arrangements. The tax benefit realized by us during the three and six months ended December 31, 2018 from the exercise of options eligible for a tax deduction was $15.0 thousand and $0.9 million, respectively.

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Long-Term Incentive Plans

We incentivize certain eligible employees, in part, with long-term compensation pursuant to our LTIP. The LTIP is a rolling three year program that grants eligible employees a certain number of target Performance Share Units (PSUs) and/or Restricted Share Units (RSUs). Target PSUs become vested upon the achievement of certain financial and/or operational performance criteria (the Performance Conditions) that are determined at the time of the grant. Target RSUs become vested when an eligible employee remains employed throughout the vesting period.

PSUs and RSUs granted under the LTIPs have been measured at fair value as of the effective date, consistent with Topic 718, and will be charged to share-based compensation expense over the remaining life of the plan. Stock options granted under the LTIPs have been measured using the Black-Scholes option-pricing model, consistent with Topic 718. We estimate the fair value of PSUs using the Monte Carlo pricing model and RSUs have been valued based upon their grant date fair value.

As of December 31, 2019, the total expected compensation cost related to the unvested LTIP awards not yet recognized was $24.1 million, which is expected to be recognized over a weighted average period of 2.1 years.

LTIP grants that have recently vested, or have yet to vest, are described below. LTIP grants are referred to in this Quarterly Report on Form 10-Q based upon the year in which the grants are expected to vest.

Fiscal 2019 LTIP

Grants made in Fiscal 2017 under the LTIP (collectively referred to as Fiscal 2019 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2017 starting on August 14, 2016. We settled the Fiscal 2019 LTIP awards by issuing 255,502 Common Shares from treasury stock during the three months ended December 31, 2019, with a cost of $9.1 million.

Fiscal 2020 LTIP

Grants made in Fiscal 2018 under the LTIP (collectively referred to as Fiscal 2020 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2018 starting on August 7, 2017. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the Fiscal 2020 LTIP. We expect to settle the Fiscal 2020 LTIP awards in stock.

Fiscal 2021 LTIP

Grants made in Fiscal 2019 under the LTIP (collectively referred to as Fiscal 2021 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2019 starting on August 6, 2018. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the Fiscal 2021 LTIP. We expect to settle the Fiscal 2021 LTIP awards in stock.

Fiscal 2022 LTIP

Grants made in Fiscal 2020 under the LTIP (collectively referred to as Fiscal 2022 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2020 starting on August 5, 2019. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the Fiscal 2022 LTIP. We expect to settle the Fiscal 2022 LTIP awards in stock.

Restricted Share Units (RSUs)

During the three and six months ended December 31, 2019, we did not grant any RSUs to employees in accordance with employment and other non-LTIP related agreements (three and six months ended December 31, 2018—nil). RSUs vest over a specified contract date, typically three years from the respective date of grants. We expect to settle RSU awards in stock.

During the three and six months ended December 31, 2019, we did not issue any Common Shares from treasury stock in connection with the settlement of vested RSUs (three and six months ended December 31, 2018—5,826 and 8,794 Common Shares, respectively, with a cost of $0.2 million and $0.3 million, respectively).

Deferred Stock Units (DSUs)

During the three and six months ended December 31, 2019, we granted 70,609 and 74,408 DSUs, respectively, to certain non-employee directors (three and six months ended December 31, 2018—90,184 and 93,342 DSUs, respectively). The DSUs were issued under our Deferred Share Unit Plan. DSUs granted as compensation for director fees vest immediately, whereas all other DSUs granted vest at our next annual general meeting following the granting of the DSUs. No DSUs are payable by us until the director ceases to be a member of the Board.

    29

Employee Share Purchase Plan (ESPP)

Our ESPP offers employees a purchase price discount of 15%.

During the three and six months ended December 31, 2019, 139,462 and 327,543 Common Shares, respectively, were eligible for issuance to employees enrolled in the ESPP (three and six months ended December 31, 2018—160,088 and 336,162 Common Shares, respectively).

During the three and six months ended December 31, 2019, cash in the amount of approximately $5.2 million and $11.7 million, respectively, was received from employees relating to the ESPP (three and six months ended December 31, 2018—$4.4 million and $10.1 million, respectively).

NOTE 14—GUARANTEES AND CONTINGENCIES

We have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

	Payments due between
	Total		January 1, 2020— June 30, 2020		July 1, 2020— June 30, 2022		July 1, 2022— June 30, 2024		July 1, 2024 and beyond
Long-term debt obligations (1)	$	3,449,651	$	223,222	$	277,680	$	1,031,371	$	1,917,378
Purchase obligations for contracts not accounted for as lease obligations (2)	60,978		23,135		32,843		5,000		—
	$	3,510,629	$	246,357	$	310,523	$	1,036,371	$	1,917,378

⁽¹⁾ Includes interest up to maturity and principal payments. Please see note 11 "Long-Term Debt" for more details.

⁽²⁾ For contractual obligations relating to leases and purchase obligations accounted for under Topic 842, please see note 6 "Leases".

Guarantees and Indemnifications

We have entered into customer agreements which may include provisions to indemnify our customers against third party claims that our software products or services infringe certain third party intellectual property rights and for liabilities related to a breach of our confidentiality obligations. We have not made any material payments in relation to such indemnification provisions and have not accrued any liabilities related to these indemnification provisions in our Condensed Consolidated Financial Statements.

Occasionally, we enter into financial guarantees with third parties in the ordinary course of our business, including, among others, guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business. Such agreements have not had a material effect on our results of operations, financial position or cash flows.

Litigation

We are currently involved in various claims and legal proceedings.

Quarterly, we review the status of each significant legal matter and evaluate such matters to determine how they should be treated for accounting and disclosure purposes in accordance with the requirements of ASC Topic 450-20 "Loss Contingencies" (Topic 450-20). Specifically, this evaluation process includes the centralized tracking and itemization of the status of all our disputes and litigation items, discussing the nature of any litigation and claim, including any dispute or claim that is reasonably likely to result in litigation, with relevant internal and external counsel, and assessing the progress of each matter in light of its merits and our experience with similar proceedings under similar circumstances.

If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20. As of the date of this Quarterly Report on Form 10-Q, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts already recognized will be incurred that would be material to our consolidated financial position or results of operations. As described more fully below, we are unable at this time to estimate a possible loss or range of losses in respect of certain disclosed matters.

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Contingencies

IRS Matter

As we have previously disclosed, the United States Internal Revenue Service (IRS) is examining certain of our tax returns for our fiscal year ended June 30, 2010 (Fiscal 2010) through our fiscal year ended June 30, 2012 (Fiscal 2012), and in connection with those examinations is reviewing our internal reorganization in Fiscal 2010 to consolidate certain intellectual property ownership in Luxembourg and Canada and our integration of certain acquisitions into the resulting structure. We also previously disclosed that the examinations may lead to proposed adjustments to our taxes that may be material, individually or in the aggregate, and that we have not recorded any material accruals for any such potential adjustments in our Condensed Consolidated Financial Statements.

We previously disclosed that, as part of these examinations, on July 17, 2015 we received from the IRS an initial Notice of Proposed Adjustment (NOPA) in draft form, that, as revised by the IRS on July 11, 2018 proposes a one-time approximately $335 million increase to our U.S. federal taxes arising from the reorganization in Fiscal 2010 (the 2010 NOPA), plus penalties equal to 20% of the additional proposed taxes for Fiscal 2010, and interest at the applicable statutory rate published by the IRS.

On July 11, 2018, we also received, consistent with previously disclosed expectations, a draft NOPA proposing a one time approximately $80 million increase to our U.S. federal taxes for Fiscal 2012 (the 2012 NOPA) arising from the integration of Global 360 Holding Corp. into the structure that resulted from the internal reorganization in Fiscal 2010, plus penalties equal to 40% of the additional proposed taxes for Fiscal 2012, and interest.

On January 7, 2019, we received from the IRS official notification of proposed adjustments to our taxable income for Fiscal 2010 and Fiscal 2012, together with the 2010 NOPA and 2012 NOPA in final form. In each case, such documentation was as expected and on substantially the same terms as provided for in the previously disclosed respective draft NOPAs, with the exception of an additional proposed penalty as part of the 2012 NOPA.

A NOPA is an IRS position and does not impose an obligation to pay tax. We continue to strongly disagree with the IRS’ positions within the NOPAs and we are vigorously contesting the proposed adjustments to our taxable income, along with any proposed penalties and interest.

As of our receipt of the final 2010 NOPA and 2012 NOPA, our estimated potential aggregate liability, as proposed by the IRS, including additional state income taxes plus penalties and interest that may be due, was approximately $770 million, comprised of approximately $455 million in U.S. federal and state taxes, approximately $130 million of penalties, and approximately $185 million of interest. Interest will continue to accrue at the applicable statutory rates until the matter is resolved and may be substantial.

As previously disclosed and noted above, we strongly disagree with the IRS’ positions and we are vigorously contesting the proposed adjustments to our taxable income, along with the proposed penalties and interest. We are examining various alternatives available to taxpayers to contest the proposed adjustments, including through IRS Appeals and U.S. Federal court. Any such alternatives could involve a lengthy process and result in the incurrence of significant expenses. As of the date of this Quarterly Report on Form 10-Q, we have not recorded any material accruals in respect of these examinations in our Condensed Consolidated Financial Statements. An adverse outcome of these tax examinations could have a material adverse effect on our financial position and results of operations.

For additional information regarding the history of this IRS matter, please see Note 13 "Guarantees and Contingencies" in our Annual Report on Form 10-K for Fiscal 2018.

CRA Matter

As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013 and Fiscal 2014. Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of December 31, 2019, in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013 and Fiscal 2014 to be limited to penalties and interest that may be due of approximately $25 million.

The notices of reassessment for Fiscal 2012, Fiscal 2013 and Fiscal 2014 would, as drafted, increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10% penalty on the proposed adjustment to income.

We strongly disagree with the CRA's positions and believe the reassessments of Fiscal 2012, Fiscal 2013 and Fiscal 2014 (including any penalties) are without merit. We have filed notices of objection for Fiscal 2012, Fiscal 2013 and Fiscal 2014, and we are currently seeking competent authority consideration under applicable international treaties in respect of these reassessments.

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Even if we are unsuccessful in challenging the CRA's reassessments to increase our taxable income for Fiscal 2012, Fiscal 2013 and Fiscal 2014, or potential reassessments that may be proposed for subsequent years currently under audit, we have elective deductions available for those years (including carry-backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of any assessed penalties and interest, as described above.

We will continue to vigorously contest the proposed adjustments to our taxable income and any penalty and interest assessments. As of the date of this Quarterly Report on Form 10-Q, we have not recorded any accruals in respect of these reassessments in our Condensed Consolidated Financial Statements. Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have been completed with no reassessment of our income tax liability in respect of our international transactions, including the transfer pricing methodology applied to them. The CRA is currently auditing Fiscal 2015, Fiscal 2016 and Fiscal 2017 and have proposed to reassess Fiscal 2015 in a manner consistent with Fiscal 2012, Fiscal 2013 and Fiscal 2014. We are engaged in ongoing discussions with the CRA and continue to vigorously contest the CRA's audit positions.

GXS India Matter

Our Indian subsidiary, GXS India Technology Centre Private Limited (GXS India), is subject to potential assessments by Indian tax authorities in the city of Bangalore. GXS India has received assessment orders from the Indian tax authorities alleging that the transfer price applied to intercompany transactions was not appropriate. Based on advice from our tax advisors, we believe that the facts that the Indian tax authorities are using to support their assessment are incorrect. We have filed appeals and anticipate an eventual settlement with the Indian tax authorities. We have accrued $1.3 million to cover our anticipated financial exposure in this matter.

Carbonite Class Action Complaint

On August 1, 2019, prior to our acquisition of Carbonite, a purported stockholder of Carbonite filed a putative class action complaint against Carbonite, its former Chief Executive Officer, Mohamad S. Ali, and its former Chief Financial Officer, Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A. Luna, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19-cv-11662-LTS). The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint generally alleges that the defendants made materially false and misleading statements in connection with Carbonite’s Server Backup VM Edition, and seeks, among other things, the designation of the action as a class action, an award of unspecified compensatory damages, costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate. On August 23, 2019, a nearly identical complaint was filed in the same court captioned William Feng, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19- cv-11808-LTS) (together with the Luna Complaint, the “Securities Actions”). On November 21, 2019, the court consolidated the Securities Actions, appointed a lead plaintiff, and designated a lead counsel. On January 15, 2020, the lead plaintiff filed a consolidated amended complaint generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019. The defendants' answer or responsive pleading is due by March 10, 2020. In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of this action and are unable to reasonably estimate the amount or range of loss, if any, that could result from this proceeding.

Carbonite vs Realtime Data

On February 27, 2017, prior to our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (“Realtime Data”) filed a lawsuit against Carbonite in the U.S. District Court for the Eastern District of Texas "Realtime Data LLC v. Carbonite, Inc. et al (No 6:17-cv-00121-RWS-JDL)", alleging that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data. Realtime Data’s complaint against Carbonite sought damages in an unspecified amount and injunctive relief. On December 19, 2017, the U.S. District Court for the Eastern District of Texas transferred the case to the U.S District Court for the District of Massachusetts (No. 1:17-cv-12499). Realtime Data has also filed numerous other patent suits on the asserted patents against other companies around the country. In one of those suits, filed in the U.S. District Court for the District of Delaware, the Delaware Court on July 29, 2019 dismissed the lawsuit after declaring invalid three of the four patents asserted by Realtime Data against Carbonite. By way of Order dated August 19, 2019, the U.S. District Court for the District of Massachusetts stayed the action against Carbonite pending appeal of the dismissal in the Delaware lawsuit. As to the fourth patent, the U.S. Patent & Trademark Office Patent Trial and Appeal Board on September 24, 2019 invalidated certain claims of that patent. No trial date has been set in the action against Carbonite. The Company is defending Carbonite vigorously. We have not accrued a loss contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable. Although a loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain unable to reasonably estimate a possible loss or range of loss associated with this litigation.

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Please also see "Risk Factors" included in our Annual Report on Form 10-K for Fiscal 2019.

NOTE 15—INCOME TAXES

Our effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a wide range of income tax rates.

The effective tax rate increased to a provision of 30.3% for the three months ended December 31, 2019, compared to 25.8% for the three months ended December 31, 2018. The increase in tax expense of $10.6 million was primarily due to (i) an increase of $16.8 million relating mainly to a one-time reversal of accruals for repatriations from subsidiaries in the United States in Fiscal 2019 that did not recur in Fiscal 2020, (ii) an increase in tax filings in excess of estimates of $6.0 million and (iii) an increase in net income taxed at foreign rates of $3.3 million. These were partially offset by (i) a decrease of $11.6 million in reserves for unrecognized tax benefits resulting from clarifications provided by tax regulations and taxation years becoming statute barred and (ii) a decrease of $4.5 million related to tax costs of internal reorganizations that did not recur in Fiscal 2020. The remainder of the difference was due to normal course movements and non-material items.

The effective tax rate decreased to a provision of 27.8% for the six months ended December 31, 2019, compared to 31.9% for the six months ended December 31, 2018. Tax expense increased by $3.8 million primarily due to (i) the increase in net income taxed at foreign rates of $11.8 million, (ii) an increase of $14.9 million relating to a one-time reversal of accruals for repatriations from subsidiaries in the United States in Fiscal 2019 that did not recur in Fiscal 2020 and (iii) an increase in tax filing in excess of estimates of $7.3 million. These were partially offset by (i) a decrease of $22.4 million in reserves for unrecognized tax benefit resulting from clarifications provided by tax regulations and taxation years becoming statute barred and (ii) a decrease of $7.9 million relating to the tax impact of internal reorganizations of subsidiaries that did not reoccur Fiscal 2020. The remainder of the difference was due to normal course movements and non-material items.

We recognize interest expense and penalties related to income tax matters in income tax expense. For the three and six months ended December 31, 2019 and 2018, we recognized the following amounts as income tax-related interest expense and penalties:

	Three Months Ended December 31,					Six Months Ended December 31,
	2019			2018		2019		2018
Interest expense (recoveries)	$	2,652		$	1,570	$	1,234	$	4,607
Penalties expense (recoveries)	(156		)	67		75		559
Total	$	2,496		$	1,637	$	1,309	$	5,166

The following amounts have been accrued on account of income tax-related interest expense and penalties:

	As of December 31, 2019		As of June 30, 2019
Interest expense accrued *	$	65,870	$	64,530
Penalties accrued *	$	2,526	$	2,525

* These balances are primarily included within "Long-term income taxes payable" within the Condensed Consolidated Balance Sheets.

We believe that it is reasonably possible that the gross unrecognized tax benefits, as of December 31, 2019, could decrease tax expense in the next 12 months by $7.1 million, relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions.

Our four most significant tax jurisdictions are Canada, the United States, Luxembourg and Germany. Our tax filings remain subject to audits by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The earliest fiscal years open for examination are 2012 for Germany, 2010 for the United States, 2012 for Luxembourg, and 2012 for Canada.

We are subject to tax audits in all major taxing jurisdictions in which we operate and currently have tax audits open in Canada, the United States, Germany, India, and the United Kingdom. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. Statements regarding the United States and Canada audits are included in note 14 "Guarantees and Contingencies".

The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that

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within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For more information relating to certain tax audits, please refer to note 14 "Guarantees and Contingencies".

As at December 31, 2019, we have recognized a provision of $19.3 million (June 30, 2019—$17.4 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution. We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future.

NOTE 16—FAIR VALUE MEASUREMENT

ASC Topic 820 “Fair Value Measurement” (Topic 820) defines fair value, establishes a framework for measuring fair value, and addresses disclosure requirements for fair value measurements. Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value, in this context, should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including our own credit risk.

In addition to defining fair value and addressing disclosure requirements, Topic 820 establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: 

• Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis:

Our financial assets and liabilities measured at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2019 and June 30, 2019:

December 31, 2019

June 30, 2019

Fair Market Measurements using:

Fair Market Measurements using:

December 31, 2019

Quoted prices in active markets for identical assets/ (liabilities)

Significant other observable inputs

Significant unobservable inputs

June 30, 2019

Quoted prices in active markets for identical assets/ (liabilities)

Significant other observable inputs

Significant unobservable inputs

(Level 1)

(Level 2)

(Level 3)

(Level 1)

(Level 2)

(Level 3)

Financial Assets:

Foreign currency forward contracts designated as cash flow hedges (note 17)

$

1,005

N/A

$

1,005

N/A

$

736

N/A

$

736

N/A

Our valuation techniques used to measure the fair values of the derivative instruments, the counterparty to which has high credit ratings, were derived from pricing models including discounted cash flow techniques, with all significant inputs derived

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from or corroborated by observable market data, as no quoted market prices exist for these instruments. Our discounted cash flow techniques use observable market inputs, such as, where applicable, foreign currency spot and forward rates.

Our cash and cash equivalents, along with our accounts receivable and accounts payable and accrued liabilities balances, are measured and recognized in our Condensed Consolidated Financial Statements at an amount that approximates their fair value (a Level 2 measurement) due to their short maturities.

If applicable, we will recognize transfers between levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. During the three and six months ended December 31, 2019 and 2018, we did not have any transfers between Level 1, Level 2 or Level 3.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets and liabilities at fair value on a nonrecurring basis. These assets and liabilities are recognized at fair value when they are deemed to be other-than-temporarily impaired. During the three and six months ended December 31, 2019 and 2018, no indications of impairment were identified and therefore no fair value measurements were required.

NOTE 17—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Foreign Currency Forward Contracts

We are engaged in hedging programs with various banks to limit the potential foreign exchange fluctuations incurred on future cash flows relating to a portion of our Canadian dollar payroll expenses. We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of our business, in particular to changes in the Canadian dollar on account of large costs that are incurred from our centralized Canadian operations, which are denominated in Canadian dollars. As part of our risk management strategy, we use foreign currency forward contracts to hedge portions of our payroll exposure with typical maturities of between one and twelve months. We do not use foreign currency forward contracts for speculative purposes.

We have designated these transactions as cash flow hedges of forecasted transactions under ASC Topic 815 “Derivatives and Hedging” (Topic 815). As the critical terms of the hedging instrument and of the entire hedged forecasted transaction are the same, in accordance with Topic 815, we have been able to conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within other comprehensive income. The fair value of the contracts, as of December 31, 2019, is recorded within "Prepaid expenses and other current assets".

As of December 31, 2019, the notional amount of forward contracts we held to sell U.S. dollars in exchange for Canadian dollars was $64.0 million (June 30, 2019—$62.0 million).

Fair Value of Derivative Instruments and Effect of Derivative Instruments on Financial Performance

The effect of these derivative instruments on our Condensed Consolidated Financial Statements for the periods indicated below were as follows (amounts presented do not include any income tax effects).

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets (see note 16 "Fair Value Measurement")

		As of December 31, 2019		As of June 30, 2019
Derivatives	Balance Sheet Location	Fair Value Asset (Liability)		Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges	Prepaid expenses and other current assets (Accounts payable and accrued liabilities)	$	1,005	$	736

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Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI)

Three and Six Months Ended December 31, 2019
Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI on Derivatives  (Effective Portion)						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended December 31, 2019			Six Months Ended December 31, 2019				Three Months Ended December 31, 2019			Six Months Ended December 31, 2019
Foreign currency forward contracts	$	1,134		$	356		Operating expenses	$	98		$	87
Three and Six Months Ended December 31, 2018
Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI on Derivatives  (Effective Portion)						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended December 31, 2018			Six Months Ended December 31, 2018				Three Months Ended December 31, 2018			Six Months Ended December 31, 2018
Foreign currency forward contracts	$	(2,554	)	$	(1,871	)	Operating expenses	$	(636	)	$	(1,134	)

NOTE 18—SPECIAL CHARGES (RECOVERIES)

Special charges (recoveries) include costs and recoveries that relate to certain restructuring initiatives that we have undertaken from time to time under our various restructuring plans, as well as acquisition-related costs and other charges. 

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Fiscal 2019 Restructuring Plan	$	23		$	5,993		$	1,679		$	26,239
Fiscal 2018 Restructuring Plan	65			(25		)	86			510
Restructuring Plans prior to Fiscal 2018 Restructuring Plan	(481		)	(79		)	(282		)	475
Acquisition-related costs	7,779			3,197			10,445			3,704
Other charges (recoveries)	2,686			294			3,245			1,763
Total	$	10,072		$	9,380		$	15,173		$	32,691

Fiscal 2019 Restructuring Plan

During Fiscal 2019, we began to implement restructuring activities to streamline our operations (Fiscal 2019 Restructuring Plan), including in connection with our acquisitions of Catalyst Repository Systems Inc. (Catalyst) and Liaison Technologies, Inc. (Liaison), to take further steps to improve our operational efficiency. The Fiscal 2019 Restructuring Plan charges relate to workforce reductions and facility consolidations. These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate.

Since the inception of the plan, approximately $30.0 million has been recorded within "Special charges (recoveries)" to date. We do not expect to incur any further significant charges relating to this plan.

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A reconciliation of the beginning and ending liability for the six months ended December 31, 2019 is shown below.

Fiscal 2019 Restructuring Plan	Workforce reduction			Facility costs			Total
Balance payable as at June 30, 2019	$	1,819		$	5,288		$	7,107
Adjustment for Topic 842 (note 1 and note 6)	—			(5,288		)	(5,288		)
Accruals and adjustments	589			1,090			1,679
Cash payments	(1,555		)	(1,090		)	(2,645		)
Foreign exchange and other non-cash adjustments	(211		)	—			(211		)
Balance payable as at December 31, 2019	$	642		$	—		$	642

Fiscal 2018 Restructuring Plan

During Fiscal 2018 and in the context of our acquisitions of Covisint Corporation, Guidance Software Inc. and Hightail, Inc., we implemented restructuring activities to streamline our operations (collectively referred to as the Fiscal 2018 Restructuring Plan). The Fiscal 2018 Restructuring Plan charges relate to workforce reductions and facility consolidations. These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate.

Since the inception of the plan, approximately $10.7 million has been recorded within "Special charges (recoveries)" to date. We do not expect to incur any further significant charges relating to this plan.

A reconciliation of the beginning and ending liability for the six months ended December 31, 2019 is shown below.

Fiscal 2018 Restructuring Plan	Workforce reduction			Facility costs			Total
Balance payable as at June 30, 2019	$	150		$	486		$	636
Adjustment for Topic 842 (note 1 and note 6)	—			(486		)	(486		)
Accruals and adjustments	(62		)	148			86
Cash payments	(39		)	(148		)	(187		)
Foreign exchange and other non-cash adjustments	(9		)	—			(9		)
Balance payable as at December 31, 2019	$	40		$	—		$	40

Other charges (recoveries)

For the three months ended December 31, 2019, "Other charges" includes $0.1 million relating to the write-off of ROU assets and $2.6 million relating to other miscellaneous charges.

For the six months ended December 31, 2019, "Other charges" includes $0.7 million relating to the write-off of ROU assets and approximately $2.6 million relating to other miscellaneous charges.

For the three months ended December 31, 2018, "Other charges" include $0.3 million relating to other miscellaneous charges.

For the six months ended December 31, 2018, "Other charges" include (i) $1.1 million relating to one-time system implementation costs and (ii) $0.7 million relating to other miscellaneous charges.

NOTE 19—ACQUISITIONS

Fiscal 2020 Acquisitions

Acquisition of Carbonite, Inc.

On December 24, 2019, we acquired all of the equity interest in Carbonite, a leading provider of cloud-based subscription backup, disaster recovery and endpoint security to small and medium-sized businesses (SMB), consumers, and a wide variety of partners. Total consideration for Carbonite was approximately $1.4 billion, comprised of $1.3 billion paid in cash (inclusive of cash acquired) and approximately $0.1 billion currently held back and unpaid in accordance with the purchase agreement. In accordance with Accounting Standards Codification (ASC) Topic 805 "Business Combinations" (Topic 805), this acquisition was accounted for as a business combination. We believe the acquisition will increase our position in the data protection and

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endpoint security space, further strengthen our cloud capabilities and open a new route to connect with customers through Carbonite's marquee SMB and consumer channels and products.

The results of operations of Carbonite have been consolidated with those of OpenText beginning December 24, 2019.

Preliminary Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of December 24, 2019, are set forth below:

Current assets (inclusive of cash acquired of $62.9 million)	$	131,119
Non-current tangible assets (inclusive of restricted cash acquired of $2.4 million)	93,111
Intangible customer assets	549,000
Intangible technology assets	291,000
Liabilities assumed	(578,747		)
Total identifiable net assets	485,483
Goodwill	885,547
Net assets acquired	$	1,371,030

The goodwill of approximately $885.5 million is primarily attributable to the synergies expected to arise after the acquisition. Of this goodwill, approximately $6.9 million is expected to be deductible for tax purposes.

Included in total identifiable net assets is acquired deferred revenue with a fair value of approximately $171.5 million, which represents our estimate of the fair value of the contractual obligations assumed. In arriving at this fair value, we reduced the acquired company’s original carrying value by approximately $74.9 million.

The fair value of current assets acquired includes accounts receivable with a fair value of $49.8 million. The gross amount receivable was $51.2 million of which $1.4 million of this receivable was expected to be uncollectible.

Acquisition-related costs for Carbonite included in "Special charges (recoveries)" in the Condensed Consolidated Financial Statements for the three and six months ended December 31, 2019 were $7.4 million, respectively.

The finalization of the above purchase price allocation is pending the finalization of the valuation of fair value for the assets acquired and liabilities assumed, including intangible assets and taxation-related balances as well as for potential unrecorded liabilities. We expect to finalize this determination on or before our quarter ending December 31, 2020.

The amount of Carbonite's revenues and net income included in our Condensed Consolidated Statements of Income for the three months ended December 31, 2019 is set forth below:

	December 24, 2019 - December 31, 2019
Revenues	$	9,511
Net Loss *	(3,654		)

* Net loss includes one-time fees of approximately $2.6 million on account of special charges and $4.2 million of amortization charges relating to intangible assets, all net of tax.

The unaudited pro forma revenues and net income (loss) of the combined entity for the three and six months ended December 31, 2019 and 2018, respectively, had the acquisition been consummated on July 1, 2018, are set forth below:

	Three Months Ended December 31,		Six Months Ended December 31,
	2019	2018	2019	2018
Supplemental Unaudited Pro Forma Information(1)
Total Revenues	887,563	812,197	1,710,047	1,557,036
Net Income (loss) (2) (3)	78,571	76,024	117,789	(9,748	)

⁽¹⁾Carbonite had recently purchased Webroot Inc. in March 2019. The supplemental pro forma revenues and net income (loss) shown above do not include the results of operations of Webroot Inc. for periods prior to the Webroot acquisition date.

⁽²⁾ Included in pro forma net income (loss) for the six months ended December 31, 2018 are approximately $127 million of one-time expenses incurred by Carbonite on account of the acquisition and the related tax effect of approximately $33 million. These one-time expenses included i) approximately $74 million related to the accelerated vesting of historical Carbonite equity

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awards, ii) approximately $29 million of one time fees, primarily related to transaction costs triggered by the closing of the acquisition, iii) $21 million related to the extinguishment of certain of Carbonite's historical debt and interest rate swaps and iv) approximately $3 million in employee severance costs.

⁽³⁾ Included in pro forma net income for the three and six months ended December 31, 2019 and 2018 are estimated amortization charges relating to the allocated value of intangible assets.

The unaudited pro forma financial information in the table above is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented or the results that may be realized in the future.

Acquisition of Dynamic Solutions Group Inc. (The Fax Guys)

On December 2, 2019, we acquired certain assets and assumed certain liabilities of The Fax Guys, for approximately $5.3 million, of which $1.2 million is currently held back and unpaid in accordance with the terms of the purchase agreement. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe this acquisition complements our Enterprise Information Management (EIM) portfolio.

The results of operations of The Fax Guys have been consolidated with those of OpenText beginning December 2, 2019.

Since the date of acquisition, the acquisition had no significant impact on revenues and net earnings for the three and six months ended December 31, 2019. Pro forma results of operations for this acquisition have not been presented because they are not material to our consolidated results of operations.

Fiscal 2019 Acquisitions

Acquisition of Catalyst Repository Systems Inc.

On January 31, 2019, we acquired all of the equity interest in Catalyst for approximately $70.8 million in an all cash transaction. Catalyst is a leading provider of eDiscovery that designs, develops and supports market-leading cloud eDiscovery software. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe this acquisition complements and extends our EIM portfolio.

The results of operations of this acquisition have been consolidated with those of OpenText beginning January 31, 2019.

Preliminary Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of January 31, 2019, are set forth below:

Current assets	$	9,699
Non-current tangible assets	5,754
Intangible customer assets	30,607
Intangible technology assets	11,658
Liabilities assumed	(17,891		)
Total identifiable net assets	39,827
Goodwill	30,973
Net assets acquired	$	70,800

The goodwill of approximately $31.0 million is primarily attributable to the synergies expected to arise after the acquisition. Of this goodwill, approximately $3.1 million is expected to be deductible for tax purposes.

Included in total identifiable net assets is acquired deferred revenue with a fair value of $0.8 million, which represents our estimate of the fair value of the contractual obligations assumed based on a preliminary valuation. In arriving at this fair value, we reduced the acquired company’s original carrying value by an insignificant amount.

The fair value of current assets acquired includes accounts receivable with a fair value of $10.8 million. The gross amount receivable was $11.8 million, of which $1.0 million is expected to be uncollectible.

The finalization of the purchase price allocation is pending the finalization of the valuation of fair value assets acquired and liabilities assumed, including tax balances. We expect to finalize this determination during the three months ended March 31, 2020.

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Acquisition of Liaison Technologies, Inc.

On December 17, 2018, we acquired all of the equity interest in Liaison, a leading provider of cloud-based business to business integration, for approximately $310.6 million in an all cash transaction. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe this acquisition complements and extends our EIM portfolio.

The results of operations of this acquisition have been consolidated with those of OpenText beginning December 17, 2018.

Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of December 17, 2018, are set forth below:

Current assets	$	23,006
Non-current tangible assets	5,168
Intangible customer assets	68,300
Intangible technology assets	107,000
Liabilities assumed	(57,265		)
Total identifiable net assets	146,209
Goodwill	164,434
Net assets acquired	$	310,643

The goodwill of approximately $164.4 million is primarily attributable to the synergies expected to arise after the acquisition. Of this goodwill, approximately $2.2 million is expected to be deductible for tax purposes.

Included in total identifiable net assets is acquired deferred revenue with a fair value of $7.6 million, which represents our estimate of the fair value of the contractual obligations assumed. In arriving at this fair value, we reduced the acquired company’s original carrying value by an insignificant amount.

The fair value of current assets acquired includes accounts receivable with a fair value of $20.5 million. The gross amount receivable was $22.2 million, of which $1.7 million is expected to be uncollectible.

The finalization of the purchase price allocation during the three months ended December 31, 2019 did not result in any significant changes to the preliminary amounts previously disclosed.

NOTE 20—SUPPLEMENTAL CASH FLOW DISCLOSURES

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Cash paid during the period for interest	$	34,685	$	36,136	$	68,129	$	68,763
Cash received during the period for interest	$	3,474	$	2,624	$	7,423	$	3,359
Cash paid during the period for income taxes	$	23,037	$	31,445	$	33,372	$	39,812

NOTE 21—EARNINGS PER SHARE

Basic earnings per share are computed by dividing net income, attributable to OpenText, by the weighted average number of Common Shares outstanding during the period. Diluted earnings per share are computed by dividing net income, attributable to OpenText, by the shares used in the calculation of basic earnings per share plus the dilutive effect of Common Share equivalents, such as stock options, using the treasury stock method. Common Share equivalents are excluded from the computation of diluted earnings per share if their effect is anti-dilutive.

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	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Basic earnings per share
Net income attributable to OpenText	$	107,467	$	104,432	$	181,868	$	140,756
Basic earnings per share attributable to OpenText	$	0.40	$	0.39	$	0.67	$	0.52
Diluted earnings per share
Net income attributable to OpenText	$	107,467	$	104,432	$	181,868	$	140,756
Diluted earnings per share attributable to OpenText	$	0.40	$	0.39	$	0.67	$	0.52
Weighted-average number of shares outstanding (in 000's)
Basic	270,450		268,524		270,232		268,276
Effect of dilutive securities	1,140		876		1,096		1,120
Diluted	271,590		269,400		271,328		269,396
Excluded as anti-dilutive(1)	2,541		3,171		2,360		2,597

⁽¹⁾ Represents options to purchase Common Shares excluded from the calculation of diluted earnings per share because the exercise price of the stock options was greater than or equal to the average price of the Common Shares during the period.

NOTE 22—RELATED PARTY TRANSACTIONS

Our procedure regarding the approval of any related party transaction requires that the material facts of such transaction be reviewed by the independent members of the Audit Committee and the transaction be approved by a majority of the independent members of the Audit Committee. The Audit Committee reviews all transactions in which we are, or will be, a participant and any related party has or will have a direct or indirect interest in the transaction. In determining whether to approve a related party transaction, the Audit Committee generally takes into account, among other facts it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; the extent and nature of the related person’s interest in the transaction; the benefits to the Company of the proposed transaction; if applicable, the effects on a director’s independence; and if applicable, the availability of other sources of comparable services or products.

During the six months ended December 31, 2019, Mr. Stephen Sadler, a director, earned approximately $0.4 million (six months ended December 31, 2018—$0.4 million) in consulting fees from OpenText for assistance with acquisition-related business activities. Mr. Sadler abstained from voting on all transactions from which he would potentially derive consulting fees.

NOTE 23—SUBSEQUENT EVENTS

Cash Dividends

As part of our quarterly, non-cumulative cash dividend program, we declared, on January 29, 2020, a dividend of $0.1746 per Common Share. The record date for this dividend is February 28, 2020 and the payment date is March 20, 2020. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board.

Fiscal 2020 Restructuring Plan

On January 29, 2020, our Board approved a restructuring plan that will impact our global workforce and consolidate certain real estate facilities in an effort to further streamline our operations, inclusive of Carbonite (Fiscal 2020 Restructuring Plan). The total size of the plan is expected to be approximately $26 million to $34 million and is proposed to be undertaken in phases throughout calendar year 2020 and the first half of calendar year 2021. We currently expect to incur charges related to this plan in the following amounts:

• Workforce restructurings of approximately $13 million to $17 million; and

• Facility consolidations of approximately $13 million to $17 million.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the U.S. Securities Act of 1933, as amended (the Securities Act), and is subject to the safe harbors created by those sections. All statements other than statements of historical facts are statements that could be deemed forward-looking statements.

When used in this report, the words “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, "might", "will" and other similar language, as they relate to Open Text Corporation (“OpenText” or the “Company”), are intended to identify forward-looking statements under applicable securities laws. Specific forward-looking statements in this report include, but are not limited to: (i) statements about our focus in the fiscal year beginning July 1, 2019 and ending June 30, 2020 (Fiscal 2020) on growth in earnings and cash flows; (ii) creating value through investments in broader Information Management (IM) capabilities; (iii) our future business plans and business planning process; (iv) statements relating to business trends; (v) statements relating to distribution; (vi) the Company’s presence in the cloud and in growth markets; (vii) product and solution developments, enhancements and releases and the timing thereof; (viii) the Company’s financial conditions, results of operations and earnings; (ix) the basis for any future growth and for our financial performance; (x) declaration of quarterly dividends; (xi) future tax rates; (xii) the changing regulatory environment; (xiii) annual recurring revenues; (xiv) research and development and related expenditures; (xv) our building, development and consolidation of our network infrastructure; (xvi) competition and changes in the competitive landscape; (xvii) our management and protection of intellectual property and other proprietary rights; (xviii) existing and foreign sales and exchange rate fluctuations; (xix) cyclical or seasonal aspects of our business; (xx) capital expenditures; (xxi) potential legal and/or regulatory proceedings; (xxii) statements about acquisitions and their expected impact; and (xxiii) other matters.

In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management’s perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. The forward-looking statements contained in this report are based on certain assumptions including the following: (i) countries continuing to implement and enforce existing and additional customs and security regulations relating to the provision of electronic information for imports and exports; (ii) our continued operation of a secure and reliable business network; (iii) the stability of general economic and market conditions, currency exchange rates, and interest rates; (iv) equity and debt markets continuing to provide us with access to capital; (v) our continued ability to identify, source and finance attractive and executable business combination opportunities; and (vi) our continued compliance with third party intellectual property rights. Management’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on our outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the Exchange Act, and the rules promulgated thereunder, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) fluctuations in currency exchange rates (including as a result of the impact of Brexit and any policy changes resulting from trade and tariff disputes); (vi) delays in the purchasing decisions of the Company’s customers; (vii) the competition the Company faces in its industry and/or marketplace; (viii) the final determination of litigation, tax audits (including tax examinations in the United States, Canada or elsewhere) and other legal proceedings; (ix) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes; (x) the possibility of technical, logistical or planning issues in connection with the deployment of the Company’s products or services; (xi) the continuous commitment of the Company’s customers; (xii) demand for the Company’s products and services; (xiii) increase in exposure to international business risks (including as a result of the impact of Brexit and any policy changes resulting from the transition from the North American Free Trade Agreement to the United States-Mexico-Canada Agreement) as we continue to increase our international operations; (xiv) inability to raise capital at all or on not unfavorable terms in the future; (xv) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); and (xvi) potential changes in ratings or outlooks of rating agencies on our outstanding debt securities. Other factors that may affect forward-looking statements include, but are not limited to: (i) the future performance, financial and otherwise, of the Company; (ii) the ability of the Company to bring new products and services to market and to increase sales; (iii) the strength of the Company’s product

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development pipeline; (iv) failure to secure and protect patents, trademarks and other proprietary rights; (v) infringement of third-party proprietary rights triggering indemnification obligations and resulting in significant expenses or restrictions on our ability to provide our products or services; (vi) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR) and Country by Country Reporting; (vii) the Company’s growth and other profitability prospects; (viii) the estimated size and growth prospects of the IM market; (ix) the Company’s competitive position in the IM market and its ability to take advantage of future opportunities in this market; (x) the benefits of the Company’s products and services to be realized by customers; (xi) the demand for the Company’s products and services and the extent of deployment of the Company’s products and services in the IM marketplace; (xii) the Company’s financial condition and capital requirements; (xiii) system or network failures or information security breaches in connection with the Company's offerings and information technology systems generally; and (xiv) failure to attract and retain key personnel to develop and effectively manage the Company's business.

For additional information with respect to risks and other factors which could occur, see Part II, Item 1A "Risk Factors" herein and the Company's Annual Report on Form 10-K, including Part I, Item 1A "Risk Factors" therein; Quarterly Reports on Form 10-Q, including Item 1A herein and other documents we file from time to time with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the

Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new

information, future events or otherwise.

The following MD&A is intended to help readers understand our results of operations and financial condition, and is

provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and

the accompanying Notes to our Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on

Form 10-Q.

All dollar and percentage comparisons made herein refer to the three and six months ended December 31, 2019 compared with the three and six months ended December 31, 2018, unless otherwise noted.

Where we say “we”, “us”, “our”, “OpenText” or “the Company”, we mean Open Text Corporation or Open Text Corporation and its subsidiaries, as applicable.

EXECUTIVE OVERVIEW

OpenText is an information management company, historically focused primarily on enabling the intelligent and connect enterprise. With our recent acquisition of Carbonite Inc. (Carbonite), we believe we have entered into the next phase of our Total Growth strategy where we have an opportunity to take advantage of Carbonite's world-class channel organization and partners, to bring our information management (IM) solutions to all size customers, including small and medium businesses (SMB) and consumers. The comprehensive OpenText IM platform and suite of software products and services provide secure and scalable solutions for global companies, SMBs, governments and consumers around the world. With our software, organizations manage a valuable asset - information: information that is made more valuable by connecting it to digital business processes, information that is enriched with analytics, information that is protected and secure throughout its entire lifecycle, information that captivates customers, and information that connects and fuels some of the world's largest digital supply chains in manufacturing, retail, and financial services. Our IM solutions are designed to enable organizations and professional consumers to secure their information so that they can collaborate with confidence, validate endpoints with all machines and the Internet of Things (IoT), stay ahead of the regulatory technology curve, identify threats that cross their networks, leverage discovery with information forensics, and gain insight and action through analytics, artificial intelligence (AI) and automation.

We offer software through traditional on-premises solutions, cloud solutions or a combination of both. We believe our customers will operate in hybrid on-premises and cloud environments, and we are ready to support the delivery method the customer prefers. In providing choice and flexibility, we strive to maximize the lifetime value of the relationship with our customers.

Our initial public offering was on the NASDAQ in 1996 and we were subsequently listed on the Toronto Stock Exchange (TSX) in 1998. We are a multinational company and as of December 31, 2019, employed approximately 14,600 people worldwide.

Our ticker symbol on both the NASDAQ and the TSX is "OTEX".

Quarterly Summary:

During the second quarter of Fiscal 2020 we saw the following activity:

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• Total revenue was $771.6 million, up 4.9% compared to the same period in the prior fiscal year; up 6.3% after factoring the impact of $10.2 million of foreign exchange rate changes.

• Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and customer support revenue, was $563.8 million, up 6.5% compared to the same period in the prior fiscal year; up 7.8% after factoring the impact of $6.9 million of foreign exchange rate changes.

• Cloud services and subscriptions revenue was $248.3 million, up 13.3% compared to the same period in the prior fiscal year; up 14.1% after factoring the impact of $1.8 million of foreign exchange rate changes.

• License revenue was $138.1 million, up 4.0% compared to the same period in the prior fiscal year; up 5.6% after factoring the impact of $2.1 million of foreign exchange rate changes.

• GAAP-based EPS, diluted, was $0.40 compared to $0.39 in the same period in the prior fiscal year.

• Non-GAAP-based EPS, diluted, was $0.84 compared to $0.80 in the same period in the prior fiscal year.

• GAAP-based gross margin was 69.9% compared to 69.0% in the same period in the prior fiscal year.

• Non-GAAP-based gross margin was 75.5% compared to 75.7% in the same period in the prior fiscal year.

• GAAP-based net income attributable to OpenText was $107.5 million compared to $104.4 million in the same period in the prior fiscal year.

• Non-GAAP-based net income attributable to OpenText was $227.0 million compared to $215.7 million in the same period in the prior fiscal year.

• Adjusted EBITDA was $317.0 million compared to $308.3 million in the same period in the prior fiscal year.

• Operating cash flow was $344.7 million for the six months ended December 31, 2019, down 4.4% from the same period in the prior fiscal year.

• Cash and cash equivalents was $675.4 million as of December 31, 2019, compared to $941.0 million as of June 30, 2019.

See "Use of Non-GAAP Financial Measures" below for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures.

See "Acquisitions" below for the impact of acquisitions on the period-to-period comparability of results.

Acquisitions

Our competitive position in the marketplace requires us to maintain an evolving array of technologies, products, services and capabilities. In light of the continually evolving marketplace in which we operate, on an ongoing basis we regularly evaluate acquisition opportunities within our market and at any time may be in various stages of discussions with respect to such opportunities.

Acquisition of Carbonite, Inc.

On December 24, 2019, we acquired all of the equity interest in Carbonite, Inc. (Carbonite), a leading provider of cloud-based subscription backup, disaster recovery and endpoint security to SMB, consumers, and a wide variety of partners. Total consideration for Carbonite was approximately $1.4 billion, comprised of $1.3 billion paid in cash (inclusive of cash acquired) and approximately $0.1 billion currently held back and unpaid in accordance with the purchase agreement. We believe the acquisition will increase our position in the data protection and endpoint security space, further strengthen our cloud capabilities and open a new route to connect with customers through Carbonite's marquee SMB and consumer channels and products. The results of operations of Carbonite have been consolidated with those of OpenText beginning December 24, 2019.

Acquisition of Dynamic Solutions Group Inc. (The Fax Guys)

On December 2, 2019, we acquired certain assets and certain liabilities of The Fax Guys, for approximately $5.3 million, of which $1.2 million is currently held back and unpaid in accordance with the terms of the purchase agreement. The results of operations of The Fax Guys have been consolidated with those of OpenText beginning December 2, 2019.

We believe our acquisitions support our long-term strategic direction, strengthen our competitive position, expand our customer base, provide greater scale to accelerate innovation, grow our earnings and provide superior shareholder value. We expect to continue to strategically acquire companies, products, services and technologies to augment our existing business. Our acquisitions, particularly significant ones, can affect the period-to-period comparability of our results. See note 19 "Acquisitions" to our Condensed Consolidated Financial Statements for more details.

Outlook for remainder of Fiscal 2020

As an organization, our management believes in delivering “Total Growth”, meaning we strive towards delivering value through organic initiatives, innovations and acquisitions, as well as financial performance. This growth is further enhanced

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through our direct and indirect sales distribution channels. With an emphasis on improving productivity, increasing recurring revenues and expanding our margins, we believe our “Total Growth” strategy will ultimately drive overall cash flow generation, thus helping to fuel our disciplined capital allocation approach and further drive our ability to deepen our account coverage and identify and execute strategic acquisitions. With strategic acquisitions, we are better positioned to expand our product portfolio and improve our ability to innovate and grow organically, which then further helps us to meet our long-term growth targets. We believe this “Total Growth” strategy is a durable model that will create shareholder value over both the near and long-term.

We are committed to continuous innovation. Our investments in research and development (R&D) drive product innovation, increasing the value of our offerings to our installed customer base, which includes Global 10,000 companies, SMBs and consumers. More valuable products, coupled with our established global partner program, lead to greater distribution and cross-selling opportunities which further help us to achieve organic growth. On a fiscal year to date basis, we have invested approximately $161 million or approximately 11% of revenue in R&D, in line with our target to spend approximately 11% to 13% of revenues for R&D this fiscal year.

The cloud is quickly becoming a business imperative. What used to be discussed as a potential option for managing budgets, is now a strategic direction that drives competitive positioning, product innovation, business agility, and cost management. We are committed to continue our investment in The OpenText Cloud, which is a purpose-built cloud environment for solutions spanning Information Management, Compliance, and B2B Integration. Supported by a global, scalable, and secure infrastructure, OpenText Cloud includes a foundational platform of technology services, and packaged business applications for industry and business processes. The OpenText Cloud enables organizations to protect and manage information in public, private or hybrid deployments.

We remain a value oriented and disciplined strategic acquirer, having efficiently deployed approximately $7.5 billion on acquisitions over the last 10 years. Mergers and acquisitions are one of our leading growth drivers. We believe in creating value by focusing on acquiring strategic businesses, integrating them into our business model and using our acquired assets to innovate. We have developed a philosophy, which we refer to as “The OpenText Business System”, that is designed to create value by leveraging a clear set of operational mandates for integrating newly acquired companies and assets. We see our ability to successfully integrate acquired companies and assets into our business as a strength and pursuing strategic acquisitions is an important aspect to our Total Growth strategy.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the Consolidated Financial Statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time. Actual results may differ materially from those estimates. The policies listed below are areas that may contain key components of our results of operations and are based on complex rules requiring us to make judgments and estimates and consequently, we consider these to be our critical accounting policies. Some of these accounting policies involve complex situations and require a higher degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect our financial statements. The critical accounting policies which we believe are the most important to aid in fully understanding and evaluating our reported financial results include the following:

(i) Revenue recognition,

(ii) Goodwill,

(iii) Acquired intangibles, and

(iv) Income taxes.

For a full discussion of all our accounting policies, please see Note 2 "Accounting Policies and Recent Accounting Pronouncements" to our Consolidated Financial Statements included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2019.

RESULTS OF OPERATIONS

The following tables provide a detailed analysis of our results of operations and financial condition. For each of the periods indicated below, we present our revenues by product type, revenues by major geography, cost of revenues by product type, total gross margin, total operating margin, gross margin by product type, and their corresponding percentage of total revenue.

In addition, we provide Non-GAAP measures for the periods discussed in order to provide additional information to investors that we believe will be useful as this presentation is in line with how our management assesses our Company's

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performance. See "Use of Non-GAAP Financial Measures" below for a reconciliation of GAAP-based measures to Non-GAAP-based measures.

Summary of Results of Operations

	Three Months Ended December 31,									Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)			2018			2019			Change increase (decrease)			2018
Total Revenues by Product Type:
License	$	138,095		$	5,339		$	132,756		$	215,993		$	6,350		$	209,643
Cloud services and subscriptions	248,340			29,107			219,233			485,605			58,289			427,316
Customer support	315,508			5,154			310,354			627,806			5,901			621,905
Professional service and other	69,614			(3,274		)	72,888			139,041			(4,483		)	143,524
Total revenues	771,557			36,326			735,231			1,468,445			66,057			1,402,388
Total Cost of Revenues	232,385			4,363			228,022			460,893			6,558			454,335
Total GAAP-based Gross Profit	539,172			31,963			507,209			1,007,552			59,499			948,053
Total GAAP-based Gross Margin %	69.9		%				69.0		%	68.6		%				67.6		%
Total GAAP-based Operating Expenses	354,432			21,155			333,277			690,299			15,405			674,894
Total GAAP-based Income from Operations	$	184,740		$	10,808		$	173,932		$	317,253		$	44,094		$	273,159
% Revenues by Product Type:
License	17.9		%				18.1		%	14.7		%				15.0		%
Cloud services and subscriptions	32.2		%				29.8		%	33.1		%				30.5		%
Customer support	40.9		%				42.2		%	42.8		%				44.3		%
Professional service and other	9.0		%				9.9		%	9.4		%				10.2		%
Total Cost of Revenues by Product Type:
License	$	3,050		$	(605	)	$	3,655		$	5,373		$	(2,154	)	$	7,527
Cloud services and subscriptions	103,644			14,946			88,698			205,806			29,405			176,401
Customer support	29,788			(1,485		)	31,273			59,175			(2,563		)	61,738
Professional service and other	53,604			(2,426		)	56,030			107,942			(4,884		)	112,826
Amortization of acquired technology-based intangible assets	42,299			(6,067		)	48,366			82,597			(13,246		)	95,843
Total cost of revenues	$	232,385		$	4,363		$	228,022		$	460,893		$	6,558		$	454,335
% GAAP-based Gross Margin by Product Type:
License	97.8		%				97.2		%	97.5		%				96.4		%
Cloud services and subscriptions	58.3		%				59.5		%	57.6		%				58.7		%
Customer support	90.6		%				89.9		%	90.6		%				90.1		%
Professional service and other	23.0		%				23.1		%	22.4		%				21.4		%
Total Revenues by Geography:(1)
Americas (2)	$	450,691		$	29,995		$	420,696		$	870,401		$	60,365		$	810,036
EMEA (3)	252,268			8,331			243,937			462,435			4,023			458,412
Asia Pacific (4)	68,598			(2,000		)	70,598			135,609			1,669			133,940
Total revenues	$	771,557		$	36,326		$	735,231		$	1,468,445		$	66,057		$	1,402,388
% Revenues by Geography:
Americas (2)	58.4		%				57.2		%	59.3		%				57.8		%
EMEA (3)	32.7		%				33.2		%	31.5		%				32.7		%
Asia Pacific (4)	8.9		%				9.6		%	9.2		%				9.5		%

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	Three Months Ended December 31,							Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)	2018			2019			Change increase (decrease)	2018
Other Metrics:
GAAP-based gross margin	69.9		%		69.0		%	68.6		%		67.6		%
GAAP-based EPS, diluted	$	0.40			$	0.39		$	0.67			$	0.52
Net income, attributable to OpenText	$	107,467			$	104,432		$	181,868			$	140,756
Non-GAAP-based gross margin (5)	75.5		%		75.7		%	74.4		%		74.6		%
Non-GAAP-based EPS, diluted (5)	$	0.84			$	0.80		$	1.48			$	1.40
Adjusted EBITDA (5)	$	317,015			$	308,287		$	571,227			$	554,543

(1)	Total revenues by geography are determined based on the location of our end customer.
(2)	Americas consists of countries in North, Central and South America.
(3)	EMEA primarily consists of countries in Europe, the Middle East and Africa.
(4)	Asia Pacific primarily consists of the countries Japan, Australia, China, Korea, Philippines, Singapore and New Zealand.
(5)	See "Use of Non-GAAP Financial Measures" (discussed later in this MD&A) for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures.

Revenues, Cost of Revenues and Gross Margin by Product Type

1)    License:

Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premises (on-premise). Our license revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products, and our acquisitions. Cost of license revenues consists primarily of royalties payable to third parties.

	Three Months Ended December 31,									Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)			2018			2019			Change increase (decrease)			2018
License Revenues:
Americas	$	66,261		$	137		$	66,124		$	105,497		$	100		$	105,397
EMEA	58,101			9,236			48,865			84,793			7,584			77,209
Asia Pacific	13,733			(4,034		)	17,767			25,703			(1,334		)	27,037
Total License Revenues	138,095			5,339			132,756			215,993			6,350			209,643
Cost of License Revenues	3,050			(605		)	3,655			5,373			(2,154		)	7,527
GAAP-based License Gross Profit	$	135,045		$	5,944		$	129,101		$	210,620		$	8,504		$	202,116
GAAP-based License Gross Margin %	97.8		%				97.2		%	97.5		%				96.4		%
% License Revenues by Geography:
Americas	48.0		%				49.8		%	48.8		%				50.3		%
EMEA	42.1		%				36.8		%	39.3		%				36.8		%
Asia Pacific	9.9		%				13.4		%	11.9		%				12.9		%

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

License revenues increased by $5.3 million or 4.0% during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year; up 5.6% after factoring the impact of $2.1 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in EMEA of $9.2 million and an increase in Americas of $0.1 million, partially offset by a decrease in Asia Pacific of $4.0 million.

During the second quarter of Fiscal 2020, we closed 37 license deals greater than $0.5 million, of which 19 deals were greater than $1.0 million, contributing approximately $54.1 million of license revenues. This was compared to 45 deals greater

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than $0.5 million closed during the second quarter of Fiscal 2019, of which 19 deals were greater than $1.0 million, contributing $51.7 million of license revenues.

Cost of license revenues decreased by $0.6 million during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year, primarily as a result of lower third party technology costs. Overall, the gross margin percentage on license revenues increased to approximately 98% from approximately 97%.

Six Months Ended December 31, 2019 Compared to Six Months Ended December 31, 2018

License revenues increased by $6.4 million or 3.0% during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year; up 4.6% after factoring the impact of $3.4 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in EMEA of $7.6 million and an increase in Americas of $0.1 million, partially offset by a decrease in Asia Pacific of $1.3 million.

During the first six months of Fiscal 2020, we closed 62 license deals greater than $0.5 million, of which 24 deals were greater than $1.0 million, contributing approximately $73.6 million of license revenues. This was compared to 71 deals greater than $0.5 million closed during the first six months of Fiscal 2019, of which 24 deals were greater than $1.0 million, contributing $72.5 million of license revenues.

Cost of license revenues decreased by $2.2 million during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year, primarily as a result of lower third party technology costs. Overall, the gross margin percentage on license revenues increased to approximately 98% from approximately 96%.

2)    Cloud Services and Subscriptions:

Cloud services and subscriptions revenues are from hosting arrangements where in connection with the licensing of software, the end user doesn’t take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements). The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis via an identified line. Our cloud arrangements can be broadly categorized as "platform as a service" (PaaS), "software as a service" (SaaS), cloud subscriptions and managed services.

Cost of Cloud services and subscriptions revenues is comprised primarily of third party network usage fees, maintenance of in-house data hardware centers, technical support personnel-related costs, and some third party royalty costs.

	Three Months Ended December 31,								Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)		2018			2019			Change increase (decrease)		2018
Cloud Services and Subscriptions:
Americas	$	170,519		$	25,302	$	145,217		$	337,075		$	53,242	$	283,833
EMEA	56,054			2,092		53,962			104,497			1,816		102,681
Asia Pacific	21,767			1,713		20,054			44,033			3,231		40,802
Total Cloud Services and Subscriptions Revenues	248,340			29,107		219,233			485,605			58,289		427,316
Cost of Cloud Services and Subscriptions Revenues	103,644			14,946		88,698			205,806			29,405		176,401
GAAP-based Cloud Services and Subscriptions Gross Profit	$	144,696		$	14,161	$	130,535		$	279,799		$	28,884	$	250,915
GAAP-based Cloud Services and Subscriptions Gross Margin %	58.3		%			59.5		%	57.6		%			58.7		%
% Cloud Services and Subscriptions Revenues by Geography:
Americas	68.7		%			66.2		%	69.4		%			66.4		%
EMEA	22.5		%			24.6		%	21.5		%			24.0		%
Asia Pacific	8.8		%			9.2		%	9.1		%			9.6		%

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

Cloud services and subscriptions revenues increased by $29.1 million or 13.3% during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year; up 14.1% after factoring the impact of $1.8 million

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of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in Americas of $25.3 million, an increase in EMEA of $2.1 million and an increase in Asia Pacific of $1.7 million.

The number of Cloud services deals greater than $1.0 million that closed during the second quarter of Fiscal 2020 was 16 deals, consistent with the number of deals greater than $1.0 million that closed during the second quarter of Fiscal 2019.

Cost of Cloud services and subscriptions revenues increased by $14.9 million during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to an increase in labour-related costs of $12.7 million, an increase in third party network usage fees of $2.1 million and an increase in other miscellaneous costs of $0.1 million. The increase in labour-related costs was primarily due to increased headcount from recent acquisitions.

Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to approximately 58% from approximately 60%.

Six Months Ended December 31, 2019 Compared to Six Months Ended December 31, 2018

Cloud services and subscriptions revenues increased by $58.3 million or 13.6% during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year; up 14.5% after factoring the impact of $3.9 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in Americas of $53.2 million, an increase in Asia Pacific of $3.2 million and an increase in EMEA of $1.8 million.

The number of Cloud services deals greater than $1.0 million that closed during the first six months of Fiscal 2020 was 23 deals, compared to 25 deals during the first six months of Fiscal 2019.

Cost of Cloud services and subscriptions revenues increased by $29.4 million during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to an increase in labour-related costs of $22.9 million, an increase in third party network usage fees of $6.3 million and an increase in other miscellaneous costs of $0.2 million. The increase in labour-related costs was primarily due to increased headcount from recent acquisitions.

Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to approximately 58% from approximately 59%.

3)    Customer Support:

Customer support revenues consist of revenues from our customer support and maintenance agreements. These agreements allow our customers to receive technical support, enhancements and upgrades to new versions of our software products when and if available. Customer support revenues are generated from support and maintenance relating to current year sales of software products and from the renewal of existing maintenance agreements for software licenses sold in prior periods. Therefore, changes in Customer support revenues do not always correlate directly to the changes in license revenues from period to period. The terms of support and maintenance agreements are typically twelve months, and are renewable, generally on an annual basis, at the option of the customer. Our management reviews our Customer support renewal rates on a quarterly basis and we use these rates as a method of monitoring our customer service performance. For the quarter ended December 31, 2019, our Customer support renewal rate was approximately 93%, up slightly compared with the Customer support renewal rate of 91% during the quarter ended December 31, 2018.

Cost of Customer support revenues is comprised primarily of technical support personnel and related costs, as well as third party royalty costs.

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	Three Months Ended December 31,									Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)			2018			2019			Change increase (decrease)			2018
Customer Support Revenues:
Americas	$	181,563		$	3,559		$	178,004		$	361,006		$	4,615		$	356,391
EMEA	108,128			1,075			107,053			215,075			214			214,861
Asia Pacific	25,817			520			25,297			51,725			1,072			50,653
Total Customer Support Revenues	315,508			5,154			310,354			627,806			5,901			621,905
Cost of Customer Support Revenues	29,788			(1,485		)	31,273			59,175			(2,563		)	61,738
GAAP-based Customer Support Gross Profit	$	285,720		$	6,639		$	279,081		$	568,631		$	8,464		$	560,167
GAAP-based Customer Support Gross Margin %	90.6		%				89.9		%	90.6		%				90.1		%
% Customer Support Revenues by Geography:
Americas	57.5		%				57.4		%	57.5		%				57.3		%
EMEA	34.3		%				34.5		%	34.3		%				34.5		%
Asia Pacific	8.2		%				8.1		%	8.2		%				8.2		%

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

Customer support revenues increased by $5.2 million or 1.7% during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year; up 3.3% after factoring the impact of $5.1 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in Americas of $3.6 million, an increase in EMEA of $1.1 million and an increase in Asia Pacific of $0.5 million.

Cost of Customer support revenues decreased by $1.5 million during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to a decrease in labour-related costs of $1.2 million and a decrease in other miscellaneous costs of $0.3 million. Overall, the gross margin percentage on Customer support revenues increased to approximately 91% from approximately 90%.

Six Months Ended December 31, 2019 Compared to Six Months Ended December 31, 2018

Customer support revenues increased by $5.9 million or 0.9% during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year; up 2.6% after factoring the impact of $10.1 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in Americas of $4.6 million, an increase in Asia Pacific of $1.1 million and an increase in EMEA of $0.2 million.

Cost of Customer support revenues decreased by $2.6 million during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year, due to a decrease in labour-related costs of approximately $2.1 million and a decrease in other miscellaneous costs of $0.5 million. Overall, the gross margin percentage on Customer support revenues increased to approximately 91% from approximately 90%.

4)    Professional Service and Other:

Professional service and other revenues consist of revenues from consulting contracts and contracts to provide implementation, training and integration services (professional services). Other revenues consist of hardware revenues, which are grouped within the “Professional service and other” category because they are relatively immaterial to our service revenues. Professional services are typically performed after the purchase of new software licenses. Professional service and other revenues can vary from period to period based on the type of engagements as well as those implementations that are assumed by our partner network.

Cost of professional service and other revenues consists primarily of the costs of providing integration, configuration and training with respect to our various software products. The most significant components of these costs are personnel-related expenses, travel costs and third party subcontracting.

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	Three Months Ended December 31,									Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)			2018			2019			Change increase (decrease)			2018
Professional Service and Other Revenues:
Americas	$	32,348		$	997		$	31,351		$	66,823		$	2,408		$	64,415
EMEA	29,985			(4,072		)	34,057			58,070			(5,591		)	63,661
Asia Pacific	7,281			(199		)	7,480			14,148			(1,300		)	15,448
Total Professional Service and Other Revenues	69,614			(3,274		)	72,888			139,041			(4,483		)	143,524
Cost of Professional Service and Other Revenues	53,604			(2,426		)	56,030			107,942			(4,884		)	112,826
GAAP-based Professional Service and Other Gross Profit	$	16,010		$	(848	)	$	16,858		$	31,099		$	401		$	30,698
GAAP-based Professional Service and Other Gross Margin %	23.0		%				23.1		%	22.4		%				21.4		%
% Professional Service and Other Revenues by Geography:
Americas	46.5		%				43.0		%	48.1		%				44.9		%
EMEA	43.1		%				46.7		%	41.8		%				44.4		%
Asia Pacific	10.4		%				10.3		%	10.1		%				10.7		%

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

Professional service and other revenues decreased by $3.3 million or 4.5% during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year; down 2.9% after factoring the impact of $1.1 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in Americas of $1.0 million, offset by a decrease in EMEA of $4.1 million and a decrease in Asia Pacific of $0.2 million.

Cost of Professional service and other revenues decreased by $2.4 million during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was due to a decrease in labour-related costs of approximately $2.5 million resulting primarily from a reduction in the use of external labour resources, partially offset by an increase in other miscellaneous costs of $0.1 million.

Overall, the gross margin percentage on Professional service and other revenues remained at approximately 23%. We continue to be selective about the professional service engagements we accept to strategically optimize margins.

Six Months Ended December 31, 2019 Compared to Six Months Ended December 31, 2018

Professional service and other revenues decreased by $4.5 million or 3.1% during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year; down 1.4% after factoring the impact of $2.5 million of foreign exchange rate changes. Geographically, the overall change was attributable to an increase in Americas of $2.4 million, offset by a decrease in EMEA of $5.6 million and a decrease in Asia Pacific of $1.3 million.

Cost of Professional service and other revenues decreased by $4.9 million during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was due to a decrease in labour-related costs of approximately $5.3 million resulting primarily from a reduction in the use of external labour resources, partially offset by an increase in other miscellaneous costs of $0.4 million.

Overall, the gross margin percentage on Professional service and other revenues increased to approximately 22% from approximately 21%.

Amortization of Acquired Technology-based Intangible Assets

	Three Months Ended December 31,							Six Months Ended December 31,
(In thousands)	2019		Change increase (decrease)			2018		2019		Change increase (decrease)			2018
Amortization of acquired technology-based intangible assets	$	42,299	$	(6,067	)	$	48,366	$	82,597	$	(13,246	)	$	95,843

Amortization of acquired technology-based intangible assets decreased during the three and six months ended December 31, 2019 by $6.1 million and $13.2 million, respectively, as compared to the same periods in the prior fiscal year. This was due to a reduction of $13.8 million and $27.5 million, respectively, relating to intangible assets from certain previous acquisitions becoming fully amortized, partially offset by an increase in amortization of $7.7 million and $14.3 million,

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respectively, primarily relating to newly acquired technology-based intangible assets from our recent acquisitions of Catalyst, Liaison and Carbonite.

Operating Expenses

	Three Months Ended December 31,									Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)			2018			2019			Change increase (decrease)			2018
Research and development	$	80,283		$	4,530		$	75,753		$	161,461		$	8,238		$	153,223
Sales and marketing	137,310			11,117			126,193			265,928			19,553			246,375
General and administrative	54,595			2,397			52,198			106,130			3,008			103,122
Depreciation	20,712			(3,122		)	23,834			40,989			(6,699		)	47,688
Amortization of acquired customer-based intangible assets	51,460			5,541			45,919			100,618			8,823			91,795
Special charges (recoveries)	10,072			692			9,380			15,173			(17,518		)	32,691
Total operating expenses	$	354,432		$	21,155		$	333,277		$	690,299		$	15,405		$	674,894
% of Total Revenues:
Research and development	10.4		%				10.3		%	11.0		%				10.9		%
Sales and marketing	17.8		%				17.2		%	18.1		%				17.6		%
General and administrative	7.1		%				7.1		%	7.2		%				7.4		%
Depreciation	2.7		%				3.2		%	2.8		%				3.4		%
Amortization of acquired customer-based intangible assets	6.7		%				6.2		%	6.9		%				6.5		%
Special charges (recoveries)	1.3		%				1.3		%	1.0		%				2.3		%

Research and development expenses consist primarily of payroll and payroll-related benefits expenses, contracted research and development expenses, and facility costs. Research and development assists with organic growth and improves product stability and functionality, and accordingly, we dedicate extensive efforts to update and upgrade our product offerings. The primary driver is typically budgeted software upgrades and software development.

	Change between Three Months Ended December 31, 2019 and 2018			Change between Six Months Ended December 31, 2019 and 2018
(In thousands)	increase (decrease)			increase (decrease)
Payroll and payroll-related benefits	$	3,319		$	8,122
Contract labour and consulting	82			540
Share-based compensation	(21		)	(159		)
Travel and communication	29			(35		)
Facilities	798			(555		)
Other miscellaneous	323			325
Total change in research and development expenses	$	4,530		$	8,238

Research and development expenses increased by $4.5 million during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to (i) an increase in payroll and payroll-related benefits of $3.3 million, driven primarily by increased headcount from recent acquisitions and (ii) an increase of $0.8 million in facility related expenses. Overall, our research and development expenses, as a percentage of total revenues, remained stable compared to the same period in the prior fiscal year at approximately 10%.

Research and development expenses increased by $8.2 million during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to (i) an increase in payroll and payroll-related benefits of $8.1 million, driven primarily by increased headcount from recent acquisitions and (ii) an increase of $0.5 million relating to the use of external labour resources. These were partially offset by a decrease in facility related expenses of $0.6 million. Overall, our research and development expenses, as a percentage of total revenues, remained stable compared to the same period in the prior fiscal year at approximately 11%.

Our research and development labour resources increased by 504 employees, from 3,542 employees at December 31, 2018 to 4,046 employees at December 31, 2019.

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Sales and marketing expenses consist primarily of personnel expenses and costs associated with advertising, marketing events and trade shows.

	Change between Three Months Ended December 31, 2019 and 2018			Change between Six Months Ended December 31, 2019 and 2018
(In thousands)	increase (decrease)			increase (decrease)
Payroll and payroll-related benefits	$	7,210		$	12,065
Commissions	4,297			7,300
Contract labour and consulting	(871		)	(799		)
Share-based compensation	169			484
Travel and communication	106			1,487
Marketing expenses	1,719			2,622
Facilities	912			1,548
Bad debt expense	(2,865		)	(4,586		)
Other miscellaneous	440			(568		)
Total change in sales and marketing expenses	$	11,117		$	19,553

Sales and marketing expenses increased by $11.1 million during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to (i) an increase in payroll and payroll-related benefits of $7.2 million, (ii) an increase in commissions expense of $4.3 million, and (iii) an increase in marketing expenses of $1.7 million. These were partially offset by a decrease in bad debt expense of $2.9 million. Overall, our sales and marketing expenses, as a percentage of total revenues, increased to approximately 18% from approximately 17% in the same period in the prior fiscal year.

Sales and marketing expenses increased by $19.6 million during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to (i) an increase in payroll and payroll-related benefits of $12.1 million, (ii) an increase in commissions expense of $7.3 million and (iii) an increase in marketing expenses of $2.6 million. These were partially offset by a decrease in bad debt expense of $4.6 million. Overall, our sales and marketing expenses, as a percentage of total revenues, as compared to the same period in the prior fiscal year, remained stable at approximately 18%.

Our sales and marketing labour resources increased by 491 employees, from 2,027 employees at December 31, 2018 to 2,518 employees at December 31, 2019.

General and administrative expenses consist primarily of payroll and payroll related benefits expenses, related overhead, audit fees, other professional fees, contract labour and consulting expenses and public company costs.

	Change between Three Months Ended December 31, 2019 and 2018			Change between Six Months Ended December 31, 2019 and 2018
(In thousands)	increase (decrease)			increase (decrease)
Payroll and payroll-related benefits	$	3,912		$	6,762
Contract labour and consulting	(531		)	(1,149		)
Share-based compensation	715			1,073
Travel and communication	391			20
Facilities	(704		)	(380		)
Other miscellaneous	(1,386		)	(3,318		)
Total change in general and administrative expenses	$	2,397		$	3,008

General and administrative expenses increased by $2.4 million during the three months ended December 31, 2019 as compared to the prior fiscal year. This was primarily due to an increase in payroll and payroll-related benefits of $3.9 million, partially offset by a decrease in other miscellaneous expenses of $1.4 million, which includes professional fees such as legal, audit and tax related expenses. The remainder of the change was attributable to other activities associated with normal growth in our business operations. Overall, general and administrative expenses, as a percentage of total revenues, remained stable compared to the same period in the prior fiscal year at approximately 7%.

General and administrative expenses increased by $3.0 million during the six months ended December 31, 2019 as compared to the prior fiscal year. This was primarily due to an increase in payroll and payroll-related benefits of $6.8 million, partially offset by a decrease in other miscellaneous expenses of $3.3 million, which includes professional fees such as legal, audit and tax related expenses. The remainder of the change was attributable to other activities associated with normal growth

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in our business operations. Overall, general and administrative expenses, as a percentage of total revenues, remained stable compared to the same period in the prior fiscal year at approximately 7% .

Our general and administrative labour resources increased by 426 employees, from 1,574 employees at December 31, 2018 to 2,000 employees at December 31, 2019.

Depreciation expenses:

	Three Months Ended December 31,							Six Months Ended December 31,
(In thousands)	2019		Change increase (decrease)			2018		2019		Change increase (decrease)			2018
Depreciation	$	20,712	$	(3,122	)	$	23,834	$	40,989	$	(6,699	)	$	47,688

Depreciation expenses decreased during the three and six months ended December 31, 2019 by $3.1 million and $6.7 million, respectively, as compared to the same periods in the prior fiscal year. Depreciation expense, as a percentage of total revenue, remained at approximately 3% for each such period.

Amortization of acquired customer-based intangible assets:

	Three Months Ended December 31,						Six Months Ended December 31,
(In thousands)	2019		Change increase (decrease)		2018		2019		Change increase (decrease)		2018
Amortization of acquired customer-based intangible assets	$	51,460	$	5,541	$	45,919	$	100,618	$	8,823	$	91,795

Amortization of acquired customer-based intangible assets increased during the three and six months ended December 31, 2019 by $5.5 million and $8.8 million, respectively, as compared to the same periods in the prior fiscal year. This was due to an increase in amortization of $5.7 million and $9.4 million respectively, relating to newly acquired customer-based intangible assets from our recent acquisitions of Catalyst, Liaison and Carbonite. The increase in amortization was partially offset by a reduction of $0.2 million and $0.6 million, respectively, relating to intangible assets from certain previous acquisitions becoming fully amortized.

Special charges (recoveries):

Special charges typically relate to amounts that we expect to pay in connection with restructuring plans, acquisition-related costs and other similar charges and recoveries. Generally, we implement such plans in the context of integrating acquired entities with existing OpenText operations. Actions related to such restructuring plans are typically completed within a period of one year. In certain limited situations, if the planned activity does not need to be implemented, or an expense lower than anticipated is paid out, we record a recovery of the originally recorded expense to Special charges.

	Three Months Ended December 31,						Six Months Ended December 31,
(In thousands)	2019		Change increase (decrease)		2018		2019		Change increase (decrease)			2018
Special charges (recoveries)	$	10,072	$	692	$	9,380	$	15,173	$	(17,518	)	$	32,691

Special charges increased by $0.7 million during the three months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to (i) an increase of $4.6 million in acquisition related costs and (ii) an increase in other miscellaneous charges of $2.4 million. These were partially offset by a decrease in restructuring activities of $6.3 million.

Special charges decreased by $17.5 million during the six months ended December 31, 2019 as compared to the same period in the prior fiscal year. This was primarily due to a decrease in restructuring activities of $25.7 million, partially offset by an increase in acquisition related costs of $6.7 million. The remainder of the change is due to other miscellaneous items.

For more details on Special charges (recoveries), see note 18 "Special Charges (Recoveries)" to our Condensed Consolidated Financial Statements.

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Other Income (Expense), Net

Other income (expense), net relates to certain non-operational charges primarily consisting of income or losses in our share of marketable equity securities accounted for under the equity method and of transactional foreign exchange gains (losses). The income (expense) from foreign exchange is dependent upon the change in foreign currency exchange rates vis-à-vis the functional currency of the legal entity.

	Three Months Ended December 31,								Six Months Ended December 31,
(In thousands)	2019		Change increase (decrease)			2018			2019			Change increase (decrease)			2018
Foreign exchange gains (losses)	$	352	$	5,568		$	(5,216	)	$	(3,307	)	$	2,850		$	(6,157	)
OpenText share in net income (loss) of equity investees (note 9)	1,266		(4,225		)	5,491			1,948			(5,915		)	7,863
Other miscellaneous income (expense)	354		251			103			546			352			194
Total other income (expense), net	$	1,972	$	1,594		$	378		$	(813	)	$	(2,713	)	$	1,900

Interest and Other Related Expense, Net

Interest and other related expense, net is primarily comprised of interest paid and accrued on our debt facilities, offset by interest income earned on our cash and cash equivalents.

	Three Months Ended December 31,									Six Months Ended December 31,
(In thousands)	2019			Change increase (decrease)			2018			2019			Change increase (decrease)			2018
Interest expense related to total outstanding debt (1)	$	33,778		$	(601	)	$	34,379		$	67,944		$	(278	)	$	68,222
Interest income	(3,474		)	(850		)	(2,624		)	(7,423		)	(4,064		)	(3,359		)
Other miscellaneous expense	2,072			214			1,858			4,065			784			3,281
Total interest and other related expense, net	$	32,376		$	(1,237	)	$	33,613		$	64,586		$	(3,558	)	$	68,144

⁽¹⁾ For more details see note 11 "Long-Term Debt" to our Condensed Consolidated Financial Statements.

Provision for (Recovery of) Income Taxes

We operate in several tax jurisdictions and are exposed to various foreign tax rates. We also note that we are subject to tax rate discrepancies between our domestic tax rate and foreign tax rates that are significant and these discrepancies are primarily related to earnings in the United States.

Please also see Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2019.

	Three Months Ended December 31,						Six Months Ended December 31,
(In thousands)	2019		Change increase (decrease)		2018		2019		Change increase (decrease)		2018
Provision for (recovery of) income taxes	$	46,818	$	10,582	$	36,236	$	69,909	$	3,823	$	66,086

The effective tax rate increased to a provision of 30.3% for the three months ended December 31, 2019, compared to 25.8% for the three months ended December 31, 2018. The increase in tax expense of $10.6 million was primarily due to (i) an increase of $16.8 million relating to a one-time reversal of accruals for repatriations from subsidiaries in the United States that did not recur in Fiscal 2020, (ii) an increase in tax filings in excess of estimates of $6.0 million and (iii) an increase in net income taxed at foreign rates of $3.3 million. These were partially offset by (i) a decrease of $11.6 million in reserves for unrecognized tax benefits resulting from clarifications provided by tax regulations and taxation years becoming statute barred and (ii) a decrease of $4.5 million related to tax costs of internal reorganizations that did not recur in Fiscal 2020. The remainder of the difference was due to normal course movements and non-material items.

The effective tax rate decreased to a provision of 27.8% for the six months ended December 31, 2019, compared to 31.9% for the six months ended December 31, 2018. The increase in tax expense of $3.8 million was primarily due to (i) the increase in net income taxed at foreign rates of $11.8 million, (ii) an increase of $14.9 million relating to a one-time reversal of accruals for repatriations from subsidiaries in the United States in fiscal 2019 that did not recur in Fiscal 2020 and (iii) an increase in tax failing in excess of estimates of $7.3 million. These were partially offset by (i) a decrease of $22.4 million in reserves for unrecognized tax benefit resulting from clarifications provided by tax regulations and taxation years becoming statute barred

    55

and (ii) a decrease of $7.9 million relating to the tax impact of internal reorganizations of subsidiaries that did not reoccur Fiscal 2020. The remainder of the difference was due to normal course movements and non-material items.

For information with regards to certain potential tax contingencies, see note 14 "Guarantees and Contingencies" to our Condensed Consolidated Financial Statements.

    56

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its Condensed Consolidated Financial Statements, all of which should be considered when evaluating the Company's results.

The Company uses these Non-GAAP financial measures to supplement the information provided in its Condensed Consolidated Financial Statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, is consistently calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense.

Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).

The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term “non-operational charge” is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.

The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company’s operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company’s “Special Charges (recoveries)” caption on the Condensed Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.

In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.

The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.

    57

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended December 31, 2019

(in thousands except for per share data)

	Three Months Ended December 31, 2019
	GAAP-based Measures		GAAP-based Measures % of Total Revenue	Adjustments			Note	Non-GAAP-based Measures		Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions	$	103,644		$	(371	)	(1)	$	103,273
Customer support	29,788			(297		)	(1)	29,491
Professional service and other	53,604			(346		)	(1)	53,258
Amortization of acquired technology-based intangible assets	42,299			(42,299		)	(2)	—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)	539,172		69.9%	43,313			(3)	582,485		75.5%
Operating expenses
Research and development	80,283			(1,255		)	(1)	79,028
Sales and marketing	137,310			(2,383		)	(1)	134,927
General and administrative	54,595			(3,131		)	(1)	51,464
Amortization of acquired customer-based intangible assets	51,460			(51,460		)	(2)	—
Special charges (recoveries)	10,072			(10,072		)	(4)	—
GAAP-based income from operations / Non-GAAP-based income from operations	184,740			111,614			(5)	296,354
Other income (expense), net	1,972			(1,972		)	(6)	—
Provision for (recovery of) income taxes	46,818			(9,861		)	(7)	36,957
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText	107,467			119,503			(8)	226,970
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText	$	0.40		$	0.44		(8)	$	0.84

(1)	Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)	Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)	GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4)	Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. See note 18 "Special Charges (Recoveries)" to our Condensed Consolidated Financial Statements for more details.
(5)	GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)	Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
(7)	Adjustment relates to differences between the GAAP-based tax provision rate of approximately 30% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

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(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

	Three Months Ended December 31, 2019
				Per share diluted
GAAP-based net income, attributable to OpenText	$	107,467		$	0.40
Add:
Amortization	93,759			0.35
Share-based compensation	7,783			0.03
Special charges (recoveries)	10,072			0.04
Other (income) expense, net	(1,972		)	(0.01		)
GAAP-based provision for (recovery of) income taxes	46,818			0.17
Non-GAAP-based provision for income taxes	(36,957		)	(0.14		)
Non-GAAP-based net income, attributable to OpenText	$	226,970		$	0.84

Reconciliation of Adjusted EBITDA

	Three Months Ended December 31, 2019
GAAP-based net income, attributable to OpenText	$	107,467
Add:
Provision for (recovery of) income taxes	46,818
Interest and other related expense, net	32,376
Amortization of acquired technology-based intangible assets	42,299
Amortization of acquired customer-based intangible assets	51,460
Depreciation	20,712
Share-based compensation	7,783
Special charges (recoveries)	10,072
Other (income) expense, net	(1,972		)
Adjusted EBITDA	$	317,015

    59

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended December 31, 2018

(in thousands except for per share data)

	Three Months Ended December 31, 2018
	GAAP-based Measures		GAAP-based Measures % of Total Revenue	Adjustments			Note	Non-GAAP-based Measures		Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions	$	88,698		$	(265	)	(1)	$	88,433
Customer support	31,273			(271		)	(1)	31,002
Professional service and other	56,030			(358		)	(1)	55,672
Amortization of acquired technology-based intangible assets	48,366			(48,366		)	(2)	—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)	507,209		69.0%	49,260			(3)	556,469		75.7%
Operating expenses
Research and development	75,753			(994		)	(1)	74,759
Sales and marketing	126,193			(1,615		)	(1)	124,578
General and administrative	52,198			(3,382		)	(1)	48,816
Amortization of acquired customer-based intangible assets	45,919			(45,919		)	(2)	—
Special charges (recoveries)	9,380			(9,380		)	(4)	—
GAAP-based income from operations / Non-GAAP-based income from operations	173,932			110,550			(5)	284,482
Other income (expense), net	378			(378		)	(6)	—
Provision for (recovery of) income taxes	36,236			(1,114		)	(7)	35,122
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText	104,432			111,286			(8)	215,718
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText	$	0.39		$	0.41		(8)	$	0.80

(1)	Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)	Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)	GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4)	Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. See note 18 "Special Charges (Recoveries)" to our Condensed Consolidated Financial Statements for more details.
(5)	GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)	Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
(7)	Adjustment relates to differences between the GAAP-based tax provision rate of approximately 26% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

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(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

	Three Months Ended December 31, 2018
				Per share diluted
GAAP-based net income, attributable to OpenText	$	104,432		$	0.39
Add:
Amortization	94,285			0.35
Share-based compensation	6,885			0.03
Special charges (recoveries)	9,380			0.03
Other (income) expense, net	(378		)	—
GAAP-based provision for (recovery of) income taxes	36,236			0.13
Non-GAAP-based provision for income taxes	(35,122		)	(0.13		)
Non-GAAP-based net income, attributable to OpenText	$	215,718		$	0.80

Reconciliation of Adjusted EBITDA

	Three Months Ended December 31, 2018
GAAP-based net income, attributable to OpenText	$	104,432
Add:
Provision for (recovery of) income taxes	36,236
Interest and other related expense, net	33,613
Amortization of acquired technology-based intangible assets	48,366
Amortization of acquired customer-based intangible assets	45,919
Depreciation	23,834
Share-based compensation	6,885
Special charges (recoveries)	9,380
Other (income) expense, net	(378		)
Adjusted EBITDA	$	308,287

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Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the six months ended December 31, 2019

(in thousands except for per share data)

	Six Months Ended December 31, 2019
	GAAP-based Measures			GAAP-based Measures % of Total Revenue	Adjustments			Note	Non-GAAP-based Measures		Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions	$	205,806			$	(754	)	(1)	$	205,052
Customer support	59,175				(613		)	(1)	58,562
Professional service and other	107,942				(589		)	(1)	107,353
Amortization of acquired technology-based intangible assets	82,597				(82,597		)	(2)	—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)	1,007,552			68.6%	84,553			(3)	1,092,105		74.4%
Operating expenses
Research and development	161,461				(2,476		)	(1)	158,985
Sales and marketing	265,928				(4,499		)	(1)	261,429
General and administrative	106,130				(5,743		)	(1)	100,387
Amortization of acquired customer-based intangible assets	100,618				(100,618		)	(2)	—
Special charges (recoveries)	15,173				(15,173		)	(4)	—
GAAP-based income from operations / Non-GAAP-based income from operations	317,253				213,062			(5)	530,315
Other income (expense), net	(813		)		813			(6)	—
Provision for (recovery of) income taxes	69,909				(4,707		)	(7)	65,202
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText	181,868				218,582			(8)	400,450
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText	$	0.67			$	0.81		(8)	$	1.48

(1)	Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)	Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)	GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4)	Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. See note 18 "Special Charges (Recoveries)" to our Condensed Consolidated Financial Statements for more details.
(5)	GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)	Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
(7)	Adjustment relates to differences between the GAAP-based tax provision rate of approximately 28% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

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(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

	Six Months Ended December 31, 2019
				Per share diluted
GAAP-based net income, attributable to OpenText	$	181,868		$	0.67
Add:
Amortization	183,215			0.68
Share-based compensation	14,674			0.05
Special charges (recoveries)	15,173			0.06
Other (income) expense, net	813			—
GAAP-based provision for (recovery of) income taxes	69,909			0.26
Non-GAAP-based provision for income taxes	(65,202		)	(0.24		)
Non-GAAP-based net income, attributable to OpenText	$	400,450		$	1.48

Reconciliation of Adjusted EBITDA

	Six Months Ended December 31, 2019
GAAP-based net income, attributable to OpenText	$	181,868
Add:
Provision for (recovery of) income taxes	69,909
Interest and other related expense, net	64,586
Amortization of acquired technology-based intangible assets	82,597
Amortization of acquired customer-based intangible assets	100,618
Depreciation	40,989
Share-based compensation	14,674
Special charges (recoveries)	15,173
Other (income) expense, net	813
Adjusted EBITDA	$	571,227

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Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the six months ended December 31, 2018

(in thousands except for per share data)

	Six Months Ended December 31, 2018
	GAAP-based Measures		GAAP-based Measures % of Total Revenue	Adjustments			Note	Non-GAAP-based Measures		Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions	$	176,401		$	(582	)	(1)	$	175,819
Customer support	61,738			(571		)	(1)	61,167
Professional service and other	112,826			(882		)	(1)	111,944
Amortization of acquired technology-based intangible assets	95,843			(95,843		)	(2)	—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)	948,053		67.6%	97,878			(3)	1,045,931		74.6%
Operating expenses
Research and development	153,223			(2,353		)	(1)	150,870
Sales and marketing	246,375			(3,416		)	(1)	242,959
General and administrative	103,122			(5,636		)	(1)	97,486
Amortization of acquired customer-based intangible assets	91,795			(91,795		)	(2)	—
Special charges (recoveries)	32,691			(32,691		)	(4)	—
GAAP-based income from operations / Non-GAAP-based income from operations	273,159			233,769			(5)	506,928
Other income (expense), net	1,900			(1,900		)	(6)	—
Provision for (recovery of) income taxes	66,086			(4,656		)	(7)	61,430
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText	140,756			236,525			(8)	377,281
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText	$	0.52		$	0.88		(8)	$	1.40

(1)	Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)	Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)	GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4)	Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. See note 18 "Special Charges (Recoveries)" to our Condensed Consolidated Financial Statements for more details.
(5)	GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)	Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
(7)	Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

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(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

	Six Months Ended December 31, 2018
				Per share diluted
GAAP-based net income, attributable to OpenText	$	140,756		$	0.52
Add:
Amortization	187,638			0.70
Share-based compensation	13,440			0.05
Special charges (recoveries)	32,691			0.12
Other (income) expense, net	(1,900		)	(0.01		)
GAAP-based provision for (recovery of) income taxes	66,086			0.25
Non-GAAP-based provision for income taxes	(61,430		)	(0.23		)
Non-GAAP-based net income, attributable to OpenText	$	377,281		$	1.40

Reconciliation of Adjusted EBITDA

	Six Months Ended December 31, 2018
GAAP-based net income, attributable to OpenText	$	140,756
Add:
Provision for (recovery of) income taxes	66,086
Interest and other related expense, net	68,144
Amortization of acquired technology-based intangible assets	95,843
Amortization of acquired customer-based intangible assets	91,795
Depreciation	47,688
Share-based compensation	13,440
Special charges (recoveries)	32,691
Other (income) expense, net	(1,900		)
Adjusted EBITDA	$	554,543

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LIQUIDITY AND CAPITAL RESOURCES

The following tables set forth changes in cash flows from operating, investing and financing activities for the periods indicated:

(In thousands)	As of December 31, 2019		Change increase (decrease)			As of June 30, 2019
Cash and cash equivalents	$	675,403	$	(265,606	)	$	941,009
Restricted cash included in other assets	4,829		2,295			2,534
Total cash, cash equivalents and restricted cash	$	680,232	$	(263,311	)	$	943,543

	Six Months Ended December 31,
(In thousands)	2019			Change			2018
Cash provided by operating activities	$	344,685		$	(15,819	)	$	360,504
Cash used in investing activities	$	(1,264,541	)	$	(911,140	)	$	(353,401	)
Cash used in financing activities	$	660,616		$	747,935		$	(87,319	)

Cash and cash equivalents

Cash and cash equivalents primarily consist of balances with banks as well as deposits with original maturities of 90 days or less.

We continue to anticipate that our cash and cash equivalents, as well as available credit facilities, will be sufficient to fund our anticipated cash requirements for working capital, contractual commitments, capital expenditures, dividends and operating needs for the next twelve months. Any further material or acquisition-related activities may require additional sources of financing and would be subject to the financial covenants established under our credit facilities. For more details, see "Long-term Debt and Credit Facilities" below.

As of December 31, 2019, we recognized a provision of $19.3 million (June 30, 2019—$17.4 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries, and planned periodic repatriations from certain United States and German subsidiaries, that will be subject to withholding taxes upon distribution.

Cash flows provided by operating activities

Cash flows from operating activities decreased by $15.8 million due to a decrease in changes from working capital of $69.5 million, partially offset by an increase in net income before the impact of non-cash items of $53.7 million. The change in operating cash flow from changes in working capital was primarily due to the net impact of the following decreases: (i) $30.9 million relating to higher accounts receivable balances, (ii) $18.2 million relating to changes in income taxes payable, (iii) $13.0 million relating to an increase in prepaid expenses and other current assets, (iv) $4.3 million relating to higher contract assets, (v) $3.5 million relating to a decrease in accounts payable and accrued liabilities, (vi) $2.6 million relating to an increase in other assets and (vii) $2.1 million net operating lease assets and liabilities. These decreases in operating cash flows were partially offset by an increase of $5.1 million relating to deferred revenues.

During the second quarter of Fiscal 2020 our days sales outstanding (DSO) was 57 days, compared to a DSO of 59 days during the second quarter of Fiscal 2019. The per day impact of our DSO in the second quarter of Fiscal 2020 on our cash flows was $8.5 million before the impact of acquired accounts receivable from Carbonite. The per day impact of our DSO in the second quarter of Fiscal 2019 was $8.2 million. In arriving at DSO, we exclude contract assets as these assets do not provide an unconditional right to the related consideration from the customer.

Cash flows used in investing activities

Our cash flows used in investing activities is primarily on account of acquisitions and additions of property and equipment.

Cash flows used in investing activities increased by $911.1 million, primarily due to an increase in consideration paid for acquisitions during the first half of Fiscal 2020, which included cash paid for the acquisition of Carbonite of approximately $1.2 billion.

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Cash flows used in financing activities

Our cash flows from financing activities generally consist of long-term debt financing and amounts received from stock options exercised by our employees. These inflows are typically offset by scheduled and non-scheduled repayments of our long-term debt financing and, when applicable, the payment of dividends and/or the repurchases of our Common Shares.

Cash flows provided by financing activities increased by $747.9 million. This was primarily due to proceeds from drawings on the Revolver of $750 million during the second quarter of Fiscal 2020, which were used, in part, to fund the acquisition of Carbonite.

Cash Dividends

During the three and six months ended December 31, 2019, we declared and paid cash dividends of $0.1746 and $0.3492 per Common Share, respectively, in the aggregated amount of $47.1 million and $94.1 million, respectively. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board. See Item 5 "Dividend Policy" in our Annual Report on Form 10-K for Fiscal 2019 for more information.

Long-term Debt and Credit Facilities

Senior Unsecured Fixed Rate Notes

Senior Notes 2026

On May 31, 2016 we issued $600 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2026 bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016. Senior Notes 2026 will mature on June 1, 2026, unless earlier redeemed, in accordance with their terms, or repurchased.

On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%. The additional notes have identical terms, are fungible with and are a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026. The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, is $850 million.

We may redeem all or a portion of the Senior Notes 2026 at any time prior to June 1, 2021 at a redemption price equal to 100% of the principal amount of Senior Notes 2026 plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date. We may also, on one or more occasions, redeem Senior Notes 2026, in whole or in part, at any time on and after June 1, 2021 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2026, dated as of May 31, 2016, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2026 Indenture), plus accrued and unpaid interest, if any, to the redemption date.

If we experience one of the kinds of changes of control triggering events specified in the 2026 Indenture, we will be required to make an offer to repurchase Senior Notes 2026 at a price equal to 101% of the principal amount of Senior Notes 2026, plus accrued and unpaid interest, if any, to the date of purchase.

The 2026 Indenture contains covenants that limit our and certain of our subsidiaries’ ability to, among other things: (i) create certain liens and enter into sale and lease-back transactions; (ii) create, assume, incur or guarantee additional indebtedness of the Company or the guarantors without such subsidiary becoming a subsidiary guarantor of the notes; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets substantially as an entirety to, another person. These covenants are subject to a number of important limitations and exceptions as set forth in the 2026 Indenture. The 2026 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding notes to be due and payable immediately.

Senior Notes 2026 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities. Senior Notes 2026 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of the our and our guarantors’ future subordinated debt. Senior Notes 2026 and the guarantees will be effectively subordinated to all of our and our guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.

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The foregoing description of the 2026 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2026 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on May 31, 2016.

Senior Notes 2023

On January 15, 2015, we issued $800 million in aggregate principal amount of our 5.625% Senior Notes due 2023 (Senior Notes 2023) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2023 bear interest at a rate of 5.625% per annum, payable semi-annually in arrears on January 15 and July 15, commencing on July 15, 2015. Senior Notes 2023 will mature on January 15, 2023, unless earlier redeemed in accordance with their terms, or repurchased.

We may, on one or more occasion, redeem Senior Notes 2023, in whole or in part, at any time at the applicable redemption prices set forth in the indenture governing the Senior Notes 2023, dated as of January 15, 2015, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon (as successor to Citibank N.A.), as U.S. trustee, and BNY Trust Company of Canada (as successor to Citi Trust Company Canada), as Canadian trustee (the 2023 Indenture), plus accrued and unpaid interest, if any, to the redemption date.

If we experience one of the kinds of changes of control triggering events specified in the 2023 Indenture, we will be required to make an offer to repurchase Senior Notes 2023 at a price equal to 101% of the principal amount of Senior Notes 2023, plus accrued and unpaid interest, if any, to the date of purchase.

The 2023 Indenture contains covenants that limit our and certain of our subsidiaries’ ability to, among other things: (i) create certain liens and enter into sale and lease-back transactions; (ii) create, assume, incur or guarantee additional indebtedness of the Company or the subsidiary guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2023; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets substantially as an entirety to, another person. These covenants are subject to a number of important limitations and exceptions as set forth in the 2023 Indenture. The 2023 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding notes to be due and payable immediately.

Senior Notes 2023 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities. Senior Notes 2023 and the guarantees rank equally in right of payment with all of our and our subsidiary guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our subsidiary guarantors’ future subordinated debt. Senior Notes 2023 and the guarantees will be effectively subordinated to all of ours and our guarantors’ existing and future secured debt, including the obligations under the Revolver and Term Loan B (as defined herein), to the extent of the value of the assets securing such secured debt.

The foregoing description of the 2023 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2023 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on January 15, 2015.

Notes due 2022

As part of our acquisition of Carbonite, our consolidated debt reflects $143.8 million of principal debt convertible notes (Notes due 2022). Notes due 2022 were originally issued by Carbonite, on April 4, 2017, in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Notes due 2022 were issued under an Indenture (the 2022 Notes Indenture) between Carbonite and U.S. Bank National Association, as trustee (the 2022 Notes Trustee). The Notes due 2022 accrue interest at 2.5% per year, payable semiannually in arrears on April 1 and October 1 of each year. The Notes due 2022 will mature on April 1, 2022, unless earlier repurchased, redeemed or converted. Carbonite, now a subsidiary of OpenText, remains the sole obligor on the Notes due 2022.

In connection with our acquisition of Carbonite, and as required by the 2022 Notes Indenture, Carbonite and the 2022 Notes Trustee entered into a first supplemental indenture, dated as of December 24, 2019 (the 2022 Notes Supplemental Indenture). The 2022 Notes Supplemental Indenture provides that, at and after the effective time of our acquisition of Carbonite, the right to convert each $1,000 principal amount of the Notes due 2022 was changed into the right to convert such principal amount of the Notes due 2022 solely into cash in an amount equal to the Conversion Rate (as defined in the 2022 Notes Indenture) in effect on the Conversion Date (as defined in the 2022 Notes Indenture) multiplied by $23.00, which was the price per share we paid in connection with our acquisition of Carbonite.

As a result of our acquisition of Carbonite, the Conversion Rate for the Notes due 2022 was temporarily increased by 7.7633 per $1,000 principal amount of Notes due 2022 to yield a Conversion Rate of 46.4667 per $1,000 principal amount of Notes due 2022.  The increased Conversion Rate will remain in effect until the close of business (5:00 P.M. New York City

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time) on February 27, 2020.  During the period between our acquisition of Carbonite and that date, each $1,000 principal amount of Notes due 2022 surrendered for conversion will be converted into $1,068.7341 in cash. 

Term Loan B

On May 30, 2018, we entered into a credit facility, which provides for a $1 billion term loan facility with certain lenders named therein, Barclays Bank PLC (Barclays), as sole administrative agent and collateral agent, and as lead arranger and joint bookrunner (Term Loan B) and borrowed the full amount on May 30, 2018 to, among other things, repay in full the loans under our prior $800 million term loan credit facility originally entered into on January 16, 2014. Repayments made under Term Loan B are equal to 0.25% of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity.

Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver. Term Loan B has a seven year term, maturing in May 2025.

Borrowings under Term Loan B bear interest at a rate per annum equal to an applicable margin plus, at the borrower’s option, either (1) the eurodollar rate for the interest period relevant to such borrowing or (2) an ABR rate. The applicable margin for borrowings under Term Loan B is 1.75%, with respect to LIBOR advances and 0.75%, with respect to ABR advances. The interest on the current outstanding balance for Term Loan B is equal to 1.75% plus LIBOR (subject to a 0.00% floor). As of December 31, 2019, the outstanding balance on the Term Loan B bears an interest rate of approximately 3.45%.

Term Loan B has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions. Consolidated senior secured net leverage ratio is defined for this purpose as the proportion of our total debt reduced by unrestricted cash, including guarantees and letters of credit, that is secured by our or any of our subsidiaries’ assets, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.

Under Term Loan B, we must maintain a “consolidated net leverage” ratio of no more than 4:1 at the end of each financial quarter. Consolidated net leverage ratio is defined for this purpose as the proportion of our total debt reduced by unrestricted cash, including guarantees and letters of credit, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges. As of December 31, 2019, our consolidated net leverage ratio was 2.3:1.

Revolver

On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total commitments under the Revolver from $450 million to $750 million as well as to extend the maturity from May 5, 2022 to October 31, 2024. Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B. The Revolver has no fixed repayment date prior to the end of the term. Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%. As of December 31, 2019, the outstanding balance on the Revolver bears an interest rate of approximately 3.29%.

During the three months ended December 31, 2019 we drew down $750 million from the Revolver to partially fund the acquisition of Carbonite. As of December 31, 2019, the full amount drawn remains outstanding (June 30, 2019—nil). During the three and six months ended December 31, 2019, we recorded interest expense relating to amounts drawn of approximately $0.6 million, respectively.

As of December 31, 2018, we had no outstanding balance on the Revolver. There was no activity during three and six months ended December 31, 2018 and we recorded no interest expense.

For further details relating to our debt, please see note 11 "Long-Term Debt" to our Condensed Consolidated Financial Statements.

Shelf Registration Statement

On November 29, 2019, we filed a universal shelf registration statement on Form S-3 with the SEC, which became effective automatically (the Shelf Registration Statement). The Shelf Registration Statement allows for primary and secondary offerings from time to time of equity, debt and other securities, including Common Shares, Preference Shares, debt securities, depositary shares, warrants, purchase contracts, units and subscription receipts. A base shelf short-form prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on November 29, 2019. The type

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of securities and the specific terms thereof will be determined at the time of any offering and will be described in the applicable prospectus supplement to be filed separately with the SEC and Canadian securities regulators.

Pensions

As of December 31, 2019, our total unfunded pension plan obligations were $75.9 million, of which $2.3 million is payable within the next twelve months. We expect to be able to make the long-term and short-term payments related to these obligations in the normal course of operations.

Our anticipated payments under our most significant plans for the fiscal years indicated below are as follows:

	Fiscal years ending June 30,
	CDT		GXS GER		GXS PHP
2020 (six months ended June 30)	$	331	$	493	$	31
2021	739		985		268
2022	810		1,017		266
2023	909		1,017		222
2024	1,014		1,023		278
2025 to 2029	5,851		5,171		2,890
Total	$	9,654	$	9,706	$	3,955

For a detailed discussion on pensions, see note 12 "Pension Plans and Other Post Retirement Benefits" to our Condensed Consolidated Financial Statements.

Commitments and Contractual Obligations

As of December 31, 2019, we have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

	Payments due between
	Total		January 1, 2020— June 30, 2020		July 1, 2020— June 30, 2022		July 1, 2022— June 30, 2024		July 1, 2024 and beyond
Long-term debt obligations (1)	$	3,449,651	$	223,222	$	277,680	$	1,031,371	$	1,917,378
Purchase obligations for contracts not accounted for as lease obligations (2)	60,978		23,135		32,843		5,000		—
	$	3,510,629	$	246,357	$	310,523	$	1,036,371	$	1,917,378

⁽¹⁾ Includes interest up to maturity and principal payments. Please see note 11 "Long-Term Debt" for more details.

⁽²⁾ For contractual obligations relating to leases and purchase obligations accounted for under Topic 842, please see note 6 "Leases".

Guarantees and Indemnifications

We have entered into customer agreements which may include provisions to indemnify our customers against third party claims that our software products or services infringe certain third party intellectual property rights and for liabilities related to a breach of our confidentiality obligations. We have not made any material payments in relation to such indemnification provisions and have not accrued any liabilities related to these indemnification provisions in our Condensed Consolidated Financial Statements.

Occasionally, we enter into financial guarantees with third parties in the ordinary course of our business, including, among others, guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business. Such agreements have not had a material effect on our results of operations, financial position or cash flows.

Litigation

We are currently involved in various claims and legal proceedings.

Quarterly, we review the status of each significant legal matter and evaluate such matters to determine how they should be treated for accounting and disclosure purposes in accordance with the requirements of ASC Topic 450-20 "Loss Contingencies" (Topic 450-20). Specifically, this evaluation process includes the centralized tracking and itemization of the

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status of all our disputes and litigation items, discussing the nature of any litigation and claim, including any dispute or claim that is reasonably likely to result in litigation, with relevant internal and external counsel, and assessing the progress of each matter in light of its merits and our experience with similar proceedings under similar circumstances.

If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20. As of the date of this Quarterly Report on Form 10-Q, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts already recognized will be incurred that would be material to our consolidated financial position or results of operations. As more fully described below, we are unable at this time to estimate a possible loss or range of losses in respect of certain disclosed matters.

Contingencies

IRS Matter

As we have previously disclosed, the United States Internal Revenue Service (IRS) is examining certain of our tax returns for our fiscal year ended June 30, 2010 (Fiscal 2010) through our fiscal year ended June 30, 2012 (Fiscal 2012), and in connection with those examinations is reviewing our internal reorganization in Fiscal 2010 to consolidate certain intellectual property ownership in Luxembourg and Canada and our integration of certain acquisitions into the resulting structure. We also previously disclosed that the examinations may lead to proposed adjustments to our taxes that may be material, individually or in the aggregate, and that we have not recorded any material accruals for any such potential adjustments in our Condensed Consolidated Financial Statements.

We previously disclosed that, as part of these examinations, on July 17, 2015 we received from the IRS an initial Notice of Proposed Adjustment (NOPA) in draft form, that, as revised by the IRS on July 11, 2018 proposes a one-time approximately $335 million increase to our U.S. federal taxes arising from the reorganization in Fiscal 2010 (the 2010 NOPA), plus penalties equal to 20% of the additional proposed taxes for Fiscal 2010, and interest at the applicable statutory rate published by the IRS.

On July 11, 2018, we also received, consistent with previously disclosed expectations, a draft NOPA proposing a one time approximately $80 million increase to our U.S. federal taxes for Fiscal 2012 (the 2012 NOPA) arising from the integration of Global 360 Holding Corp. into the structure that resulted from the internal reorganization in Fiscal 2010, plus penalties equal to 40% of the additional proposed taxes for Fiscal 2012, and interest.

On January 7, 2019, we received from the IRS official notification of proposed adjustments to our taxable income for Fiscal 2010 and Fiscal 2012, together with the 2010 NOPA and 2012 NOPA in final form. In each case, such documentation was as expected and on substantially the same terms as provided for in the previously disclosed respective draft NOPAs, with the exception of an additional proposed penalty as part of the 2012 NOPA.

A NOPA is an IRS position and does not impose an obligation to pay tax. We continue to strongly disagree with the IRS’ positions within the NOPAs and we are vigorously contesting the proposed adjustments to our taxable income, along with any proposed penalties and interest.

As of our receipt of the final 2010 NOPA and 2012 NOPA, our estimated potential aggregate liability, as proposed by the IRS, including additional state income taxes plus penalties and interest that may be due, was approximately $770 million, comprised of approximately $455 million in U.S. federal and state taxes, approximately $130 million of penalties, and approximately $185 million of interest. Interest will continue to accrue at the applicable statutory rates until the matter is resolved and may be substantial.

As previously disclosed and noted above, we strongly disagree with the IRS’ positions and we are vigorously contesting the proposed adjustments to our taxable income, along with the proposed penalties and interest. We are examining various alternatives available to taxpayers to contest the proposed adjustments, including through IRS Appeals and U.S. Federal court. Any such alternatives could involve a lengthy process and result in the incurrence of significant expenses. As of the date of this Quarterly Report on Form 10-Q, we have not recorded any material accruals in respect of these examinations in our Condensed Consolidated Financial Statements. An adverse outcome of these tax examinations could have a material adverse effect on our financial position and results of operations.

For additional information regarding the history of this IRS matter, please see Note 13 "Guarantees and Contingencies" in our Annual Report on Form 10-K for Fiscal 2018.

CRA Matter

As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of

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reassessment for Fiscal 2012, Fiscal 2013 and Fiscal 2014. Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of December 31, 2019, in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013 and Fiscal 2014 to be limited to penalties and interest that may be due of approximately $25 million.

The notices of reassessment for Fiscal 2012, Fiscal 2013 and Fiscal 2014 would, as drafted, increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10% penalty on the proposed adjustment to income.

We strongly disagree with the CRA's positions and believe the reassessments of Fiscal 2012, Fiscal 2013 and Fiscal 2014 (including any penalties) are without merit. We have filed notices of objection for Fiscal 2012, Fiscal 2013 and Fiscal 2014, and we are currently seeking competent authority consideration under applicable international treaties in respect of these reassessments.

Even if we are unsuccessful in challenging the CRA's reassessments to increase our taxable income for Fiscal 2012, Fiscal 2013 and Fiscal 2014, or potential reassessments that may be proposed for subsequent years currently under audit, we have elective deductions available for those years (including carry-backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of any assessed penalties and interest, as described above.

We will continue to vigorously contest the proposed adjustments to our taxable income and any penalty and interest assessments. As of the date of this Quarterly Report on Form 10-Q, we have not recorded any accruals in respect of these reassessments in our Condensed Consolidated Financial Statements. Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have been completed with no reassessment of our income tax liability in respect of our international transactions, including the transfer pricing methodology applied to them. The CRA is currently auditing Fiscal 2015, Fiscal 2016 and Fiscal 2017 and have proposed to reassess Fiscal 2015 in a manner consistent with Fiscal 2012, Fiscal 2013 and Fiscal 2014. We are engaged in ongoing discussions with the CRA and continue to vigorously contest the CRA's audit positions.

GXS India Matter

Our Indian subsidiary, GXS India Technology Centre Private Limited (GXS India), is subject to potential assessments by Indian tax authorities in the city of Bangalore. GXS India has received assessment orders from the Indian tax authorities alleging that the transfer price applied to intercompany transactions was not appropriate. Based on advice from our tax advisors, we believe that the facts that the Indian tax authorities are using to support their assessment are incorrect. We have filed appeals and anticipate an eventual settlement with the Indian tax authorities. We have accrued $1.3 million to cover our anticipated financial exposure in this matter.

Carbonite Class Action Complaint

On August 1, 2019, prior to our acquisition of Carbonite, a purported stockholder of Carbonite filed a putative class action complaint against Carbonite, its former Chief Executive Officer, Mohamad S. Ali, and its former Chief Financial Officer, Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A. Luna, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19-cv-11662-LTS). The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint generally alleges that the defendants made materially false and misleading statements in connection with Carbonite’s Server Backup VM Edition, and seeks, among other things, the designation of the action as a class action, an award of unspecified compensatory damages, costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate. On August 23, 2019, a nearly identical complaint was filed in the same court captioned William Feng, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19- cv-11808-LTS) (together with the Luna Complaint, the “Securities Actions”). On November 21, 2019, the court consolidated the Securities Actions, appointed a lead plaintiff, and designated a lead counsel. On January 15, 2020, the lead plaintiff filed a consolidated amended complaint generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019. The defendants' answer or responsive pleading is due by March 10, 2020. In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of this action and are unable to reasonably estimate the amount or range of loss, if any, that could result from this proceeding.

Carbonite vs Realtime Data

On February 27, 2017, prior to our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (“Realtime Data”) filed a lawsuit against Carbonite in the U.S. District Court for the Eastern District of Texas "Realtime Data LLC v. Carbonite, Inc. et al (No 6:17-cv-00121-RWS-JDL)", alleging that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data. Realtime Data’s complaint against Carbonite sought damages in an unspecified

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amount and injunctive relief. On December 19, 2017, the U.S. District Court for the Eastern District of Texas transferred the case to the U.S District Court for the District of Massachusetts (No. 1:17-cv-12499). Realtime Data has also filed numerous other patent suits on the asserted patents against other companies around the country. In one of those suits, filed in the U.S. District Court for the District of Delaware, the Delaware Court on July 29, 2019 dismissed the lawsuit after declaring invalid three of the four patents asserted by Realtime Data against Carbonite. By way of Order dated August 19, 2019, the U.S. District Court for the District of Massachusetts stayed the action against Carbonite pending appeal of the dismissal in the Delaware lawsuit. As to the fourth patent, the U.S. Patent & Trademark Office Patent Trial and Appeal Board on September 24, 2019 invalidated certain claims of that patent. No trial date has been set in the action against Carbonite. The Company is defending Carbonite vigorously. We have not accrued a loss contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable. Although a loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain unable to reasonably estimate a possible loss or range of loss associated with this litigation.

Please also see Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2019.

Off-Balance Sheet Arrangements

We do not enter into off-balance sheet financing as a matter of practice, except for guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

We are primarily exposed to market risks associated with fluctuations in interest rates on our term loans, revolving loans and foreign currency exchange rates.

Interest rate risk

Our exposure to interest rate fluctuations relate primarily to our Term Loan B and the Revolver.

As of December 31, 2019, we had an outstanding balance of $982.5 million on Term Loan B. Term Loan B bears a floating interest rate of 1.75% plus LIBOR. As of December 31, 2019, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on Term Loan B by approximately $9.8 million, assuming that the loan balance as of December 31, 2019 is outstanding for the entire period (June 30, 2019—$9.9 million).

As of December 31, 2019, we had an outstanding balance of $750.0 million on the Revolver. Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed rate that is dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%. As at December 31, 2019, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on the Revolver by approximately $7.5 million, assuming that the full balance as of December 31, 2019 is outstanding for the entire period (June 30, 2019—nil).

Foreign currency risk

Foreign currency transaction risk

We transact business in various foreign currencies. Our foreign currency exposures typically arise from intercompany fees, intercompany loans and other intercompany transactions that are expected to be cash settled in the near term. We expect that we will continue to realize gains or losses with respect to our foreign currency exposures. Our ultimate realized gain or loss with respect to foreign currency exposures will generally depend on the size and type of cross-currency transactions that we enter into, the currency exchange rates associated with these exposures and changes in those rates. Additionally, we have hedged certain of our Canadian dollar foreign currency exposures relating to our payroll expenses in Canada.

Based on the foreign exchange forward contracts outstanding as of December 31, 2019, a one cent change in the Canadian dollar to U.S. dollar exchange rate would have caused a change of approximately $0.6 million in the mark to market on our existing foreign exchange forward contracts (June 30, 2019—$0.6 million).

Foreign currency translation risk

Our reporting currency is the U.S. dollar. Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. In particular, the amount of cash and cash equivalents that we report in U.S. dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each

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respective reporting period (the offset to which is recorded to accumulated other comprehensive income on our Condensed Consolidated Balance Sheets).

The following table shows our cash and cash equivalents denominated in certain major foreign currencies as of December 31, 2019 (equivalent in U.S. dollar):

(In thousands)	U.S. Dollar Equivalent at December 31, 2019		U.S. Dollar Equivalent at June 30, 2019
Euro	$	58,020	$	120,417
British Pound	30,603		33,703
Canadian Dollar	15,678		12,635
Swiss Franc	34,163		56,776
Other foreign currencies	97,856		105,273
Total cash and cash equivalents denominated in foreign currencies	236,320		328,804
U.S. dollar	439,083		612,205
Total cash and cash equivalents	$	675,403	$	941,009

If overall foreign currency exchange rates in comparison to the U.S. dollar uniformly weakened by 10%, the amount of cash and cash equivalents we would report in equivalent U.S. dollars would decrease by approximately $23.6 million (June 30, 2019—$32.9 million), assuming we have not entered into any derivatives discussed above under "Foreign Currency Transaction Risk".

Item 4.    Controls and Procedures

(A) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2019, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that information required to be disclosed by us in the reports we file under the Exchange Act (according to Rule 13(a)-15(e)) is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(B) Changes in Internal Control over Financial Reporting (ICFR)

Based on the evaluation completed by our management, in which our Chief Executive Officer and Chief Financial Officer participated, our management has concluded that there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - Other Information

Item 1A. Risk Factors

You should carefully consider the risk factors discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for our fiscal year ended June 30, 2019 in addition to the risk factors set forth below. These are not the only risks and uncertainties facing us. Additional risks not currently known to us or that we currently believe are immaterial may also impair our operating results, financial condition and liquidity. Our business is also subject to general risks and uncertainties that affect many other companies.

We may fail to realize all of the anticipated benefits of the acquisition of Carbonite or those benefits may take longer to realize than expected.

We may be required to devote significant management attention and resources to integrating the business practices and operations of OpenText and Carbonite. As we continue to integrate, we may experience disruptions to our business and, if implemented ineffectively, it could restrict the realization of the full expected benefits. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the acquisition of Carbonite could cause an interruption of, or loss of momentum in, our operations and could adversely affect our business, financial condition and results of operations.

Furthermore, as we continue the integration of Carbonite, it may result in material unanticipated problems, expenses, charges, liabilities, competitive responses, loss of customers and other business relationships, and diversion of management’s attention. Additional integration challenges may include:

• Difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition;

• Difficulties in the integration of operations and systems, including pricing and marketing strategies, which may hurt the sale of hybrid backup solutions which are sensitive to price; and

• Difficulties in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures.

Many of these factors will be outside of our control and any one of them could result in increased costs, including restructuring charges, decreases in the amount of expected revenues and diversion of management’s time and energy, which could adversely affect our business, financial condition and results of operations.

We may be unable to maintain or expand our base of SMB and professional consumer customers, which could adversely affect our anticipated future growth and operating results.

With the acquisition of Carbonite, we have expanded our presence in the SMB market as well as the consumer market. To expand in this market may require substantial resources and increased marketing efforts, different to what we are accustomed to. If we are unable to market and sell our solutions to the SMB market and consumers with competitive pricing and in a cost-effective manner, it may harm our ability to grow our revenues and adversely affect our results of operation. In addition, SMBs frequently have limited budgets and are more likely to be significantly affected by economic downturns than larger, more established companies. As such, SMBs may choose to spend funds on items other than our solutions, particularly during difficult economic times, which may hurt our projected revenues, business financial condition and results of operations.

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Item 6.    Exhibits

The following documents are filed as a part of this report:

Exhibit Number	Description of Exhibit
2.1	Agreement and Plan of Merger (1)
4.1	Amended and Restated Shareholder Rights Plan Agreement between Open Text Corporation and Computershare Investor Services, Inc. dated September 4, 2019 (2)
4.2	Indenture (including form of Note), dated as of April 4, 2017, by and between Carbonite, Inc. and U.S. Bank National Association, as trustee
4.3	First Supplemental Indenture, dated as of December 24, 2019, by and between Carbonite, Inc. and U.S. Bank National Association, as trustee
10.1	Fourth Amended and Restated Credit Agreement (3)
31.1	Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL instance document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL taxonomy extension schema.
101.CAL	Inline XBRL taxonomy extension calculation linkbase.
101.DEF	Inline XBRL taxonomy extension definition linkbase.
101.LAB	Inline XBRL taxonomy extension label linkbase.
101.PRE	Inline XBRL taxonomy extension presentation.

(1) Filed as an Exhibit to the Company's Current Report on Form 8-K, as filed with the SEC on November 12, 2019 and incorporated herein by reference.

(2) Filed as an Exhibit to the Company's Current Report on Form 8-K, as filed with the SEC on September 4, 2019 and incorporated herein by reference.

(3) Filed as an Exhibit to Company's Current Report on Form 8-K, as filed with the SEC on November 5, 2019 and incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OPEN TEXT CORPORATION

Date: January 30, 2020

By:	/s/ MARK J. BARRENECHEA
	Mark J. Barrenechea Vice Chair, Chief Executive Officer and Chief Technology Officer (Principal Executive Officer)
	/s/ MADHU RANGANATHAN
	Madhu Ranganathan Executive Vice President and Chief Financial Officer (Principal Financial Officer)
	(Acting Principal Accounting Officer)

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EX-4.2

Exhibit 4.2

EXECUTION VERSION

CARBONITE, INC.,

as Issuer

AND

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

INDENTURE

Dated as of April 4, 2017

2.50% Convertible Senior Notes due 2022

TABLE OF CONTENTS

		PAGE
ARTICLE 1
DEFINITIONS
Section 1.01.	Definitions	1
Section 1.02.	References to Interest	13
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.01.	Designation and Amount	13
Section 2.02.	Form of Notes	13
Section 2.03.	Date and Denomination of Notes; Payments of Interest and Defaulted Amounts	14
Section 2.04.	Execution, Authentication and Delivery of Notes	15
Section 2.05.	Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary	16
Section 2.06.	Mutilated, Destroyed, Lost or Stolen Notes	22
Section 2.07.	Temporary Notes	23
Section 2.08.	Cancellation of Notes Paid, Converted, Etc.	24
Section 2.09.	CUSIP Numbers	24
Section 2.10.	Additional Notes; Purchases	24
Section 2.11.	Ranking	25
ARTICLE 3
SATISFACTION AND DISCHARGE
Section 3.01.	Satisfaction and Discharge	25
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01.	Payment of Principal and Interest	26
Section 4.02.	Maintenance of Office or Agency	26
Section 4.03.	Appointments to Fill Vacancies in Trustee’s Office	27
Section 4.04.	Provisions as to Paying Agent	27
Section 4.05.	[Reserved]	28
Section 4.06.	Rule 144A Information Requirement; Reporting; and Additional Interest	28
Section 4.07.	Stay, Extension and Usury Laws	30
Section 4.08.	Compliance Certificate; Statements as to Defaults	30

ARTICLE 5.
[RESERVED]
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01.	Events of Default	30
Section 6.02.	Acceleration	32
Section 6.03.	Additional Interest	32
Section 6.04.	Payments of Notes on Default; Suit Therefor	34
Section 6.05.	Application of Monies Collected by Trustee	35
Section 6.06.	Proceedings by Holders	36
Section 6.07.	Proceedings by Trustee	36
Section 6.08.	Remedies Cumulative and Continuing	37
Section 6.09.	Direction of Proceedings and Waiver of Defaults by Majority of Holders	37
Section 6.10.	Notice of Defaults	38
Section 6.11.	Undertaking to Pay Costs	38
ARTICLE 7
CONCERNING THE TRUSTEE
Section 7.01.	Duties and Responsibilities of Trustee	38
Section 7.02.	Certain Rights of the Trustee	40
Section 7.03.	No Responsibility for Recitals, Etc.	41
Section 7.04.	Trustee, Paying Agents, Conversion Agents, Bid Solicitation Agent or Note Registrar May Own Notes	42
Section 7.05.	Monies and Shares of Common Stock to Be Held in Trust	42
Section 7.06.	Compensation and Expenses of Trustee	42
Section 7.07.	Officer’s Certificate as Evidence	43
Section 7.08.	Eligibility of Trustee	43
Section 7.09.	Resignation or Removal of Trustee	43
Section 7.10.	Acceptance by Successor Trustee	44
Section 7.11.	Succession by Merger, Etc.	45
Section 7.12.	Trustee’s Application for Instructions from the Company	46
Section 7.13.	Conflicting Interests of Trustee	46
Section 7.14	Limitation on Trustee’s Liability	46
ARTICLE 8
CONCERNING THE HOLDERS
Section 8.01.	Action by Holders	46
Section 8.02.	Proof of Execution by Holders	46
Section 8.03.	Who Are Deemed Absolute Owners	47
Section 8.04.	Company-Owned Notes Disregarded	47
Section 8.05.	Revocation of Consents; Future Holders Bound	47

2

ARTICLE 9
[RESERVED]
ARTICLE 10
SUPPLEMENTAL INDENTURES
Section 10.01.	Supplemental Indentures Without Consent of Holders	48
Section 10.02.	Supplemental Indentures with Consent of Holders	49
Section 10.03.	Effect of Amendment, Supplement and Waiver	50
Section 10.04.	Notation on Notes	50
Section 10.05.	Evidence of Compliance of Amendment, Supplement or Waiver to Be Furnished to Trustee	51
ARTICLE 11
CONSOLIDATION, MERGER AND SALE
Section 11.01.	Company May Consolidate, Etc. on Certain Terms	51
Section 11.02.	Opinion of Counsel to Be Given to Trustee	52
ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01.	Indenture and Notes Solely Corporate Obligations	52
ARTICLE 13
[RESERVED]
ARTICLE 14
CONVERSION OF NOTES
Section 14.01.	Conversion Privilege	53
Section 14.02.	Conversion Procedure; Settlement Upon Conversion	56
Section 14.03.	Increase in Conversion Rate Upon Conversion in Connection with a Make-Whole Fundamental Change or Redemption Notice	61
Section 14.04.	Adjustment of Conversion Rate	63
Section 14.05.	Adjustments of Prices	72
Section 14.06.	Shares to Be Fully Reserved	73
Section 14.07.	Effect of Recapitalizations, Reclassifications and Changes of the Common Stock	73
Section 14.08.	Certain Covenants	75
Section 14.09.	Responsibility of Trustee	75
Section 14.10.	Notice to Holders Prior to Certain Actions	76
Section 14.11.	Stockholder Rights Plans	77

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ARTICLE 15
PURCHASE OF NOTES AT OPTION OF HOLDERS
Section 15.01.	Intentionally Omitted	77
Section 15.02.	Repurchase at Option of Holders Upon a Fundamental Change	77
Section 15.03.	Withdrawal of Fundamental Change Repurchase Notice	80
Section 15.04.	Deposit of Fundamental Change Repurchase Price	81
Section 15.05.	Covenant to Comply with Applicable Laws Upon Repurchase of Notes	82
ARTICLE 16
OPTIONAL REDEMPTION
Section 16.01.	Optional Redemption	82
Section 16.02.	Notice of Optional Redemption; Selection of Notes	82
Section 16.03.	Payment of Notes Called for Redemption	84
Section 16.04.	Restrictions on Redemption	84
ARTICLE 17
MISCELLANEOUS PROVISIONS
Section 17.01.	Provisions Binding on Company’s Successors	85
Section 17.02.	Official Acts by Successor Entity	85
Section 17.03.	Addresses for Notices, Etc.	85
Section 17.04.	Governing Law	86
Section 17.05.	Intentionally Omitted	86
Section 17.06.	Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee	86
Section 17.07.	Legal Holidays	86
Section 17.08.	No Security Interest Created	87
Section 17.09.	Benefits of Indenture	87
Section 17.10.	Table of Contents, Headings, Etc.	87
Section 17.11.	Authenticating Agent	87
Section 17.12.	Execution in Counterparts	88
Section 17.13.	Severability	88
Section 17.14.	Waiver of Jury Trial; Submission of Jurisdiction	88
Section 17.15.	Force Majeure	89
Section 17.16.	Calculations	89
Section 17.17.	U.S.A. Patriot Act	89
Section 17.18.	Tax Withholding	89

EXHIBIT

Exhibit A Form of Note A-1

INDENTURE dated as of April 4, 2017 between Carbonite, Inc., a Delaware corporation, as issuer (the “Company”, as more fully set forth in Section 1.01), and U.S. Bank National Association, as trustee (the “Trustee”, as more fully set forth in Section 1.01).

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W I T N E S S E T H:

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its 2.50% Convertible Senior Notes due 2022 (the “Notes”), initially in an aggregate principal amount of $ $143,750,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and

WHEREAS, the Form of Note, the certificate of authentication to be borne by each Note, the Form of Notice of Conversion, the Form of Fundamental Change Repurchase Notice and the Form of Assignment and Transfer to be borne by the Notes are to be substantially in the forms hereinafter provided; and

WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as provided in this Indenture, the valid, binding and legal obligations of the Company, and this Indenture the valid, binding and legal obligations of the Company, have been done and performed, and the execution of this Indenture and the issuance hereunder of the Notes have in all respects been duly authorized.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as otherwise provided below), as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. The words “herein,” “hereof,” “hereunder,” and words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include the plural as well as the singular.

“Additional Interest” means all amounts, if any, payable pursuant to Section 4.06(d), Section 4.06(e) and Section 6.03, as applicable.

“Additional Shares” shall have the meaning specified in Section 14.03(a).

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any specified Person means the power to direct or cause the direction of the

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management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Applicable Procedures” means, with respect to a Depositary, as to any matter at any time, the policies and procedures of such Depositary, if any, that are applicable to such matter at such time.

“Bankruptcy Law” means Title 11, U.S. Code, as amended, or any similar federal, state or foreign law for the relief of debtors.

“Bid Solicitation Agent” means the Person appointed by the Company to solicit bids for the Trading Price of the Notes in accordance with Section 14.01(b)(i). The Company shall initially act as the Bid Solicitation Agent.

“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it hereunder.

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day” means 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.

“Capital Stock” means, for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that entity; provided that debt securities that are convertible into or exchangeable for Capital Stock shall not constitute Capital Stock prior to their conversion or exchange, as the case may be.

“Cash Settlement” shall have the meaning provided in Section 14.02(a).

“Certificated Notes” means permanent certificated Notes in registered form issued in denominations of $1,000 principal amount and multiples thereof.

“Clause A Distribution” shall have the meaning specified in Section 14.04(c).

“Clause B Distribution” shall have the meaning specified in Section 14.04(c).

“Clause C Distribution” shall have the meaning specified in Section 14.04(c).

“close of business” means 5:00 p.m. (New York City time).

“Combination Settlement” shall have the meaning provided in Section 14.02(a).

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“Commission” means the U.S. Securities and Exchange Commission.

“Common Equity” of any Person means Capital Stock of such Person that is generally entitled (a) to vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management or policies of such Person.

“Common Stock” means the common stock of the Company, par value $0.01 per share, subject to Section 14.07.

“Company” shall have the meaning specified in the first paragraph of this Indenture, and subject to the provisions of Article 11, shall include its successors and assigns.

“Company Order” means a written order of the Company, signed by an Officer of the Company.

“Conversion Agent” shall have the meaning specified in Section 4.02.

“Conversion Date” shall have the meaning specified in Section 14.02(c).

“Conversion Obligation” shall have the meaning specified in Section 14.01(a).

“Conversion Price” means as of any date, $1,000, divided by the Conversion Rate as of such date.

“Conversion Rate” shall have the meaning specified in Section 14.01(a).

“Corporate Trust Office” means the principal designated office of the Trustee at which at any time its corporate trust business shall be principally administered, which office at the date hereof is located at (1) for purposes other than transfers, exchanges, or surrender of the Notes, at 111 Fillmore Avenue, St. Paul, MN 55107, Attention: Carbonite, Inc., and (2) for all other purposes at One Federal Street, 10^th Floor, Boston, MA 02110, Attention: Carbonite, Inc., or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal designated corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company). “Custodian” means the Trustee, as custodian for The Depository Trust Company, with respect to the Global Notes, or any successor entity thereto.

“Daily Conversion Value” means, for each of the 30 consecutive VWAP Trading Days during the relevant Observation Period, 1/30th of the product of (i) the Conversion Rate on such VWAP Trading Day and (ii) the Daily VWAP for such VWAP Trading Day.

“Daily Measurement Value” shall have the meaning specified in the definition of “Daily Settlement Amount.”

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“Daily Settlement Amount,” for each of the 30 consecutive VWAP Trading Days during the relevant Observation Period, shall consist of:

(a) cash in an amount equal to the lesser of (i) the Specified Dollar Amount, if any, divided by 30 (such quotient, the “Daily Measurement Value”) and (ii) the Daily Conversion Value for such VWAP Trading Day; and

(b) if the Daily Conversion Value on such VWAP Trading Day exceeds the Daily Measurement Value, a number of shares of Common Stock equal to (i) the difference between the Daily Conversion Value and the Daily Measurement Value, divided by (ii) the Daily VWAP for such VWAP Trading Day.

“Daily VWAP” means, for each of the 30 consecutive VWAP Trading Days during the relevant Observation Period, the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page “CARB<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 VWAP Trading Day (or if such volume-weighted average price is unavailable, the market value of one share of Common Stock on such VWAP Trading Day determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained for this purpose by the Company). The “Daily VWAP” shall be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.

“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.

“Defaulted Amounts” means any amounts on any Note (including, without limitation, the Fundamental Change Repurchase Price, Redemption Price, principal and interest) that are payable but are not punctually paid or duly provided for.

“Depositary” means, with respect to each Global Note, the Person specified in Section 2.05(c) as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, “Depositary” shall mean or include such successor.

“Distributed Property” shall have the meaning specified in Section 14.04(c).

“effective date” means the first date on which shares of the Common Stock trade on the Relevant Stock Exchange, regular way, reflecting the relevant share split or share combination, as applicable.

“Effective Date” means, for purposes of Section 14.03, the meaning specified in Section 14.03(c).

“Event of Default” shall have the meaning specified in Section 6.01.

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“Ex-Dividend Date” means the first date on which shares of 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 the Company or, if applicable, from the seller of Common Stock on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Expiration Date”shallhave the meaning specified in Section 14.04(e).

“Form of Assignment and Transfer” shall mean the “Form of Assignment and Transfer” attached as Attachment 3 to the Form of Note attached hereto as Exhibit A.

“Form of Fundamental Change Repurchase Notice” shall mean the “Form of Fundamental Change Repurchase Notice” attached as Attachment 2 to the Form of Note attached hereto as Exhibit A.

“Form of Notice of Conversion” shall mean the “Form of Notice of Conversion” attached as Attachment 1 to the Form of Note attached hereto as Exhibit A.

“Fundamental Change” shall be deemed to have occurred at the time after the Notes are originally issued if any of the following occurs:

(a) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its Wholly-Owned Subsidiaries and the employee benefit plans of the Company and its Wholly-Owned Subsidiaries 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 the Company’s Common Equity representing more than 50% of the voting power of the Company’s Common Equity;

(b) the consummation of (A) any recapitalization, reclassification or change of the Common Stock (other than changes resulting from a subdivision or combination) as a result of which the Common Stock would be converted into, or exchanged for, stock, other securities, or other property or assets; (B) any share exchange, consolidation or merger of the Company pursuant to which the Common Stock will be converted into 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 the Company and its Subsidiaries , taken as a whole, to any Person other than one of the Company’s Wholly-Owned Subsidiaries; provided, however, that a transaction described in clause (A) or (B) in which the holders of all classes of the Company’s Common Equity immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of the 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 (b);

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(c) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or

(d) the Common Stock (or other common stock issuable upon conversion of 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);

provided, however, that a transaction or transactions described in clauses (a) or (b) above shall not constitute a Fundamental Change, if at least 90% of the consideration received or to be received by the holders of the Company’s Common Stock, excluding cash payments for fractional shares and cash payments made in respect of dissenters’ appraisals 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 such consideration becomes the Reference Property for the Notes (subject to the provisions set forth in Section 14.02).

Any event, transaction or series of related transactions that constitute a Fundamental Change under both clause (a) and clause (b) above (determined without regard to the proviso in clause (b)) shall be deemed to be a Fundamental Change solely under clause (b) above.

If any transaction in which the Common Stock is replaced, in whole or in part, 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 date that such transaction is effective), references to the Company in the definition of “Fundamental Change” above shall instead be references to such other entity.

“Fundamental Change Company Notice” shall have the meaning specified in Section 15.02(c).

“Fundamental Change Repurchase Date” shall have the meaning specified in Section 15.02(a).

“Fundamental Change Repurchase Notice” shall have the meaning specified in Section 15.02(b)(i).

“Fundamental Change Repurchase Price” shall have the meaning specified in Section 15.02(a).

“Global Note” shall have the meaning specified in Section 2.05(b).

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“Holder,” as applied to any Note, or other similar terms (but excluding the term “beneficial holder”), shall mean any person in whose name at the time a particular Note is registered on the Note Register.

“Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented.

“Interest Payment Date” means April 1 and October 1 of each year, beginning on October 1, 2017.

“Issue Date” means April 4, 2017.

“Last Reported Sale Price” of the Common Stock (or any other security) on any date means:

(a) 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 such date as reported in composite transactions for the Relevant Stock Exchange;

(b) if the Common Stock (or any other security) is not listed for trading on a Relevant Stock Exchange on such date, the last quoted bid price per share for the Common Stock in the over-the-counter market on such date as reported by OTC Markets Group Inc. or a similar organization; and

(c) if the Common Stock (or any other security) is not so quoted, the average of the mid-point of the last bid and ask prices per share for the Common Stock on such date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose.

“Make-Whole Fundamental Change” means any transaction or event that constitutes a Fundamental Change, after giving effect to any exceptions to or exclusions from the definition thereof, but without regard to the proviso in clause (b) of the definition thereof.

“Make-Whole Fundamental Change Company Notice” shall have the meaning specified in Section 14.03(b).

“Make-Whole Fundamental Change Period” shall have the meaning specified in Section 14.03.

“Market Disruption Event” means:

(a) a failure by the Relevant Stock Exchange to open for trading during its regular trading session; or

(b) the occurrence or existence prior to 1:00 p.m., New York City time, on any Scheduled Trading Day for the Common Stock for more than one half-hour period in

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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 the Common Stock or in any option contracts or futures contracts relating to the Common Stock.

“Maturity Date” means April 1, 2022.

“Measurement Period” shall have the meaning specified in Section 14.01(b)(i).

“Note” or “Notes” shall have the meaning specified in the first paragraph of the recitals of this Indenture.

“Note Register” shall have the meaning specified in Section 2.05(a).

“Note Registrar” shall have the meaning specified in Section 2.05(a).

“Notice of Conversion” shall have the meaning specified in Section 14.02(b)(ii).

“Observation Period” with respect to any Note surrendered for conversion means:

(a) subject to clause (b), if the relevant Conversion Date occurs prior to January 1, 2022, the 30 consecutive VWAP Trading Day period beginning on, and including, the third VWAP Trading Day immediately succeeding such Conversion Date;

(b) if the relevant Conversion Date occurs on or after the date of the Company’s issuance of a Redemption Notice with respect to the Notes pursuant to Section 16.02 and prior to the close of business on the second Scheduled Trading Day immediately preceding the relevant Redemption Date, the 30 consecutive VWAP Trading Days beginning on, and including, the 32nd Scheduled Trading Day immediately preceding such Redemption Date; and

(c) subject to clause (b), if the relevant Conversion Date occurs on or after January 1, 2022, the 30 consecutive VWAP Trading Day period beginning on, and including, the 32nd Scheduled Trading Day immediately preceding the Maturity Date.

“Offering Memorandum” means the offering memorandum dated March 29, 2017, relating to the offering and sale of the Notes.

“Officer” means, with respect to any Person, the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary, any Senior Vice President or any Vice President of such Person.

“Officer’s Certificate” means a certificate signed on behalf of the Company by one Officer of the Company that meets the requirements of Section 17.06.

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“open of business” means 9:00 a.m. (New York City time).

“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 17.06. The counsel may be an employee of or counsel to the Company or any Subsidiary of the Company.

“Optional Redemption” shall have the meaning specified in Section 16.01.

“outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 8.04, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except:

(a) Notes theretofore canceled by the Trustee or accepted by the Trustee for cancellation;

(b) Notes, or portions thereof, that have become due and payable and in respect of which monies in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent);

(c) Notes in lieu of which, or in substitution for which, other Notes shall have been authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Trustee is presented that any such Notes are held by protected purchasers in due course;

(d) Notes surrendered for purchase in accordance with Article 15 for which the Paying Agent holds money sufficient to pay the Fundamental Change Repurchase Price, in accordance with Section 15.04(b);

(e) Notes converted pursuant to Article 14 and required to be cancelled pursuant to Section 2.08;

(f) Notes redeemed pursuant to Article 16; and

(g) Notes repurchased by the Company.

“Paying Agent” shall have the meaning specified in Section 4.02.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Physical Settlement” shall have the meaning provided in Section 14.02(a).

“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.06 in lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note that it replaces.

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“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of Common Stock entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).

“Redemption Date” shall have the meaning specified in Section 16.02(a).

“Redemption Notice” shall have the meaning specified in Section 16.02(a).

“Redemption Price” means, for any Notes to be redeemed pursuant to Section 16.01, 100% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to, but excluding, the Redemption Date (unless the Redemption Date falls after a Regular Record Date but on or prior to the immediately succeeding Interest Payment Date, in which case the Company shall pay the full amount of accrued and unpaid interest to the Holders of record as of the close of business on such Regular Record Date, and the Redemption Price will be equal to 100% of the principal amount of such Notes).

“Reference Property” shall have the meaning specified in Section 14.07(a).

“Regular Record Date,” with respect to any Interest Payment Date, shall mean the March 15 or September 15 (whether or not such day is a Business Day), as the case may be, immediately preceding such Interest Payment Date.

“Relevant Stock Exchange” means The NASDAQ Global Market or, if the Common Stock is not then listed on The NASDAQ Global Market, the principal other U.S. national or regional securities exchange or market on which the Common Stock (or any other security) is then listed.

“Resale Restriction Termination Date” shall have the meaning specified in Section 2.05(c).

“Responsible Officer” means, with respect to the Trustee, any officer assigned to the Corporate Trust Division - Corporate Finance Unit (or any successor division or unit) of the Trustee located at the Corporate Trust Office of the Trustee having direct responsibility for the administration of this Indenture or to whom any corporate trust matter relating to this Indenture is referred because of such person’s knowledge of and familiarity with the particular subject.

“Restricted Securities” shall have the meaning specified in Section 2.05(c).

“Rule 144” means Rule 144 as promulgated under the Securities Act.

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“Rule 144A” means Rule 144A as promulgated under the Securities Act.

“Scheduled Trading Day” means a day that is scheduled to be a Trading Day on the Relevant Stock Exchange. If the Common Stock is not so listed or admitted for trading on a Relevant Stock Exchange, “Scheduled Trading Day” means a “Business Day.”

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Settlement Amount” has the meaning specified in Section 14.02(a)(iii).

“Settlement Method” means, with respect to any conversion of Notes, Physical Settlement, Cash Settlement or Combination Settlement, as elected (or deemed to have been elected) by the Company.

“Significant Subsidiary” means a Subsidiary of the Company that is a “significant subsidiary” as defined under Rule 1-02(w) of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date.

“Specified Corporate Event” shall have the meaning specified in Section 14.07(a).

“Specified Dollar Amount” means, with respect to any conversion of Notes, the maximum cash amount per $1,000 principal amount of Notes to be received upon conversion as specified by the Company (or deemed specified) in the notice specifying the Company’s chosen Settlement Method.

“Spin-Off” shall have the meaning specified in Section 14.04(c).

“Stock Price” shall have the meaning specified in Section 14.03(c).

“Subsidiary” means, with respect to any specified Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person.

“Successor Company” shall have the meaning specified in Section 11.01(a)(i).

“Trading Day” means a day on which:

(a) trading in the Common Stock (or any other security) generally occurs on the Relevant Stock Exchange, or, if the Common Stock is not then listed on a Relevant Stock Exchange, on the principal other market on which the Common Stock is then listed or admitted for trading; and

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(b) a Last Reported Sale Price for the Common Stock (or any other security) is available on the Relevant Stock Exchange or such other market;

provided, that, if the Common Stock (or any other security) is not so listed or traded as described in clause (a), “Trading Day” means a “Business Day.”

“Trading Price” per $1,000 principal amount 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 the Company selects 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 such 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 shall be deemed to be less than 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate on such day.

“transfer” shall have the meaning specified in Section 2.05(c).

“Trigger Event” shall have the meaning specified in Section 14.04(c).

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this Indenture.

“Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder.

“Unit of Reference Property” shall have the meaning specified in Section 14.07(a).

“Valuation Period” shall have the meaning specified in Section 14.04(c).

“VWAP Trading Day” means a day on which:

(a) there is no Market Disruption Event; and

(b) trading in the Common Stock generally occurs on the Relevant Stock Exchange.

If the Common Stock is not so listed or admitted for trading on any Relevant Stock Exchange, “VWAP Trading Day” means a “Business Day.”

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“Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

Section 1.02. References to Interest. Unless the context otherwise requires, any reference to interest on, or in respect of, any Note in this Indenture shall be deemed to include Additional Interest if, in such context, Additional Interest is, was or would be payable pursuant to any of Section 4.06(d), Section 4.06(e) and Section 6.03. Unless the context otherwise requires, any express mention of Additional Interest in any provision hereof shall not be construed as excluding Additional Interest in those provisions hereof where such express mention is not made.

ARTICLE 2

ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

Section 2.01. Designation and Amount. The Notes shall be designated as the “2.50% Convertible Senior Notes due 2022.” The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is initially limited to $143,750,000, subject to Section 2.10 and except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes pursuant to Section 2.05, Section 2.06, Section 2.07, Section 10.04, Section 14.02 and Section 15.04.

Section 2.02. Form of Notes. The Notes and the Trustee’s certificate of authentication to be borne by such Notes shall be substantially in the respective forms set forth in Exhibit A, the terms and provisions of which shall constitute, and are hereby expressly incorporated in and made a part of this Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian or the Depositary, or as may be required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Notes are subject.

Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements as any Officer executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes are subject.

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Each Global Note shall represent such principal amount of the outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect purchases, cancellations, conversions, transfers or exchanges permitted hereby. Any endorsement of the Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the Holder of such Notes in accordance with this Indenture. Payment of principal (including the Fundamental Change Repurchase Price and the Redemption Price, if applicable) of, and accrued and unpaid interest on, the Global Note shall be made to the Holder of such Note on the date of payment, unless a record date or other means of determining Holders eligible to receive payment is provided for herein.

Section 2.03. Date and Denomination of Notes; Payments of Interest and Defaulted Amounts.

(a) The Notes shall be issuable in registered form without coupons in denominations of $1,000 principal amount and integral multiples thereof. Each Note shall be dated the date of its authentication and shall bear interest from the date specified on the face of the form of Note attached as Exhibit A hereto. Accrued interest on the Notes shall be computed on the basis of a 360-day year composed of twelve 30-day months and, for a partial month, on the basis of the number of days actually elapsed in a 30-day month.

(b) The Person in whose name any Note (or its Predecessor Note) is registered on the Note Register at the close of business on the Regular Record Date immediately preceding the relevant Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date. Interest shall be payable at the office or agency of the Company maintained by the Company for such purposes, which shall initially be the Corporate Trust Office. The Company shall pay interest:

(i) on any Certificated Notes (A) to Holders holding Certificated Notes having an aggregate principal amount of $1,000,000 or less, by check mailed to the Holders of these Notes at their address as it appears in the Note Register and (B) to Holders holding Certificated Notes having an aggregate principal amount of more than $1,000,000, either by check mailed to such Holders or, upon application by such a Holder to the Note Registrar not later than the relevant Regular Record Date, by wire transfer in immediately available funds to that Holder’s account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Note Registrar to the contrary; and

(ii) on any Global Note by wire transfer of immediately available funds to the account of the Depositary or its nominee.

(c) Any Defaulted Amounts shall forthwith cease to be payable to the Holder on the relevant payment date but shall accrue interest per annum at the rate borne by the Notes from, and including, such relevant payment date, and such Defaulted Amounts together with such

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interest thereon shall be paid by the Company, at its election in each case, as provided in clause (i) or (ii) below:

(i) The Company may elect to make payment of any Defaulted Amounts to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a special record date for the payment of such Defaulted Amounts, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of the Defaulted Amounts proposed to be paid on each Note and the date of the proposed payment (which shall be not less than 25 days after the receipt by the Trustee of such notice, unless the Trustee shall consent to an earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount to be paid in respect of such Defaulted Amounts or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Amounts as in this clause provided. Thereupon the Company shall fix a special record date for the payment of such Defaulted Amounts which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment, and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Company shall promptly notify the Trustee in writing of such special record date and the Trustee, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Amounts and the special record date therefor to be sent to each Holder at its address as it appears in the Note Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Amounts and the special record date therefor having been sent, such Defaulted Amounts shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such special record date and shall no longer be payable pursuant to the following clause (ii) of this Section 2.03(c).

(ii) The Company may make payment of any Defaulted Amounts in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, and upon such notice as may be required by such exchange or automated quotation system and the Depositary, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed satisfactory to the Trustee.

Section 2.04. Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the Company by the manual or facsimile signature of at least one of its Officers.

At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes, without any further action by the Company hereunder.

Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note attached as Exhibit A hereto, executed manually by an authorized signatory of the Trustee (or an authenticating agent appointed by the Trustee as provided by Section 17.11), shall be entitled to the benefits of this Indenture or be valid or

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obligatory for any purpose. Such certificate by the Trustee (or such an authenticating agent) upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture.

In case any Officer of the Company who shall have signed any of the Notes shall cease to be such Officer before the Notes so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Notes nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Notes had not ceased to be such Officer of the Company; and any Note may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Note, shall be an Officer of the Company, although at the date of the execution of this Indenture any such Person was not such an Officer.

Section 2.05. Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary.

(a) The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office or in any other office or agency of the Company designated pursuant to Section 4.02, the “Note Register”) in which, subject to such reasonable regulations or procedures as it may prescribe, the Company shall provide for the registration of Notes and transfers of Notes. Such register shall be in written form or in any form capable of being converted into written form within a reasonable period of time. The Trustee is hereby initially appointed the “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint one or more co-Note Registrars in accordance with Section 4.02.

Upon surrender for registration of transfer of any Note to the Note Registrar or any co-registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.05, the Company shall execute, and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture.

Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute, and upon receipt of a Company Order, the Trustee shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive, bearing registration numbers not contemporaneously outstanding.

All Notes presented or surrendered for registration of transfer or for exchange, repurchase or conversion shall (if so required by the Company, the Trustee, the Note Registrar or any co-Note Registrar) be duly endorsed, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and duly executed, by the Holder thereof or its attorney-in-fact duly authorized in writing.

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No service charge shall be imposed by the Company, the Trustee, the Note Registrar or any co-Note Registrar for any registration of transfer or exchange of Notes, but the Company or the Trustee may require a Holder to pay a sum sufficient to cover any transfer tax or other similar governmental charge required by law or permitted pursuant to Section 14.02(d) or Section 14.02(e).

None of the Company, the Trustee, the Note Registrar or any co-Note Registrar shall be required to exchange or register a transfer of (i) any Notes surrendered for conversion or, if a portion of any Note is surrendered for conversion, such portion thereof surrendered for conversion or (ii) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn) in accordance with Article 15.

All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange.

(b) So long as the Notes are eligible for book-entry settlement with the Depositary, unless otherwise required by law, subject to the fourth paragraph from the end of Section 2.05(c) all Notes shall be represented by one or more Notes in global form (each, a “Global Note”) registered in the name of the Depositary or the nominee of the Depositary. The transfer and exchange of beneficial interests in a Global Note that does not involve the issuance of a Certificated Note, shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with this Indenture (including the restrictions on transfer set forth herein) and the Applicable Procedures.

(c) Every Note that bears or is required under this Section 2.05(c) to bear the legend set forth in this Section 2.05(c) (together with any Common Stock issued upon conversion of the Notes and required to bear the legend set forth in Section 2.05(d), collectively, the “Restricted Securities”) shall be subject to the restrictions on transfer set forth in this Section 2.05(c) (including the legend set forth below), unless such restrictions on transfer shall be eliminated or otherwise waived by written consent of the Company, and the Holder of each such Restricted Security, by such Holder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in this Section 2.05(c) and Section 2.05(d), the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security.

Until the date (the “Resale Restriction Termination Date”) that is the later of (1) the date that is one year after the Issue Date, or such shorter period of time as permitted by Rule 144 under the Securities Act or any successor provision thereto, and (2) such later date, if any, as may be required by applicable law, any certificate evidencing such Note (and all securities issued in exchange therefor or substitution thereof, other than Common Stock, if any, issued upon conversion thereof which shall bear the legend set forth in Section 2.05(d), if applicable) shall bear a legend in substantially the following form (unless such Notes have been transferred pursuant to a registration statement that has become or been declared effective under the

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Securities Act and that continues to be effective at the time of such transfer or unless otherwise agreed by the Company in writing, with written notice thereof to the Trustee):

THIS SECURITY AND THE COMMON STOCK, IF ANY, ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND

(2) AGREES FOR THE BENEFIT OF CARBONITE, INC. (THE “COMPANY”) THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE ISSUE DATE HEREOF OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW EXCEPT:

(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF;

(B) PURSUANT TO, AND IN ACCORDANCE WITH, A REGISTRATION STATEMENT THAT IS EFFECTIVE UNDER THE SECURITIES ACT AT THE TIME OF SUCH TRANSFER;

(C) TO A PERSON THAT YOU REASONABLY BELIEVE TO BE A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT; OR

(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH CLAUSE (2)(D) ABOVE, THE COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

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No transfer of any Note prior to the Resale Restriction Termination Date will be registered by the Note Registrar unless the applicable box on the Form of Assignment and Transfer has been checked.

Any Note (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms may, upon surrender of such Note for exchange to the Note Registrar in accordance with the provisions of this Section 2.05, be exchanged for a new Note or Notes, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.05(c) and shall not be assigned (or deemed assigned) a restricted CUSIP number. The restrictive legend set forth above and affixed on any Note will be deemed, in accordance with the terms of the certificate representing such Note, to be removed therefrom upon the Company’s delivery to the Trustee of written notice to such effect, without further action by the Company, the Trustee, the Holder(s) thereof or any other Person; at such time, such Note will be deemed to be assigned an unrestricted CUSIP number as provided in the certificate representing such Note, it being understood that the Depositary of any Global Note may require a mandatory exchange or other process to cause such Global Note to be identified by an unrestricted CUSIP number in the facilities of such Depositary. Without limiting the generality of any other provision of this Indenture, the Trustee will be entitled to receive an instruction letter from the Company before taking any action with respect to effecting any such mandatory exchange or other process. The Company and the Trustee reserve the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that any proposed transfer of any Note is being made in compliance with the Securities Act and applicable state securities laws.

The Company shall be entitled to instruct the Custodian in writing to so surrender any Global Note as to which such restrictions on transfer shall have expired in accordance with their terms for exchange, and, upon such instruction, the Custodian shall so surrender such Global Note for exchange; and any new Global Note so exchanged therefor shall not bear the restrictive legend specified in this Section 2.05(c) and shall not be assigned (or deemed assigned) a restricted CUSIP number. The Company shall promptly notify the Trustee upon the occurrence of the Resale Restriction Termination Date and promptly after a registration statement, if any, with respect to the Notes or any Common Stock issued upon conversion of the Notes has been declared effective under the Securities Act.

Notwithstanding any other provisions of this Indenture (other than the provisions set forth in this Section 2.05(c)), a Global Note may not be transferred as a whole or in part except (i) by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary and (ii) for transfers of portions of a Global Note in certificated form made upon request of a member of, or a participant in, the Depositary (for itself or on behalf of a beneficial owner) by written notice given to the Trustee by or on behalf of the Depositary in accordance with Applicable Procedures and in compliance with this Section 2.05(c).

The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as the “Depositary” with respect to each Global Note. Initially, each Global Note shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as custodian for Cede & Co.

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If:

(x) the Depositary (i) notifies the Company at any time that the Depositary is unwilling or unable to continue as depositary for the Global Notes and a successor depositary is not appointed within 90 days or (ii) ceases to be a clearing agency registered under the Exchange Act and in either event the Company fails to appoint a successor depositary within 90 days; or

(y) there has occurred and is continuing an Event of Default and the Depositary notifies the Trustee of its decision to exchange the Global Note for Certificated Notes,

the Company shall execute, and the Trustee, upon receipt of an Officer’s Certificate, an Opinion of Counsel and a Company Order for the authentication and delivery of Notes, shall authenticate and deliver Certificated Notes to each beneficial owner of the related Global Notes (or a portion thereof) in an aggregate principal amount equal to the aggregate principal amount of such Global Notes in exchange for such Global Notes, and upon delivery of the Global Notes to the Trustee such Global Notes shall be canceled.

Certificated Notes issued in exchange for all or a part of the Global Note pursuant to this Section 2.05(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such Certificated Notes to the Persons in whose names such Certificated Notes are so registered.

At such time as all interests in a Global Note have been converted, canceled, redeemed, purchased or transferred, such Global Note shall be, upon receipt thereof, canceled by the Trustee in accordance with Applicable Procedures and existing instructions between the Depositary and the Custodian. At any time prior to such cancellation, if any interest in a Global Note is exchanged for Certificated Notes, converted, canceled, redeemed, purchased or transferred to a transferee who receives Certificated Notes therefor or any Certificated Note is exchanged or transferred for part of such Global Note, the principal amount of such Global Note shall, in accordance with the Applicable Procedures and instructions existing between the Depositary and the Custodian, be appropriately reduced or increased, as the case may be, and an endorsement shall be made on such Global Note, by the Trustee or the Custodian, at the direction of the Trustee, to reflect such reduction or increase.

Neither the Company, the Trustee nor any agent of the Company or the Trustee shall have any responsibility or liability to any beneficial owner of a Global Note, member of, or participant in, the Depositary or other Person for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Neither the Company nor the Trustee shall have any responsibility or liability for any act or omission of the Depositary. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Notes shall be given or made only to, or upon the order of, the registered Holders (which shall be the Depositary or its nominee in the case of a Global Note).

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The rights of beneficial owners in any Global Note shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.

(d) Until the Resale Restriction Termination Date, any stock certificate representing Common Stock issued upon conversion of a Note shall bear a legend in substantially the following form (unless the Note or such Common Stock has been transferred pursuant to a registration statement that has become or been declared effective under the Securities Act and that continues to be effective at the time of such transfer or unless otherwise agreed by the Company in writing, with notice thereof to the Trustee and any transfer agent for the Common Stock):

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND

(2) AGREES FOR THE BENEFIT OF CARBONITE, INC. (THE “COMPANY”) THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE LAST ORIGINAL ISSUE DATE OF THE NOTE UPON THE CONVERSION OF WHICH THIS SECURITY WAS DELIVERED OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW EXCEPT:

(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF;

(B) PURSUANT TO, AND IN ACCORDANCE WITH, A REGISTRATION STATEMENT THAT IS EFFECTIVE UNDER THE SECURITIES ACT AT THE TIME OF SUCH TRANSFER;

(C) TO A PERSON THAT YOU REASONABLY BELIEVE TO BE A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT; OR

(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

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PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH CLAUSE (2)(D) ABOVE, THE COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

(e) Any such Common Stock as to which such restrictions on transfer shall have expired in accordance with their terms may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new certificate or certificates for a like aggregate number of shares of Common Stock, which shall not bear the restrictive legend required by Section 2.05(d).

(f) Any Note that is repurchased or owned by an Affiliate of the Company (or any Person who was an Affiliate of the Company at any time during the three months preceding) may not be resold by such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction that results in such Note no longer being a “restricted security” (as defined under Rule 144 under the Securities Act). The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among members of, or participants in, the Depositary or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(g) Neither the Trustee nor any agent of the Trustee shall have any responsibility for any actions taken or not taken by the Depositary.

Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or stolen, the Company in its discretion may execute, and upon its written request the Trustee or an authenticating agent appointed by the Trustee shall authenticate and deliver, a new Note, bearing a registration number not contemporaneously outstanding, in exchange and substitution for the mutilated Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall furnish to the Company, to the Trustee and, if applicable, to such authenticating agent such security or indemnity as may be required by them to save each of them harmless from any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company, to the Trustee and, if applicable, to such authenticating agent evidence to their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof.

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The Trustee or such authenticating agent may authenticate any such substituted Note and deliver the same upon the receipt of such security and/or indemnity as the Trustee, the Company and, if applicable, such authenticating agent may require. Upon the issuance of any substitute Note, the Company or the Trustee may require the payment by the Holder of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Note that has matured or is about to mature or has been surrendered for required repurchase or is about to be converted in accordance with Article 14 or redeemed in accordance with Article 16 shall become mutilated or be destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note, pay or authorize the payment of or convert or authorize the conversion of the same (without surrender thereof except in the case of a mutilated Note), as the case may be, if the applicant for such payment or conversion shall furnish to the Company, to the Trustee and, if applicable, to such authenticating agent such security and/or indemnity as may be required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or theft, evidence satisfactory to the Company, the Trustee and, if applicable, any Paying Agent or Conversion Agent evidence of their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof.

Every substitute Note issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any Note is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment or conversion or repurchase of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment or conversion of negotiable instruments or other securities without their surrender.

Section 2.07. Temporary Notes. Pending the preparation of Certificated Notes, the Company may execute and the Trustee or an authenticating agent appointed by the Trustee shall, upon written request of the Company, authenticate and deliver temporary Notes (printed or lithographed). Temporary Notes shall be issuable in any authorized denomination, and substantially in the form of the Certificated Notes but with such omissions, insertions and variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be executed by the Company and authenticated by the Trustee or such authenticating agent upon the same conditions and in substantially the same manner, and with the same effect, as the Certificated Notes. Without unreasonable delay, the Company shall execute and deliver to the Trustee or such authenticating agent Certificated Notes (other than any Global Note) and thereupon any or all temporary Notes (other than any Global Note) may be surrendered in exchange therefor, at each office or agency maintained by the Company pursuant

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to Section 4.02 and the Trustee or such authenticating agent shall authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of Certificated Notes. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as Certificated Notes authenticated and delivered hereunder.

Section 2.08. Cancellation of Notes Paid, Converted, Etc. The Company shall cause all Notes surrendered for the purpose of payment, repurchase (but excluding Notes repurchased pursuant to cash-settled swaps or other derivatives), redemption, registration of transfer or conversion, if surrendered to any Person other than the Trustee (including any of the Company’s agents or Subsidiaries), to be surrendered to the Trustee for cancellation, and such Notes shall no longer be considered outstanding for purposes of this Indenture upon their payment, repurchase, redemption, registration of transfer or conversion. All Notes delivered to the Trustee shall be canceled promptly by it. No Notes shall be authenticated in exchange for any Notes cancelled, except as expressly permitted by any of the provisions of this Indenture. The Trustee shall dispose of canceled Notes in accordance with its customary procedures and, after such disposition, shall deliver a certificate of such disposition to the Company, at the Company’s written request in a Company Order. If the Company or any of its Subsidiaries shall acquire any of the Notes, such acquisition shall not operate as a purchase or satisfaction of the indebtedness represented by such Notes unless and until the same are delivered to the Trustee for cancellation.

Section 2.09. CUSIP Numbers. The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in all notices issued to Holders as a convenience to such Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or on such notice and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

Section 2.10. Additional Notes; Purchases. (a) The Company may, from time to time, without the consent of, or notice to, the Holders, issue additional Notes under this Indenture with the same terms and with the same CUSIP number as the Notes issued on the Issue Date (other than differences in the issue date, the issue price and interest accrued prior to the issue date of such additional Notes) in an unlimited aggregate principal amount; provided that if any such additional Notes are not fungible with the Notes issued on the Issue Date for U.S. federal income tax or securities law purposes, such additional Notes shall have a separate CUSIP number. Such Notes issued on the Issue Date and the additional Notes shall rank equally and ratably and shall be treated as a single series for all purposes under this Indenture. Prior to the issuance of any such additional Notes, the Company shall deliver to the Trustee a Company Order, an Officer’s Certificate and an Opinion of Counsel, such Officer’s Certificate and Opinion of Counsel to cover such matters, in addition to those required by Section 17.06, as the Trustee shall reasonably request.

(b) The Company may, to the extent permitted by law and without the consent of Holders, directly or indirectly (regardless of whether such Notes are surrendered to the Company), repurchase Notes in the open market or otherwise, whether by the Company or its

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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. The Company shall cause any Notes so repurchased (but excluding Notes repurchased pursuant to cash-settled swaps or other derivatives) to be surrendered to the Trustee for cancellation in accordance with Section 2.08, and they will no longer be considered outstanding under this Indenture upon this repurchase.

Section 2.11. Ranking. The Notes constitute a senior general unsecured obligation of the Company, ranking equally in right of payment with all existing and future unsubordinated indebtedness of the Company and ranking senior in right of payment to all existing and future indebtedness of the Company that is expressly made subordinate to the Notes by the terms of such indebtedness.

ARTICLE 3

SATISFACTION AND DISCHARGE

Section 3.01. Satisfaction and Discharge. This Indenture and the Notes shall upon request of the Company contained in an Officer’s Certificate cease to be of further effect (except as set forth in the last paragraph of this Section 3.01), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture and the Notes, when:

(i) either:

(A) all Notes theretofore authenticated and delivered (other than (x) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.06 and (y) Notes for whose payment money has theretofore been deposited in trust with the Trustee or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 4.04(d)) have been delivered to the Trustee for cancellation; or

(B) the Company has deposited with the Paying Agent or delivered to Holders, as applicable, after all of the outstanding Notes have (i) become due and payable, whether at the Maturity Date, any Redemption Date or any Fundamental Change Repurchase Date, and/or (ii) have been converted (and the related Settlement Amounts have been determined), cash or cash and/or shares of Common Stock (solely to satisfy the Company’s Conversion Obligations), as applicable, sufficient to pay all of the outstanding Notes and/or satisfy all conversions, as the case may be, and pay all other sums due and payable under this Indenture by the Company; and

(ii) the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

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Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 7.06 and, if cash or shares of Common Stock shall have been deposited with the Paying Agent pursuant to Section 3.01(i)(B), Section 4.04 shall survive such satisfaction and discharge.

ARTICLE 4

PARTICULAR COVENANTS OF THE COMPANY

Section 4.01. Payment of Principal and Interest. The Company shall pay or cause to be paid the principal (including the Fundamental Change Repurchase Price and Redemption Price, if applicable) of, the Settlement Amounts owed on conversion, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, Settlement Amounts and interest shall be considered paid on the date due if the Paying Agent, if other than the Company, holds as of 11:00 a.m., New York City time, on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, Settlement Amounts and interest then due; provided, however, that to the extent any such deposit is received by the Trustee (or applicable Paying Agent) after 11:00 a.m., New York City time on any such due date, such deposit will be deemed deposited on the next Business Day. Unless such Paying Agent is the Trustee, the Company will promptly notify the Trustee in writing of any failure to take such action.

The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal (including the Fundamental Change Repurchase Price and Redemption Price, if applicable) and overdue Settlement Amounts owed on conversion to the extent they include cash, at the rate equal to the interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period), at the same rate to the extent lawful.

Section 4.02. Maintenance of Office or Agency. The Company shall maintain an office or agency (which may be an office of the Trustee or an Affiliate of the Trustee) where Notes may be presented or surrendered for registration of transfer or exchange or for payment or repurchase (“Paying Agent”) or for conversion (“Conversion Agent”) and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The terms “Paying Agent” and “Conversion Agent” include any such additional or other offices or agencies, as applicable.

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The Company hereby appoints the Trustee as Paying Agent, Note Registrar, Custodian and Conversion Agent and designates the Corporate Trust Office of the Trustee as one such office or agency of the Company. In acting hereunder and in connection with the Notes, the Paying Agent, Note Registrar, Custodian and Conversion Agent shall act solely as an agent of the Company, and will not thereby assume any obligation towards or relationship of agency or trust for or with any Holder.

Section 4.03. Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.09, a Trustee, so that there shall at all times be a Trustee hereunder.

Section 4.04. Provisions as to Paying Agent. (a) If the Company shall appoint a Paying Agent other than the Trustee, the Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 4.04:

(i) that it will hold all sums held by it as such agent for the payment of the principal (including the Fundamental Change Repurchase Price and the Redemption Price, if applicable) of, the Settlement Amounts owed on conversion to the extent they include cash, and accrued and unpaid interest on, the Notes in trust for the benefit of the Holders of the Notes;

(ii) that it will give the Trustee prompt written notice of any failure by the Company to make any payment of the principal (including the Fundamental Change Repurchase Price and the Redemption Price, if applicable) of, the Settlement Amounts owed on conversion to the extent they include cash, and accrued and unpaid interest on, the Notes when the same shall be due and payable; and

(iii) that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith pay to the Trustee all sums so held in trust.

(b) If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal (including the Fundamental Change Repurchase Price and Redemption Price, if applicable) of, the Settlement Amounts owed on conversion to the extent they include cash, and accrued and unpaid interest on, the Notes, set aside, segregate and hold in trust for the benefit of the Holders of the Notes a sum sufficient to pay such principal (including the Fundamental Change Repurchase Price and the Redemption Price, if applicable) and accrued and unpaid interest so becoming due and will promptly notify the Trustee in writing of any failure to take such action and of any failure by the Company to make any payment of the principal (including the Fundamental Change Repurchase Price and the Redemption Price, if applicable) of, the Settlement Amounts owed on conversion to the extent they include cash, or accrued and unpaid interest on, the Notes when the same shall become due and payable.

(c) Anything in this Section 4.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay, cause to be paid or deliver to the Trustee all sums or amounts held in trust by the Company or any Paying Agent hereunder as required by this Section 4.04, such

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sums or amounts to be held by the Trustee upon the trusts herein contained and upon such payment or delivery by the Company or any Paying Agent to the Trustee, the Company or such Paying Agent shall be released from all further liability but only with respect to such sums or amounts.

(d) Subject to any applicable escheat laws, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal (including the Fundamental Change Repurchase Price and the Redemption Price, if applicable) of, the Settlement Amounts owed on conversion to the extent they include cash, and accrued and unpaid interest on, any Note and remaining unclaimed for two years after such principal (including the Fundamental Change Repurchase Price and Redemption Price, if applicable), the Settlement Amounts owed on conversion to the extent they include cash, or interest has become due and payable shall be paid to the Company on request of the Company contained in an Officer’s Certificate, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease.

Section 4.05. [Reserved].

Section 4.06. Rule 144A Information Requirement; Reporting; and Additional Interest. (a) For as long as any Notes are outstanding hereunder, at any time the Company is not subject to Sections 13 and 15(d) of the Exchange Act, the Company shall, so long as any of the Notes or any shares of Common Stock issued upon conversion of the Notes shall, at such time, constitute “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, promptly provide to the Trustee and shall, upon written request, provide to any Holder, beneficial owner or prospective purchaser of such Notes or any shares of Common Stock issued upon conversion of the Notes, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to facilitate the resale of such Notes or such Common Stock, as the case may be, pursuant to Rule 144A under the Securities Act.

(b) The Company shall file with the Trustee within 15 days after the same are required to be filed with the Commission (after giving effect to any grace period provided by Rule 12b-25 under the Exchange Act or any successor rule under the Exchange Act), copies of any documents or reports that the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding the foregoing, the Company shall in no event be required to file with, or otherwise provide or disclose to, the Trustee or any Holder any information for which the Company is requesting (assuming such request has not been denied), or has received, confidential treatment from the Commission. Any such document or report that the Company files with the Commission via the Commission’s EDGAR system (or any successor thereto) shall be deemed to be filed with the Trustee and the Holders for purposes of this Section 4.06(b) as of the time such documents are filed via the EDGAR system (or such successor).

(c) Delivery of the reports, information and documents described in Section 4.06(b) to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not

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constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to conclusively rely on an Officer’s Certificate). The Trustee shall not be obligated to monitor or confirm, on a continuing basis or otherwise, the Company’s compliance with the covenants or with respect to any reports or other documents filed with the Commission or the Commission’s EDGAR system or any website under this Indenture or participate in any conference calls.

(d) Subject to Section 4.06(f) and Section 6.03(b), if, at any time during the six-month period beginning on, and including, the date that is six months after the Issue Date, the Company fails to timely file any document or report that it is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (after giving effect to all applicable grace periods thereunder and other than reports on Form 8-K), or the Notes are not otherwise freely tradable pursuant to Rule 144 by Holders other than the Company’s Affiliates or Holders that were the Company’s Affiliates at any time during the three months immediately preceding (as a result of restrictions pursuant to U.S. securities laws or the terms of this Indenture or the Notes), the Company shall pay Additional Interest on the Notes. Such Additional Interest shall accrue on the Notes outstanding at a rate of 0.50% per annum of the principal amount of the Notes outstanding for each day during such period for which the Company’s failure to file has occurred and is continuing or the Notes are not otherwise freely tradable during such period by Holders other than the Company’s Affiliates (or Holders that have been the Company’s Affiliates at any time during the three immediately preceding months) without restrictions pursuant to Rule 144.

(e) Subject to Section 4.06(f) and Section 6.03(b), if, and for so long as, the restrictive legend on the Notes specified in Section 2.05(c) has not been removed (or deemed removed pursuant to this Indenture and the certificate representing the Note), the Notes are assigned a restricted CUSIP or the Notes are not otherwise freely tradable pursuant to Rule 144 by Holders other than the Company’s Affiliates or Holders that were the Company’s Affiliates at any time during the three months immediately preceding without restrictions pursuant to U.S. securities law or the terms of this Indenture or the Notes as of the 365th day after the Issue Date, the Company shall pay Additional Interest on the Notes at a rate equal to 0.50% per annum of the principal amount of Notes outstanding until the restrictive legend on the Notes has been removed (or deemed removed pursuant to this Indenture and the certificate representing such Note), the Notes are assigned an unrestricted CUSIP and the Notes are freely tradable by such Holders. The restrictive legend on the Notes shall be deemed removed pursuant to the terms of this Indenture as provided in Section 2.05(c), and, at such time, the Notes will, pursuant to, and subject to the provisions of, such Section, be deemed assigned an unrestricted CUSIP number. However, for the avoidance of doubt, Global Notes will continue to bear Additional Interest pursuant to this paragraph until such time as they are identified by an unrestricted CUSIP in the facilities of the Depositary therefor, as a result of completion of such Depositary’s mandatory exchange process or otherwise.

(f) Additional Interest will be payable in arrears on each Interest Payment Date following accrual in the same manner as regular interest on the Notes and shall be in addition to any Additional Interest that may accrue, at the Company’s election, as the sole remedy relating

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to the failure to comply with the Company’s obligations under Section 4.06(b). In no event, however, will Additional Interest accrue on any day (taking into consideration any Additional Interest payable as described in Section 4.06(d), Section 4.06(e) or Section 6.03(a)) at a rate in excess of 0.50% per annum, regardless of the number of events or circumstances giving rise to the requirement to pay such Additional Interest.

(g) If Additional Interest is payable by the Company pursuant to Section 4.06(d), Section 4.06(e) or Section 6.03(a), the Company shall deliver to the Trustee an Officer’s Certificate to that effect stating (i) the amount of such Additional Interest that is payable and (ii) the date on which such Additional Interest is payable. Unless and until a Responsible Officer of the Trustee receives at the Corporate Trust Office such a certificate, the Trustee may assume without inquiry that no such Additional Interest is payable.

Section 4.07. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.08. Compliance Certificate; Statements as to Defaults.

(a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year (beginning with the year ended December 31, 2017), an Officer’s Certificate stating whether the signers thereof have knowledge of any Default that occurred during the previous year. Delivery of such reports and documents to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein

(b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee an Officer’s Certificate within 30 days after an Officer of the Company becomes aware of any event that would constitute a Default or Event of Default, the status and what action the Company is taking or proposes to take with respect thereto.

ARTICLE 5.

[RESERVED]

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01. Events of Default. The following events shall be “Events of Default” with respect to the Notes:

(a) default in any payment of interest on any Note when due and payable, and the default continues for a period of 30 days;

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(b) default in the payment of principal of any Note when due and payable on the Maturity Date, on a Redemption Date, upon any required repurchase, upon declaration of acceleration or otherwise;

(c) failure by the Company to comply with its obligation to convert the Notes in accordance with this Indenture upon exercise of a Holder’s conversion right and such failure continues for a period of five Business Days;

(d) failure by the Company to issue a Fundamental Change Company Notice in accordance with Section 15.02(c) or notice of a specified corporate transaction in accordance with Section 14.01(b)(ii) or (iii) or a Make-Whole Fundamental Change Company Notice in accordance with Section 14.03(b), in each case when due, and such failure continues for five Business Days;

(e) failure by the Company to comply with its obligations under Article 11;

(f) failure by the Company 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 by the Company or the Trustee to comply with any of the other agreements of the Company contained in the Notes or this Indenture;

(g) default by the Company or any Significant Subsidiary of the Company 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 having a principal amount in excess of $10,000,000 (or its foreign currency equivalent) in the aggregate of the Company and/or any such Significant Subsidiary, whether such indebtedness exists on the Issue Date 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 indebtedness 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 the Company by the Trustee or to the Company and the Trustee by Holders of at least 25% in aggregate principal amount of Notes then outstanding;

(h) the Company or any Significant Subsidiary of the Company pursuant to or within the meaning of Bankruptcy Law:

(i) commences a voluntary case;

(ii) consents in writing to the entry of an order for relief against it in an involuntary case;

(iii) consents in writing to the appointment of a custodian of it or for all or substantially all of its property;

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(iv) makes a general assignment for the benefit of its creditors; or

(v) admits in writing in a public report or release or bondholder report it generally is not paying its debts as they become due; or

(i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Company or any Significant Subsidiary of the Company in an involuntary case;

(ii) appoints a custodian of the Company or any Significant Subsidiary of the Company or for all or substantially all of the property of the Company or any Significant Subsidiary of the Company; or

(iii) orders the liquidation of the Company or any Significant Subsidiary of the Company;

and the order or decree remains unstayed and in effect for 60 consecutive days; or

(j) a final judgment or judgments for the payment of $10,000,000 (or its foreign currency equivalent) or more (excluding any amounts covered by insurance) in the aggregate rendered against the Company or any Significant Subsidiary of the Company, which judgments are 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.

Section 6.02. Acceleration. In case one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), then, and in each and every such case (other than an Event of Default specified in Section 6.01(h) or Section 6.01(i) with respect to the Company), either the Trustee by notice in writing to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Company and the Trustee, may, and the Trustee at the request of such Holders shall, declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Notes to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable. If an Event of Default specified in Section 6.01(h) or Section 6.01(i) with respect to the Company occurs and is continuing, 100% of the principal of, and accrued and unpaid interest, if any, on, all Notes shall become and shall automatically be immediately due and payable.

Section 6.03. Additional Interest.

(a) Notwithstanding anything in this Indenture or in the Notes to the contrary, to the extent the Company elects, the sole remedy for an Event of Default relating to the Company’s failure to comply with its obligations as set forth in Section 4.06(b) shall, after the occurrence

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of such an Event of Default, consist exclusively of the right to receive Additional Interest on the Notes (subject to Section 4.06(f) and Section 6.03(b)) at a rate equal to:

(i) 0.25% per annum of the principal amount of the Notes outstanding for each day during the period beginning on, and including, the date on which such Event of Default first occurred and ending on the earlier of (x) the date on which such Event of Default is cured or validly waived and (y) the 90th day immediately following, and including, the date on which such Event of Default first occurred and

(ii) if such Event of Default has not been cured or validly waived prior to the 91st day immediately following, and including, the date on which such Event of Default first occurred, 0.50% per annum of the principal amount of the Notes outstanding for each day during the period beginning on, and including, the 91st day immediately following, and including, the date on which such Event of Default first occurred and ending on the earlier of (x) the date on which such Event of Default is cured or validly waived and (y) the 180th day immediately following, and including, the date on which such Event of Default first occurred.

(b) Any Additional Interest payable pursuant to Section 6.03(a) above shall be in addition to any Additional Interest that may accrue pursuant to Sections 4.06(d) and 4.06(e). Notwithstanding anything in this Indenture to the contrary, in no event, however, shall Additional Interest accrue on any day (taking into consideration any Additional Interest payable pursuant to Section 6.03(a) above, together with Additional Interest payable pursuant to Sections 4.06(d) and 4.06(e)) at a rate in excess of 0.50% per annum, regardless of the number of events or circumstances giving rise to the requirement to pay such Additional Interest.

(c) If the Company so elects, the Additional Interest payable pursuant to Section 6.03(a) above shall be payable in the same manner and on the same dates as the stated interest payable on the Notes and will accrue on all Notes then outstanding from, and including, the date on which the Event of Default relating to the Company’s failure to comply with its obligations as set forth in Section 4.06(b) first occurs to, but not including, the 181st day thereafter (or such earlier date on which such Event of Default is cured or validly waived by the Holders of a majority in principal amount of the Notes then outstanding). On the 181st day after such Event of Default (if the Event of Default relating to the Company’s failure to comply with its obligations as set forth in Section 4.06(b) is not cured or validly waived prior to such 181st day), such Additional Interest will cease to accrue and the Notes will be subject to acceleration as provided in Section 6.02. In the event the Company does not elect to pay Additional Interest following an Event of Default relating to the Company’s failure to comply with its obligations as set forth in Section 4.06(b) in accordance with this Section 6.03, or the Company elects to make such payment but does not pay the Additional Interest when due, the Notes shall immediately be subject to acceleration as provided in Section 6.02. For the avoidance of doubt, the provisions of this Section 6.03 shall not affect the rights of Holders in the event of the occurrence of any other Event of Default.

(d) In order to elect to pay Additional Interest as the sole remedy during the first 180 days after the occurrence of an Event of Default relating to the Company’s failure to comply with its obligations as set forth in Section 4.06(b), the Company must notify in writing all

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Holders of the Notes, the Trustee and the Paying Agent (if other than the Trustee) of such election on or before the close of business on the date on which such Event of Default first occurs. Upon the Company’s failure to timely give such notice, the Notes shall be immediately subject to acceleration as provided in Section 6.02. The Company may elect to pay Additional Interest with respect to multiple Events of Default in a single written notification.

Section 6.04. Payments of Notes on Default; Suit Therefor. If an Event of Default described in clause (a), (b) or (c) of Section 6.01 shall have occurred and the Notes have become due and payable pursuant to Section 6.02, the Company shall, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of the Notes, the whole amount then due and payable on the Notes for principal (including the Fundamental Change Repurchase Price and Redemption Price, if applicable), satisfaction of the Conversion Obligation with respect to all Notes that have been converted, and interest, if any, with (to the extent that payment of such interest shall be legally enforceable) interest on any such overdue amounts, at the rate borne by the Notes at such time, and, in addition thereto, such further amount as shall be sufficient to cover any amounts due to the Trustee under Section 7.06. If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Notes and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Notes, wherever situated.

In the event there shall be pending proceedings for the bankruptcy or for the reorganization of the Company under Bankruptcy Law, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company, the property of the Company, or in the event of any other judicial proceedings relative to the Company, or to the creditors or property of the Company, the Trustee, irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.04, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and accrued and unpaid interest, if any, in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents and to take such other actions as it may deem necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceedings relative to the Company, its creditors, or its property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amounts due to the Trustee under Section 7.06; and any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each of the Holders to make such payments to the Trustee, as administrative expenses, and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for reasonable compensation, expenses, advances and disbursements, including agents and counsel fees, and including any other amounts due to the Trustee under Section 7.06, incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses,

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advances and disbursements out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property that the Holders of the Notes may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting such Holder or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes.

In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Holders of the Notes parties to any such proceedings.

In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of any waiver, rescission or a annulment pursuant to Section 6.09 or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Holders, and the Trustee shall, subject to any determination in such proceeding, be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Holders, and the Trustee shall continue as though no such proceeding had been instituted.

Section 6.05. Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article 6 with respect to the Notes shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:

FIRST: to the payment of all amounts due the Trustee under Section 7.06;

SECOND: to the payment of the amounts then due and unpaid for principal of, the Fundamental Change Repurchase Price (if applicable) of, the Redemption Price (if applicable) of, and/or satisfaction of the Conversion Obligation with respect to all Notes that have been converted, and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes; and

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THIRD: to the Company.

Section 6.06. Proceedings by Holders. Except to enforce the right to receive payment of principal (including, if applicable, the Fundamental Change Repurchase Price and the Redemption Price) or interest when due, or the right to receive payment and/or delivery of the consideration due upon conversion, no Holder of any Note shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or the Notes, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, unless:

(a) such Holder has previously given the Trustee written notice that an Event of Default is continuing;

(b) the Holders of at least 25% in principal amount of the then outstanding Notes have requested the Trustee in writing to pursue the remedy;

(c) such Holders have offered the Trustee security and/or indemnity satisfactory to the Trustee against any loss, liability or expense;

(d) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of such security or indemnity; and

(e) the Holders of a majority in principal amount of the then 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.

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder, it being understood that the Trustee does not have an affirmative duty to ascertain whether or not any actions or forbearances by a Holder are unduly prejudicial to other Holders.

Notwithstanding any other provision of this Indenture and any provision of any Note, (i) the contractual right of any Holder to receive payment or delivery, as the case may be, of (x) principal (including the Fundamental Change Repurchase Price and Redemption Price, if applicable) of, (y) accrued and unpaid interest, if any, on, and (z) consideration due upon conversion of, such Note, on or after the respective due dates expressed or provided for in such Note or in this Indenture, and (ii) the contractual right of any Holder to institute suit for the enforcement of any such payment or delivery, as the case may be, on or after such respective dates, shall, in each case, not be amended without the consent of such Holder.

Section 6.07. Proceedings by Trustee. In case of an Event of Default, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

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Section 6.08. Remedies Cumulative and Continuing. Except as provided in the last paragraph of Section 2.06, all powers and remedies given by this Article 6 to the Trustee or to the Holders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder of any of the Notes to exercise any right or power accruing upon any Default or Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such Default or Event of Default or any acquiescence therein; and, subject to the provisions of Section 6.06, every power and remedy given by this Article 6 or by law to the Trustee or to the Holders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders.

Section 6.09. Direction of Proceedings and Waiver of Defaults by Majority of Holders.

(a) The Holders of a majority of the aggregate principal amount of the Notes at the time outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to Notes; provided, however, that (i) such direction shall not be in conflict with any rule of law or with this Indenture, and (ii) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. The Trustee may refuse to follow any direction that conflicts with any rule of law or with this Indenture, it determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. The Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security satisfactory to it against any loss, liability or expense that might be incurred by it in compliance with such request or direction.

(b) The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of all of the Notes waive any past Default or Event of Default hereunder and rescind any acceleration with respect to the Notes and its consequences hereunder except:

(i) a default in the payment of the principal (including any Fundamental Change Repurchase Price or Redemption Price, if applicable) of, or accrued and unpaid interest, if any, on the Notes; or

(ii) a failure by the Company to deliver the consideration due upon conversion of the Notes;

provided that, in the case of the rescission of any acceleration with respect to the Notes, (1) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) 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.

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Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 6.09, said Default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

Section 6.10. Notice of Defaults. If a Default occurs and is continuing and is known to a Responsible Officer of the Trustee, the Trustee shall send to all Holders as the names and addresses of such Holders appear upon the Note Register notice of such Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of (including the Fundamental Change Repurchase Price and Redemption Price, if applicable) or accrued and unpaid interest, if any, on any Note or a Default in the payment or delivery of the consideration due upon conversion, the Trustee shall be protected in withholding such notice if and so long as a committee of trust officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders.

Section 6.11. Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Note by its acceptance thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section 6.11 (to the extent permitted by law) shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Notes at the time outstanding, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (including, but not limited to, the Fundamental Change Repurchase Price with respect to the Notes being purchased as provided in this Indenture and Redemption Price, if applicable) or accrued and unpaid interest, if any, on any Note on or after the due date expressed or provided for in such Note or to any suit for the enforcement of the payment or delivery of consideration due upon conversion.

ARTICLE 7

CONCERNING THE TRUSTEE

Section 7.01. Duties and Responsibilities of Trustee.

(a) Prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have occurred:

(i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

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(ii) in the absence of bad faith or willful misconduct on the part of the Trustee, unless a Responsible Officer has actual knowledge to the contrary, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions that by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations).

(b) In the event an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) this subsection shall not be construed to limit the effect of subsection (a) of this Section;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a majority of the aggregate principal amount of the Notes at the time outstanding determined as provided in Section 8.04 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

(iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity and/or security against such risk or liability is not assured to it.

(d) Whether or not therein provided, every provision of this Indenture relating to the conduct or affecting the liability of, or affording protection to, the Trustee shall be subject to the provisions of this Section 7.01.

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Section 7.02. Certain Rights of the Trustee.

(a) The Trustee may conclusively rely and shall be fully protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, coupon or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties;

(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officer’s Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

(c) the Trustee may consult with counsel of its selection and require an Opinion of Counsel and any advice of such counsel or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

(d) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, at a reasonable time on any Business Day, to examine the books, records and premises of the Company, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such inquiry or investigation;

(e) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through duly authorized agents, custodians, nominees or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, custodian, nominee or attorney appointed by it with due care hereunder;

(f) the permissive rights of the Trustee enumerated herein shall not be construed as duties;

(g) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder;

(h) the Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of Officers authorized at such time to take specified actions pursuant to this Indenture;

(i) in no event shall the Trustee be liable for any special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

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(j) the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Notes, unless either (1) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (2) written notice of such Default or Event of Default shall have been given to a Responsible Officer of the Trustee by the Company or by any Holder of the Notes at the Corporate Trust Office of the Trustee and such notice references the Company, the Notes and this Indenture;

(k) the Trustee shall not be liable in respect of any payment (as to the correctness of amount, entitlement to receive or any other matters relating to payment) or notice effected by the Company or any Paying Agent (except in its capacity as Paying Agent pursuant to the terms of the Indenture) or any records maintained by any co-Note Registrar with respect to the Notes;

(l) if any party fails to deliver a notice relating to an event the fact of which, pursuant to this Indenture, requires notice to be sent to the Trustee, the Trustee may conclusively rely on its failure to receive such notice as reason to act as if no such event occurred, unless such Responsible Officer of the Trustee had actual knowledge of such event;

(m) in the absence of written investment direction from the Company, all cash received by the Trustee shall be placed in a non-interest bearing trust account, and in no event shall the Trustee be liable for the selection of investments or for investment losses, fees, taxes or other charges incurred thereon or for losses incurred as a result of the liquidation of any such investment prior to its maturity date or the failure of the party directing such investments prior to its maturity date or the failure of the party directing such investment to provide timely written investment direction, and the Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of such written investment direction from the Company;

(n) the rights, privileges, immunities, benefits and protections afforded to the Trustee pursuant to this Article 7 shall also be afforded to the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder;

(o) subject to this Article 7, if an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security and/or indemnity satisfactory to the Trustee against any loss, liability and expense which might be incurred by it in compliance with such request or direction; and

(p) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.

Section 7.03. No Responsibility for Recitals, Etc. The recitals contained herein and in the Notes (except in the Trustee’s certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes or the proceeds of any Notes authenticated and delivered by the Trustee in conformity with the provisions of this Indenture.

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Section 7.04. Trustee, Paying Agents, Conversion Agents, Bid Solicitation Agent or Note Registrar May Own Notes. The Trustee, any Paying Agent, any Conversion Agent, the Custodian, Bid Solicitation Agent or Note Registrar, in its individual or any other capacity, may become the owner or pledgee of Notes with the same rights it would have if it were not the Trustee, Paying Agent, Conversion Agent, Custodian, Bid Solicitation Agent or Note Registrar.

Section 7.05. Monies and Shares of Common Stock to Be Held in Trust. All monies and shares of Common Stock received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received. Money and shares of Common Stock held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law or as expressly provided herein. The Trustee shall be under no liability for interest on any money or shares of Common Stock received by it hereunder except as may be agreed from time to time by the Company and the Trustee.

Section 7.06. Compensation and Expenses of Trustee. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation for all services rendered by it hereunder in any capacity (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) as mutually agreed to in writing between the Trustee and the Company, and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any of the provisions of this Indenture in any capacity hereunder (including the reasonable compensation and the expenses and disbursements of its agents and counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as shall have been caused by its negligence or willful misconduct. The Company also covenants to provide indemnification reasonably satisfactory to the Trustee (which for purposes of this Section 7.06 shall include its officers, directors, employees and agents) in any capacity under this Indenture and any other document or transaction entered into in connection herewith and its agents and any authenticating agent for, and to hold them harmless against, any loss, claim, damage, liability or expense incurred without negligence or willful misconduct on the part of the Trustee, its officers, directors, agents or employees, or such agent or authenticating agent, as the case may be, and arising out of or in connection with the acceptance or administration of this Indenture or in any other capacity hereunder, including the costs and expenses of defending themselves against any claim (whether asserted by the Company, a Holder or any other Person) of liability in the premises (including, without limitation, any and all reasonable attorneys’ fees and expenses). The obligations of the Company under this Section 7.06 to compensate or indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall be secured by a senior claim to which the Notes are hereby made subordinate on all money or property held or collected by the Trustee, except, subject to the effect of Section 6.05, funds held in trust herewith for the benefit of the Holders of particular Notes. The Trustee’s right to receive payment of any amounts due under this Section 7.06 shall not be subordinate to any other liability or indebtedness of the Company and to secure the Company’s payment obligations of the Company in this Section 7.06, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as

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the Trustee, other than money or property held in trust to pay principal of and interest, if any, on particular Notes. The obligation of the Company under this Section 7.06 shall survive the satisfaction and discharge of this Indenture, final payment of the Notes and the earlier resignation or removal of the Trustee. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The indemnification provided in this Section 7.06 shall extend to the officers, directors, agents and employees of the Trustee and to any successor Trustee hereunder.

Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee and its agents and any authenticating agent incur expenses or render services after an Event of Default specified in Section 6.01(h) or Section 6.01(i) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws.

Section 7.07. Officer’s Certificate as Evidence.Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officer’s Certificate delivered to the Trustee, and such Officer’s Certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

Section 7.08. Eligibility of Trustee. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act (as if the Trust Indenture Act were applicable hereto) to act as such and has a combined capital and surplus of at least $50,000,000. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then for the purposes of this Section 7.08, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 7.

Section 7.09. Resignation or Removal of Trustee. The Trustee may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof to the Holders at their addresses as they shall appear on the Note Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the Holders, the resigning Trustee may, at the expense of the Company, upon ten Business Days’ notice to the Company and the Holders, petition any court of competent jurisdiction for the appointment of a successor trustee, or any Holder who has been a bona fide holder of a Note or Notes for at least six months may, subject to the provisions of Section 6.11, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.

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(a) In case at any time any of the following shall occur:

(i) the Trustee shall fail to comply with Section 7.13 within a reasonable time after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note or Notes for at least six (6) months;

(ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Holder, or

(iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, the Company may by a Board Resolution remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 6.11, any Holder who has been a bona fide holder of a Note or Notes for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.

(b) The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may at any time remove the Trustee and nominate a successor trustee that shall be deemed appointed as successor trustee unless within ten days after notice to the Company of such nomination the Company objects thereto. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after removal of the Trustee by the Holders, the Trustee may, at the expense of the Company, upon ten Business Days’ notice to the Company and the Holders, petition any court of competent jurisdiction for the appointment of a successor trustee.

(c) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 7.09 shall become effective upon (i) payment of all fees and expenses owing to the Trustee and (ii) acceptance of appointment by the successor trustee as provided in Section 7.10.

Section 7.10. Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 7.09 shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein;

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but, nevertheless, on the written request of the Company or of the successor trustee, the predecessor trustee shall, upon payment of any amounts then due it pursuant to the provisions of Section 7.06, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon request of any such successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a senior claim to which the Notes are hereby made subordinate on all money or property held or collected by such trustee as such pursuant to this Indenture, except for funds held in trust for the benefit of Holders of particular Notes, to secure any amounts then due it pursuant to the provisions of Section 7.06.

No successor trustee shall accept appointment as provided in this Section 7.10 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 7.08.

Upon acceptance of appointment by a successor trustee as provided in this Section 7.10, each of the Company and the successor trustee, at the written direction and at the expense of the Company shall send or cause to be sent notice of the succession of such trustee hereunder to the Holders at their addresses as they shall appear on the Note Register. If the Company fails to mail such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Company.

Section 7.11. Succession by Merger, Etc. Any corporation or other entity into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all of the corporate trust business of the Trustee (including the administration of this Indenture), shall be the successor to the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that in the case of any corporation or other entity succeeding to all or substantially all of the corporate trust business of the Trustee such corporation or other entity shall be eligible under the provisions of Section 7.08.

In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee or authenticating agent appointed by such predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee or an authenticating agent appointed by such successor trustee may authenticate such Notes either in the name of any predecessor trustee hereunder or in the name of the successor trustee; and in all such cases such certificates of authentication shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of authentication of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor trustee or to authenticate Notes in the name of any predecessor trustee shall apply only to its successor or successors by merger, conversion or consolidation.

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Section 7.12. Trustee’s Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company (other than with regard to any action proposed to be taken or omitted to be taken by the Trustee that affects the rights of the Holders of the Notes under this Indenture) may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any Officer actually receives such application, unless any such Officer shall have consented in writing to any earlier date), unless, prior to taking any such action (or the effective date in the case of any omission), the Trustee shall have received written instructions in accordance with this Indenture in response to such application specifying the action to be taken or omitted.

Section 7.13. Conflicting Interests of Trustee. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of this Indenture.

Section 7.14 Limitation on Trustee’s Liability. Except as provided in this Article, in accepting the trusts hereby created, the entities acting as Trustee are acting solely as Trustee hereunder and not in their individual capacity and, except as provided in this Article, all Persons having any claim against the Trustee by reason of the transactions contemplated by this Indenture or any Note shall look only to the Company for payment or satisfaction thereof

ARTICLE 8

CONCERNING THE HOLDERS

Section 8.01. Action by Holders. Whenever in this Indenture it is provided that the Holders of a specified percentage of the aggregate principal amount of the Notes may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the Holders of such specified percentage have joined therein may be evidenced (i) by any instrument or any number of instruments of similar tenor executed by Holders in person or by agent or proxy appointed in writing, or (ii) by the record of the Holders voting in favor thereof at any meeting of Holders duly called and held, or (iii) by a combination of such instrument or instruments and any such record of such a meeting of Holders. Whenever the Company or the Trustee solicits the taking of any action by the Holders of the Notes, the Company or the Trustee may, but shall not be required to, fix in advance of such solicitation, a date as the record date for determining Holders entitled to take such action. The record date if one is selected shall be not more than fifteen days prior to the date of commencement of solicitation of such action.

Section 8.02. Proof of Execution by Holders. Subject to the provisions of Section 7.01 and Section 7.02, proof of the execution of any instrument by a Holder or its agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall be proved by the Note Register or by a certificate of the Note Registrar.

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Section 8.03. Who Are Deemed Absolute Owners. The Company, the Trustee, any authenticating agent, any Paying Agent, any Conversion Agent and any Note Registrar may deem the Person in whose name a Note shall be registered upon the Note Register to be, and may treat it as, the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing thereon made by any Person other than the Company or any Note Registrar) for the purpose of receiving payment of or on account of the principal of and (subject to Section 2.03) accrued and unpaid interest on such Note, for conversion of such Note and for all other purposes; and neither the Company nor the Trustee nor any Paying Agent nor any Conversion Agent nor any Note Registrar shall be affected by any notice to the contrary. All such payments or deliveries so made to any Holder, or upon its order, shall be valid, and, to the extent of the sums or shares of Common Stock so paid or delivered, effectual to satisfy and discharge the liability for monies payable or shares deliverable upon any such Note. Notwithstanding anything to the contrary in this Indenture or the Notes following an Event of Default, any Holder of a beneficial interest in a Global Note may directly enforce against the Company, without the consent, solicitation, proxy, authorization or any other action of the Depositary or any other Person, such Holder’s right to exchange such beneficial interest for a Note in certificated form in accordance with the provisions of this Indenture.

Section 8.04. Company-Owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent, waiver or other action under this Indenture, Notes that are owned by the Company or by any Affiliate of the Company shall be disregarded (from both the numerator and the denominator) and deemed not to be outstanding for the purpose of any such determination; provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or other action only Notes that a Responsible Officer actually knows are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as outstanding for the purposes of this Section 8.04 if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to so act with respect to such Notes and that the pledgee is not the Company or any Affiliate of the Company. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officer’s Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above described Persons; and, subject to Section 7.01, the Trustee shall be entitled to accept such Officer’s Certificate as conclusive evidence of the facts therein set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any such determination.

Section 8.05. Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the percentage of the aggregate principal amount of the Notes specified in this Indenture in connection with such action, any Holder of a Note that is shown by the evidence to be included in the Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and upon proof of holding as

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provided in Section 8.02, revoke such action so far as concerns such Note. Except as aforesaid, any such action taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note and of any Notes issued in exchange or substitution therefor or upon registration of transfer thereof, irrespective of whether any notation in regard thereto is made upon such Note or any Note issued in exchange or substitution therefor or upon registration of transfer thereof.

ARTICLE 9

[RESERVED]

ARTICLE 10

SUPPLEMENTAL INDENTURES

Section 10.01. Supplemental Indentures Without Consent of Holders. Notwithstanding Section 10.02, without the consent of any Holder, the Company and the Trustee may amend or supplement this Indenture and the Notes to:

(a) cure any ambiguity, omission, defect or inconsistency in this Indenture or in the Notes;

(b) provide for the assumption by a Successor Company of the obligations of the Company under this Indenture or the Notes in accordance with Article 11;

(c) add guarantees with respect to the Notes;

(d) secure the Notes;

(e) add to the covenants or Events of Default for the benefit of the Holders or surrender any right or power conferred upon the Company;

(f) make any change that does not adversely affect the rights of any Holder;

(g) in connection with any Specified Corporate Event, provided that the Notes are convertible into Reference Property, subject to Section 14.02, and make certain related changes to the terms of this Indenture and the Notes to the extent expressly required by this Indenture;

(h) comply with any requirement of the Commission in connection with the qualification of this Indenture under the Trust Indenture Act;

(i) conform the provisions of this Indenture or the Notes to the “Description of notes” section of the Offering Memorandum;

(j) provide for the issuance of additional Notes in accordance with Section 2.10(a);

(k) provide for the appointment of a successor trustee, Security Registrar, Paying Agent, Bid Solicitation Agent or Conversion Agent;

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(l) comply with the rules of any applicable Depositary, including The Depository Trust Company, so long as such amendment does not adversely affect the rights of any Holder in any material respect; or

(m) irrevocably elect or eliminate one of the Settlement Methods and/or irrevocably elect a minimum Specified Dollar Amount.

Upon the written direction of the Company, the Trustee is hereby authorized to join with the Company in the execution of any such amendment, supplement or waiver, to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to, but may in its discretion, enter into any amendment, supplement or waiver that adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Any amendment, supplement or waiver to this Indenture authorized by the provisions of this Section 10.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time outstanding, notwithstanding any of the provisions of Section 10.02.

Section 10.02. Supplemental Indentures with Consent of Holders. Except as provided above in Section 10.01 and below in this Section 10.02, the Company and the Trustee may from time to time and at any time amend or supplement this Indenture and the Notes with the consent (evidenced as provided in Article 8) of the Holders of at least a majority of the aggregate principal amount of the Notes then outstanding (determined in accordance with Article 8 and including, without limitation, consents obtained in connection with a repurchase of, or tender or exchange offer for, Notes) and any existing Default or Event of Default (other than (i) a Default or Event of Default in the payment of the principal (including any Fundamental Change Repurchase Price and any Redemption Price, if applicable) of, or accrued and unpaid interest, if any, on the Notes, except a payment default resulting from an acceleration that has been rescinded, and (ii) a Default or Event of Default as a result of a failure by the Company to deliver the consideration due upon conversion of the Notes) or compliance with any provision of this Indenture or the Notes may be waived with the consent (evidenced as provided in Article 8) of the Holders of at least a majority of the aggregate principal amount of the Notes then outstanding (determined in accordance with Article 8 and including, without limitation, consents obtained in connection with a repurchase of, or tender or exchange offer for, Notes); provided, however, that, without the consent of each Holder of an outstanding Note affected, no such amendment shall:

(a) reduce the principal amount of Notes whose Holders must consent to an amendment;

(b) reduce the rate of or extend the stated time for payment of interest on any Note;

(c) reduce the principal of or extend the Maturity Date of any Note;

(d) make any change that adversely affects the conversion rights of any Note;

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(e) reduce the Redemption Price or the Fundamental Change Repurchase Price of any Note or amend or modify in any manner adverse to the Holders the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise;

(f) make any Note payable in a money, or at a place of payment, other than that stated in the Note;

(g) change the ranking of the Notes;

(h) amend the contractual rights expressly set forth in this Indenture or any Notes of any Holder to receive or to institute suit for the enforcement of, any payment of principal (including the Redemption Price and Fundamental Change Repurchase Price, if applicable) of, accrued and unpaid interest, if any, on, and the consideration due upon conversion of, its Notes, on or after the respective due dates expressed or provided for in this Indenture or the Notes); or

(i) make any change in this Article 10 that requires each Holder’s consent or in the waiver provisions (including in Section 6.09).

Upon the written request of the Company, and upon the filing with the Trustee of evidence of the consent of Holders as aforesaid and subject to Section 10.05, the Trustee shall join with the Company in the execution of such amendment, supplement or waiver unless such amendment, supplement or waiver adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amendment, supplement or waiver.

Holders do not need under this Section 10.02 to approve the particular form of any proposed amendment, supplement or waiver of this Indenture. It shall be sufficient if such Holders approve the substance thereof. After any such amendment, supplement or waiver becomes effective, the Company shall send to the Holders a notice briefly describing such amendment, supplement or waiver. 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, supplement or waiver.

Section 10.03. Effect of Amendment, Supplement and Waiver. Upon the execution of any amendment, supplement or waiver of this Indenture pursuant to the provisions of this Article 10, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such amendment or supplement shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

Section 10.04. Notation on Notes. Notes authenticated and delivered after the execution of any amendment, supplement or waiver to this Indenture pursuant to the provisions of this Article 10 may, at the Company’s expense, bear a notation in form approved by the Trustee as to any matter provided for in such amendment, supplement or waiver. If the Company or the Trustee shall so

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determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such amendment, supplement or waiver may, at the Company’s expense, be prepared and executed by the Company, authenticated by the Trustee (or an authenticating agent duly appointed by the Trustee pursuant to Section 17.11) and delivered in exchange for the Notes then outstanding, upon surrender of such Notes then outstanding. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

Section 10.05. Evidence of Compliance of Amendment, Supplement or Waiver to Be Furnished to Trustee. In addition to the documents required by Section 17.06, the Trustee shall receive and may rely on an Officer’s Certificate and an Opinion of Counsel as conclusive evidence that any amendment, supplement or waiver to this Indenture executed pursuant hereto complies with the requirements of this Article 10 and is permitted or authorized by this Indenture and it is the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.

ARTICLE 11

CONSOLIDATION, MERGER AND SALE

Section 11.01. Company May Consolidate, Etc. on Certain Terms.

(a) The Company shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated assets of the Company and its Subsidiaries, taken as a whole, to another Person, unless:

(i) (x) the Company is the continuing corporation or (y) the resulting, surviving or transferee Person (if not the Company) (the “Successor Company”) 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 the Company) expressly assumes by supplemental indenture all of the Company’s obligations under the Notes and this Indenture; and

(ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing under this Indenture.

(b) Upon any such consolidation, merger, sale, conveyance, transfer or lease and upon the assumption by the Successor Company, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and accrued and unpaid interest on all of the Notes, the due and punctual delivery and/or payment, as the case may be, of any consideration due upon conversion of the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company, such Successor Company (if not the Company) shall succeed to, and may exercise every right and power of and be substituted for, the Company, with the same effect as if it had been named herein as the party of the first part, and the Company shall be discharged from its obligations under the Notes and this Indenture, except in the case of a lease. Such Successor Company thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and

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delivered to the Trustee; and, upon the order of such Successor Company instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes that previously shall have been signed and delivered by an Officer of the Company to the Trustee for authentication, and any Notes that such Successor Company thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Notes so issued shall in all respects have the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger, sale, transfer or disposition (but not in the case of a lease), upon compliance with this Article 11, the Person named as the “Company” in the first paragraph of this Indenture shall be released from its liabilities as obligor and maker of the Notes and from its obligations under this Indenture and the Notes.

Section 11.02. Opinion of Counsel to Be Given to Trustee. If a supplemental indenture is required in connection with this Article 11, no such consolidation, merger, sale, conveyance, transfer or lease shall be effective unless the Trustee shall receive an Officer’s Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance, transfer or lease and any such assumption complies with the provisions of this Article 11.

ARTICLE 12

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 12.01. Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of or accrued and unpaid interest on, or the payment or delivery of consideration due upon conversion of, any Note, nor for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture or in any Note, nor because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, Officer or director or Subsidiary, as such, past, present or future, of the Company or of any of its successor corporations or other entities, either directly or through the Company or any of its successor corporations or other entities, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes.

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ARTICLE 13

[RESERVED]

ARTICLE 14

CONVERSION OF NOTES

Section 14.01. Conversion Privilege.

(a) Subject to and upon compliance with the provisions of this Article 14, each Holder of a Note shall have the right, at such Holder’s option, to convert all or any portion (if the portion to be converted is $1,000 principal amount or an integral multiple thereof) of such Note:

(i) subject to satisfaction of the conditions described in Section 14.01(b), at any time prior to the close of business on the Business Day immediately preceding January 1, 2022 under the circumstances and during the periods set forth in Section 14.01(b);

(ii) on or after January 1, 2022, at any time prior to the close of business on the second Scheduled Trading Day immediately preceding the Maturity Date;

in each case, at an initial conversion rate of 38.7034 shares of Common Stock (subject to adjustment as provided in Section 14.04 and, if applicable, Section 14.03, the “Conversion Rate”) per $1,000 principal amount of Notes (subject to the settlement provisions of Section 14.02, the “Conversion Obligation”).

(b) (i) Prior to the close of business on the Business Day immediately preceding January 1, 2022, a Holder may surrender all or any portion of its Notes (that is $1,000 principal amount or an integral multiple thereof) for conversion at any time during the five Business Day period after any five 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 in this subsection (b)(i), for each Trading Day of the Measurement Period was less than 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate on each such Trading Day, subject to compliance with the following procedures concerning the Bid Solicitation Agent’s obligation to make a Trading Price determination.

(A) The Bid Solicitation Agent (if other than the Company) shall have no obligation to determine the Trading Price per $1,000 principal amount of the Notes unless the Company has requested such determination, and the Company shall have no obligation to make such request (or, if the Company is acting as Bid Solicitation Agent, the Company shall have no obligation to determine the Trading Price) unless a Holder of at least $1,000,000 in aggregate principal amount of Notes requests in writing that the Company makes such a determination and provides the Company with reasonable evidence that the Trading Price per $1,000 principal amount of Notes would be less than 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate on such Trading Day. At the time of such request, the Company shall instruct the Bid Solicitation Agent (if other than the Company) to determine, or if the Company is acting as Bid Solicitation Agent, the Company shall determine, the Trading Price per $1,000 principal amount of the Notes beginning on the Trading Day following the receipt of such evidence 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 the Common Stock and the Conversion Rate on such Trading Day.

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(B) If the Trading Price condition has been met, the Company shall so notify the Holders, the Trustee and the Conversion Agent (if other than the Trustee) in writing. 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 the Common Stock and the Conversion Rate on such Trading Day, the Company shall so notify the Holders, the Trustee and the Conversion Agent (if other than the Trustee) in writing.

(C) If the Company does not, when it is required to, instruct the Bid Solicitation Agent to (or, if the Company is acting as Bid Solicitation Agent, it does not) obtain bids, or if the Company gives such instruction to the Bid Solicitation Agent and the Bid Solicitation Agent fails to make such determination (or, if the Company is acting as Bid Solicitation Agent, it fails to make such determination), then, in either case, the Trading Price per $1,000 principal amount of the Notes shall be deemed to be less than 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate on each Trading Day of such failure.

(ii) If, prior to the close of business on the Business Day immediately preceding January 1, 2022, the Company elects to:

(A) issue to all or substantially all holders of the 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 60 calendar days after the announcement date of such issuance, to subscribe for or purchase shares of the Common Stock, at a price per share that is less than the average of the Last Reported Sale Prices of the 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

(B) distribute to all or substantially all holders of the Common Stock the Company’s assets, securities or rights to purchase securities of the Company (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 the Board of Directors, exceeding 10% of the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the date of announcement of such distribution,

then, in either case, the Company shall notify all Holders of the Notes, the Trustee and the Conversion Agent (if other than the Trustee) at least 40 Scheduled Trading Days prior to the Ex-Dividend Date of such issuance or distribution. Once the Company has given such notice, the Holders may surrender all or any portion of their Notes (that is $1,000 in principal amount or an integral multiple thereof) for conversion at any time until the earlier of (1) the close of business on the Business Day immediately preceding the Ex-Dividend Date for such issuance or distribution and (2) the Company’s announcement that such issuance or distribution will not take place.

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A Holder of the Notes may not convert its Notes pursuant to this Section 14.01(b)(ii) if such Holder otherwise participates in such issuance or distribution (other than in the case of a share split or share combination), at the same time and upon the same terms as holders of the Common Stock and solely as a result of holding Notes, without having to convert its Notes as if such Holder held a number of shares of Common Stock equal to (x) the applicable Conversion Rate multiplied by (y) the principal amount (expressed in thousands) of Notes held by such Holder.

(iii) If, prior to the close of business on the Business Day immediately preceding January 1, 2022:

(A) a Fundamental Change occurs;

(B) a Make-Whole Fundamental Change occurs; or

(C) the Company is a party to a consolidation, merger, binding share exchange, or transfer or lease of all or substantially all of the consolidated assets of the Company and its Subsidiaries, taken as a whole (other than with one of the Company’s Wholly Owned Subsidiaries, unless such transaction also constitutes a Fundamental Change or Make-Whole Fundamental Change), in each case, pursuant to which the Common Stock would be converted into cash, securities or other assets,

then, in each case, the Holders may surrender all or any portion of their Notes (that is $1,000 in principal amount or an integral multiple thereof) for conversion at any time from or after the date that such transaction is effective until the earlier of (x) 35 trading days after the date that such transaction is effective or, if such transaction also constitutes a fundamental change, until the close of business on the Business Day immediately preceding the related Fundamental Change Repurchase Date and (y) the second Scheduled Trading Day immediately preceding the Maturity Date.

The Company shall notify Holders, the Trustee and the Conversion Agent (if other than the Trustee) as promptly as practicable following the date the Company publicly announces such transaction, but in no event later than the date that any such transaction is effective.

(iv) Prior to the close of business on the Business Day immediately preceding January 1, 2022, a Holder may surrender all or any portion of its Notes (that is $1,000 in principal amount or an integral multiple thereof) for conversion during any calendar quarter commencing after the calendar quarter ending on June 30, 2017 (and only during such calendar quarter), if the Last Reported Sale Price of the 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.

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(v) If the Company calls any or all of the Notes for redemption pursuant to Article 16, then a Holder may surrender all or any portion of its Notes for conversion at any time prior to the close of business on the second Scheduled Trading Day prior to the Redemption Date. After that time, the right to convert on account of the Company’s delivery of the Redemption Notice shall expire, unless the Company defaults in the payment of the Redemption Price, in which case a Holder of Notes may convert all or any portion of its Notes until the close of business on the Business Day immediately preceding the date on which the Redemption Price has been paid or duly provided for.

Section 14.02. Conversion Procedure; Settlement Upon Conversion.

(a) Subject to this Section 14.02, Section 14.03(b) and Section 14.07(a), upon conversion of any Note, the Company shall, at its election, pay or deliver, as the case may be, to the converting Holder, in full satisfaction of its Conversion Obligation, cash (“Cash Settlement”), shares of the Common Stock (“Physical Settlement”) or a combination of cash and shares of the Common Stock (“Combination Settlement”), as set forth in this Section 14.02.

(i) All conversions for which the relevant Conversion Date occurs on or after January 1, 2022 and all conversions for which the relevant Conversion Date occurs after the Company’s issuance of a Redemption Notice and prior to the Scheduled Trading Day immediately preceding the related Redemption Date shall be settled using the same Settlement Method (including the same relative proportion of cash and/or shares of the Common Stock). Except for any conversions for which the relevant Conversion Date occurs after the Company’s issuance of a Redemption Notice, but prior to the Scheduled Trading Day immediately preceding the related Redemption Date, and any conversions for which the relevant Conversion Date occurs on or after January 1, 2022, the Company shall use the same Settlement Method (including the same relative proportion of cash and/or shares of the Common Stock) for all conversions with the same Conversion Date, but the Company shall not have any obligation to use the same Settlement Method with respect to conversions with different Conversion Dates.

(ii) If the Company elects a Settlement Method, the Company shall deliver notice to Holders through the Conversion Agent (if other than the Trustee) of such Settlement Method the Company has selected no later than the close of business on the second Trading Day immediately following the related Conversion Date, or in the case of any conversions for which the relevant Conversion Date occurs (x) on or after the date of issuance of a Redemption Notice and prior to the Scheduled Trading Day immediately preceding the related Redemption Date, in such Redemption Notice or (y) on or after January 1, 2022, no later than January 1, 2022. If the Company does not timely elect a Settlement Method, the Company shall no longer have the right to elect Cash Settlement or Physical Settlement with respect to that Conversion Date and the Company shall be deemed to have elected Combination Settlement in respect of its Conversion Obligation, and the Specified Dollar Amount per $1,000 principal amount of Notes shall be equal to $1,000. If the Company has timely elected Combination Settlement in respect of any conversion but does not timely notify the converting Holders of the Specified Dollar Amount per $1,000 principal amount of Notes, or the Company is deemed to have elected Combination Settlement, the Specified Dollar Amount shall be deemed to be $1,000.

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(iii) The cash, shares of Common Stock or combination of cash and shares of Common Stock payable or deliverable by the Company in respect of any conversion of Notes (the “Settlement Amount”) shall be computed by the Company as follows:

(A) if the Company elects to satisfy its Conversion Obligation in respect of such conversion by Physical Settlement, the Company shall 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 on the Conversion Date (plus cash in lieu of any fractional share of Common Stock issuable upon conversion);

(B) if the Company elects to satisfy its Conversion Obligation in respect of such conversion by Cash Settlement, the Company shall 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 VWAP Trading Days during the related relevant Observation Period; and

(C) if the Company elects (or is deemed to have elected) to satisfy its Conversion Obligation in respect of such conversion by Combination Settlement, the Company shall pay and 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 VWAP Trading Days during the related Observation Period (plus cash in lieu of any fractional share of Common Stock issuable upon conversion).

If more than one Note shall be surrendered for conversion at any one time by the same Holder, the Conversion Obligation with respect to such Notes shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted hereby) so surrendered.

(iv) The Daily Settlement Amounts (if applicable) and the Daily Conversion Values (if applicable) shall be determined by the Company promptly following the last VWAP Trading Day of the related Observation Period. Promptly after such determination of the Daily Settlement Amounts or the Daily Conversion Values, as the case may be, and, if applicable, the amount of cash payable in lieu of any fractional share of Common Stock, the Company shall notify the Trustee and the Conversion Agent (if other than the Trustee) of the Daily Settlement Amounts or the Daily Conversion Values, as the case may be, and, if applicable, the amount of cash payable in lieu of fractional shares of Common Stock. The Trustee and the Conversion Agent (if other than the Trustee) shall have no responsibility for any such determination.

(b) (i) To convert a beneficial interest in a Global Note (which conversion is irrevocable), the holder of such beneficial interest must:

(A) comply with the Applicable Procedures;

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(B) if required, pay funds equal to all documentary, stamp or similar issue or transfer tax owed as set forth in Section 14.02(d) and Section 14.02(e); and

(C) if required, pay funds equal to any interest payable on the next Interest Payment Date to which such Holder is not entitled as set forth in Section 14.02(g); and

(ii) To convert a Certificated Note, the Holder must:

(A) complete, manually sign and deliver an irrevocable notice to the Conversion Agent as set forth in the Form of Notice of Conversion (or a facsimile thereof) (a “Notice of Conversion”) and such Note to the Conversion Agent;

(B) if required, furnish appropriate endorsements and transfer documents;

(C) if required, pay funds equal to all documentary, stamp or similar issue or transfer tax owed as set forth in Section 14.02(d) and Section 14.02(e); and

(D) if required, pay funds equal to any interest payable on the next Interest Payment Date to which such Holder is not entitled as set forth in Section 14.02(g).

The Trustee (and if different, the Conversion Agent) shall notify the Company of any conversion pursuant to this Article 14 on the Conversion Date for such conversion or, if notice on such date is not feasible given the nature of the conversion, promptly thereafter.

If a Holder has already delivered a Fundamental Change Repurchase Notice with respect to a Note, such Holder may not surrender such Note for conversion until such Holder has validly withdrawn such Fundamental Change Repurchase Notice (or, in the case of a Global Note, has complied with the Applicable Procedures with respect to such a withdrawal) in accordance with the terms of Section 15.03. If a Holder has already delivered a Fundamental Change Repurchase Notice, such Holder’s right to withdraw such notice and convert the Notes that are subject to repurchase will terminate at the close of business on the Business Day immediately preceding the relevant Fundamental Change Repurchase Date.

(c) A Note shall be deemed to have been converted immediately prior to the close of business on the date (the “Conversion Date”) that the Holder has complied with the requirements set forth in Section 14.02(b) above.

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Subject to the provisions of Section 14.03(b) and Section 14.07(a), the Company shall pay or deliver, as the case may be, the Settlement Amount due in respect of the Conversion Obligation on:

(i) the third Business Day immediately following the relevant Conversion Date, if the Company elects Physical Settlement; or

(ii) the third Business Day immediately following the last VWAP Trading Day of the relevant Observation Period, if the Company elects Cash Settlement or if the Company elects or is deemed to elect Combination Settlement.

If any shares of Common Stock are due to converting Holders, the Company shall issue or cause to be issued, and deliver to such Holder, or such Holder’s nominee or nominees, certificates or a book-entry transfer through the Depositary, as the case may be, for the full number of shares of Common Stock to which such Holder shall be entitled in satisfaction of the Company’s Conversion Obligation.

(d) In case any Certificated Note shall be surrendered for partial conversion, in $1,000 principal amount or an integral multiple thereof, the Company shall execute and upon receipt of a Company Order, the Trustee shall authenticate and deliver to or upon the written order of the Holder so surrendered a new Note or Notes in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without payment of any service charge by the converting Holder but, if required by the Company or Trustee, with payment of a sum sufficient to cover any documentary, stamp or similar issue or transfer tax or similar governmental charge required by law or that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such conversion being different from the name of the Holder of the old Notes surrendered for such conversion.

(e) If a Holder submits a Note for conversion, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issuance of any shares of Common Stock upon conversion of such Note, unless the tax is due because the Holder requests such shares to be issued in a name other than the Holder’s name, in which case the Holder shall pay that tax. The Conversion Agent may refuse to deliver the certificates representing the shares of Common Stock being issued in a name other than the Holder’s name until the Trustee receives a sum sufficient to pay any tax that is due by such Holder in accordance with the immediately preceding sentence.

(f) Upon the conversion of an interest in a Global Note, the Trustee, or the Custodian of the Global Note at the direction of the Trustee, shall make a notation in the books and records of the Trustee and Depositary as to the reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any conversion of Notes effected through any Conversion Agent other than the Trustee.

(g) Upon conversion of a Note, the converting Holder shall not receive any separate cash payment representing accrued and unpaid interest, if any, except as set forth in the paragraph below. The Company’s payment or delivery, as the case may be, of the Settlement Amount upon conversion of any Note shall be deemed to satisfy in full its obligation to pay the principal amount of the Note and accrued and unpaid interest, if any, to, but not including, the relevant Conversion Date. As a result, accrued and unpaid interest, if any, to, but not including, the relevant Conversion Date shall be deemed to be paid in full rather than canceled,

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extinguished or forfeited. Upon a conversion of Notes into a combination of cash and shares of Common Stock, accrued and unpaid interest shall 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, but prior to the open of business on the immediately following Interest Payment Date, Holders of such Notes shall 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 on the corresponding Interest Payment Date (regardless of whether the converting Holder was the Holder of record on the corresponding Regular Record Date); provided that no such payment need be made:

(i) if the Notes are surrendered for conversion following the Regular Record Date immediately preceding the Maturity Date;

(ii) if the Company has specified a Redemption Date that is after a Regular Record Date and on or prior to the second Scheduled Trading Day immediately following the corresponding Interest Payment Date;

(iii) if the Company has 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

(iv) to the extent of any overdue interest, if any overdue interest exists at the time of conversion with respect to such Note.

Therefore, for the avoidance of doubt, all Holders of record on the Regular Record Date immediately preceding the Maturity Date, any Redemption Date as described in clause (ii) above and any Fundamental Change Repurchase Date as described in clause (iii) above shall receive and retain the full interest payment due on the Maturity Date or other applicable Interest Payment Date regardless of whether their Notes have been converted following such Regular Record Date.

(h) The Person in whose name any shares of Common Stock delivered upon conversion is registered shall become the holder of record of such shares as of the close of business on (i) the relevant Conversion Date if the Company elects Physical Settlement or (ii) the last VWAP Trading Day of the relevant Observation Period if the Company elects or is deemed to elect Combination Settlement. Upon a conversion of Notes, such Person shall no longer be a Holder of such Notes surrendered for conversion; provided that (a) the converting Holder shall have the right to receive the Settlement Amount due upon conversion and (b) in the case of a conversion between a Regular Record Date and the corresponding Interest Payment Date, the Holder of record as of the close of business on such Regular Record Date shall have the right to receive the interest payable on such Interest Payment Date, in accordance with Section 14.02(g).

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(i) The Company shall not issue any fractional share of Common Stock upon conversion of the Notes and shall instead pay cash in lieu of any fractional share of Common Stock issuable upon conversion in an amount based on (i) the Daily VWAP on the relevant Conversion Date if the Company elects Physical Settlement or (ii) the Daily VWAP on the last VWAP Trading Day of the relevant Observation Period if the Company elects or is deemed to elect Combination Settlement. For each Note surrendered for conversion, if the Company has elected (or is deemed to elect) Combination Settlement, the full number of shares that shall be issued upon conversion thereof shall be computed on the basis of the aggregate Daily Settlement Amounts for the relevant Observation Period and, if applicable, any fractional share remaining after such computation shall be paid in cash.

Section 14.03. Increase in Conversion Rate Upon Conversion in Connection with a Make-Whole Fundamental Change or Redemption Notice. (a) If the Effective Date of a Make-Whole Fundamental Change occurs prior to the Maturity Date or the Company gives a Redemption Notice with respect to any or all of the Notes pursuant to Section 16.02 and, in either case, a Holder elects to convert its Notes in connection with such Make-Whole Fundamental Change or Redemption Notice, the Company shall, under the circumstances described below, 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 shall be deemed for these purposes to be “in connection with” such Make-Whole Fundamental Change if the relevant Conversion Date occurs during the period from the Effective Date of the Make-Whole Fundamental Change to the close of business on 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 (b) 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”). A conversion of Notes shall be deemed for these purposes to be “in connection with” a Redemption Notice if the relevant Conversion Date occurs during the period from the date of the Redemption Notice to (i) the close of business on the second Scheduled Trading Day immediately preceding the Redemption Date or (ii) if the Company fails to pay the Redemption Price on the Redemption Date, the close of business on the Business Day immediately preceding the date on which the Redemption Price has been duly paid or duly provided for.

(b) Upon surrender of Notes for conversion in connection with a Make-Whole Fundamental Change or in connection with a Redemption Notice, the Company shall, at its option, satisfy its Conversion Obligation by Physical Settlement, Cash Settlement or Combination Settlement in accordance with Section 14.02; provided, however, that, if the consideration for the Common Stock in any Make-Whole Fundamental Change described in clause (b) 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 shall be calculated based solely on the Stock Price for the transaction and shall be deemed to be an amount of cash per $1,000 principal amount of converted Notes equal to (i) the Conversion Rate (including any increase to reflect the Additional Shares as described in this Section 14.03), multiplied by (ii) such Stock Price. In such event, the Conversion Obligation shall be determined and paid to Holders in cash on the

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third Business Day following the Conversion Date. The Company shall notify Holders, the Trustee and the Conversion Agent (if other than the Trustee) of the Effective Date of any Make-Whole Fundamental Change no later than five Business Days after such Effective Date (the “Make-Whole Fundamental Change Company Notice”).

(c) The number of Additional Shares, if any, by which the Conversion Rate shall be increased shall be determined by reference to the table below, based on: (x) the date on which the Make-Whole Fundamental Change occurs or becomes effective, or the date of the Redemption Notice, as the case may be (in each case, the “Effective Date”), and (y) the price paid (or deemed to be paid) per share of the Common Stock in the Make-Whole Fundamental Change or with respect to the Optional Redemption, as the case may be (the “Stock Price”). If the holders of the Common Stock receive only cash in a Make-Whole Fundamental Change described in clause (b) of the definition of Fundamental Change, the Stock Price shall be the cash amount paid per share. Otherwise, the Stock Price shall be the average of the Last Reported Sale Prices of the 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 or the date of the Redemption Notice, as the case may be. The Board of Directors shall make appropriate adjustments to the Stock Price, in its good faith determination, 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 of the event occurs, during such five Trading Day period.

(d) The Stock Prices set forth in the column headings of the table below shall be adjusted as of any date on which the Conversion Rate is otherwise adjusted. The adjusted Stock Prices shall equal (i) the Stock Prices applicable immediately prior to such adjustment, multiplied by (ii) a fraction, the numerator of which is the Conversion Rate immediately prior to such 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 set forth in the table below shall be adjusted in the same manner and at the same time as the Conversion Rate as set forth in Section 14.04.

(e) The following table sets forth the number of Additional Shares by which the Conversion Rate shall be increased per $1,000 principal amount of Notes pursuant to this Section 14.03 for each Stock Price and Effective Date set forth below:

Effective Date	$	19.50	$	22.50	$	25.84	$	30.00	$	35.00	$	40.00	$	50.00	$	60.00	$	70.00	$	80.00	$	90.00	$	100.00	$	120.00
April 4, 2017	12.5786		9.3480		6.9146		4.9196		3.4035		2.4353		1.3356		0.7722		0.4542		0.2631		0.1444		0.0697		0.0000
April 1, 2018	12.5786		8.9937		6.4879		4.4800		2.9996		2.0851		1.0905		0.6067		0.3437		0.1902		0.0972		0.0400		0.0000
April 1, 2019	12.5786		8.5839		5.9636		3.9314		2.4994		1.6602		0.8088		0.4271		0.2307		0.1200		0.0543		0.0153		0.0000
April 1, 2020	12.5786		8.0247		5.2280		3.1692		1.8285		1.1159		0.4829		0.2393		0.1233		0.0590		0.0205		0.0000		0.0000
April 1, 2021	12.5786		7.1138		4.0072		1.9555		0.8526		0.4048		0.1362		0.0683		0.0361		0.0143		0.0000		0.0000		0.0000
April 1, 2022	12.5786		5.7410		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000

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The exact Stock Price and Effective Date may not be set forth in the table above, in which case:

(i) 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 shall be increased shall 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;

(ii) if the Stock Price is greater than $120.00 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 shall be added to the Conversion Rate; and

(iii) if the Stock Price is less than $19.50 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 shall be added to the Conversion Rate.

Notwithstanding the foregoing, in no event shall the Conversion Rate per $1,000 principal amount of Notes exceed 51.2820 shares of Common Stock, subject to adjustment in the same manner as the Conversion Rate pursuant to Section 14.04.

(f) Nothing in this Section 14.03 shall prevent an adjustment to the Conversion Rate pursuant to Section 14.04 in respect of a Make-Whole Fundamental Change.

Section 14.04. Adjustment of Conversion Rate. The Conversion Rate shall be adjusted from time to time by the Company if any of the following events occurs, except that the Company shall not make any adjustments to the Conversion Rate if Holders of the Notes 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 the Common Stock and solely as a result of holding the Notes, in any of the transactions described in this Section 14.04, without having to convert their Notes, as if they held a number of shares of Common Stock equal to (i) the Conversion Rate, multiplied by (ii) the principal amount (expressed in thousands) of Notes held by such Holder.

(a) If the Company exclusively issues shares of Common Stock as a dividend or distribution on shares of the Common Stock, or if the Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following formula:

CR1	=	CR0	x	OS1
				OS0

where,

CR0	=	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;
CR1	=	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	=	the number of shares of Common Stock outstanding immediately prior to the open of business on such Ex-Dividend Date or effective date, as applicable, before giving effect to such dividend, distribution, share split or share combination; and
OS1	=	the number of shares of Common Stock outstanding immediately after giving effect to such dividend, distribution, share split or share combination.

Any adjustment made under this Section 14.04(a) 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 Section 14.04(a) is declared that results in an adjustment under this Section 14.04(a) but is not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors 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.

(b) If the Company issues to all or substantially all holders of the Common Stock any rights, options or warrants (other than pursuant to a stockholders rights plan) entitling them, for a period of not more than 60 calendar days after the announcement date of such issuance, to subscribe for or purchase shares of Common Stock at a price per share that is less than the average of the Last Reported Sale Prices of the 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 shall be increased based on the following formula:

CR1	=	CR0	x	OS0 + X
				OS0 + Y

where,

CR0	=	the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such issuance;
CR1	=	the Conversion Rate in effect immediately after the open of business on such Ex-Dividend Date;
OS0	=	the number of shares of Common Stock outstanding immediately prior to the open of business on such Ex-Dividend Date;
X	=	the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and
Y	=	the number of shares of Common Stock equal to (i) the aggregate price payable to exercise such rights, options or warrants, divided by (ii) the average of the Last Reported Sale Prices of the 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 Section 14.04(b) shall 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 such rights, options or warrants are not so issued, 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 purposes of this Section 14.04(b) and Section 14.01(b)(ii)(A), in determining whether any rights, options or warrants entitle the holders to subscribe for or purchase shares of the Common Stock at less than such average of the Last Reported Sale Prices of the Common Stock over 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 the Company 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 the Company in good faith.

(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of the Common Stock, excluding:

(i) dividends, distributions or issuances (including share splits) as to which an adjustment was effected pursuant to Section 14.04(a) or Section 14.04(b);

(ii) rights issued pursuant to a stockholders rights plan of the Company (other than pursuant to Section 14.11);

(iii) dividends or distributions paid exclusively in cash as to which an adjustment was effected pursuant to Section 14.04(d);

(iv) distributions of Reference Property in connection with a Specified Corporate Event described below under Section 14.07; and

(v) Spin-Offs as to which the provisions set forth below in this Section 14.04(c) shall apply

(any of such shares of Capital Stock, evidences of indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities of the Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:

CR1	=	CR0	x	SP0
				(SP0 - FMV)

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where,

CR0	=	the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such distribution;
CR1	=	the Conversion Rate in effect immediately after the open of business on such Ex-Dividend Date;
SP0	=	the average of the Last Reported Sale Prices of the 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
FMV	=	the fair market value (as determined by the Company in good faith) of the Distributed Property so distributed with respect to each outstanding share of the Common Stock on the Ex-Dividend Date for such distribution.

Any increase made under the portion of this Section 14.04(c) above shall 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 dividend or distribution had not been declared.

Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP₀” (as defined above), in lieu of the foregoing increase, each Holder of a Note shall receive, in respect of each $1,000 principal amount thereof, at the same time and upon the same terms as holders of the Common Stock receive the Distributed Property, the amount and kind of Distributed Property 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 Section 14.04(c) where there has been a payment of a dividend or other distribution on the Common Stock of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued, will be, listed or admitted for trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:

CR1	=	CR0	x	(FMV0 + MP0)
				MP0

where,

CR0	=	the Conversion Rate in effect immediately prior to the end of the Valuation Period;
CR1	=	the Conversion Rate in effect immediately after the end of the Valuation Period;

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FMV0	=	the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of the Common Stock applicable to one share of the Common Stock (determined by reference to the definition of Last Reported Sale Price as set forth in Section 1.01 as if references therein to 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
MP0	=	the average of the Last Reported Sale Prices of the Common Stock over the Valuation Period.

The increase to the Conversion Rate under the preceding paragraph shall occur at the close of business 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 references 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 of such Spin-Off and the 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, for any Trading Day that falls within the relevant Observation Period for such conversion and within the Valuation Period, the references 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 of such Spin-Off and such Trading Day in determining the Conversion Rate as of such Trading Day. In addition, 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 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 the Spin-Off to, and including, the last VWAP Trading Day of such Observation Period. If any dividend or distribution that constitutes a Spin-Off is declared but not so paid or made, the Conversion Rate shall be immediately decreased, effective as of the on which the Board of Directors determines not to pay or make such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared or announced.

For purposes of this Section 14.04(c) (and subject in all respect to Section 14.11), rights, options or warrants distributed by the Company to all holders of the Common Stock entitling them to subscribe for or purchase shares of the Company’s Capital Stock, including Common Stock (either initially or under certain circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”):

(i) are deemed to be transferred with such shares of the Common Stock;

(ii) are not exercisable; and

(iii) are also issued in respect of future issuances of the Common Stock,

shall be deemed not to have been distributed for purposes of this Section 14.04(c) (and no adjustment to the Conversion Rate under this Section 14.04(c) will be required) until the

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occurrence of the earliest Trigger Event, whereupon such rights, options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 14.04(c). If any such right, option or warrant, including any such existing rights, options or warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights, options or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Ex-Dividend Date with respect to new rights, options or warrants with such rights (in which case the existing rights, options or warrants shall be deemed to terminate and expire on such date without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 14.04(c) was made:

(A) in the case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any holders thereof, upon such final redemption or purchase (x) the Conversion Rate shall be readjusted as if such rights, options or warrants had not been issued and (y) the Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or purchase price received by a holder or holders of Common Stock with respect to such rights, options or warrants (assuming such holder had retained such rights, options or warrants), made to all holders of Common Stock as of the date of such redemption or purchase, and

(B) in the case of such rights, options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been issued.

For purposes of Section 14.04(a), Section 14.04(b) and this Section 14.04(c), any dividend or distribution to which this Section 14.04(c) is applicable that also includes one or both of:

(i) a dividend or distribution of shares of Common Stock to which Section 14.04(a) is applicable (the “Clause A Distribution”); or

(ii) a dividend or distribution of rights, options or warrants to which Section 14.04(b) is applicable (the “Clause B Distribution”),

then:

(A) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be deemed to be a dividend or distribution to which this Section 14.04(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment required by this Section 14.04(c) with respect to such Clause C Distribution shall then be made; and

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(B) the Clause A Distribution and Clause B Distribution shall be deemed to immediately follow the Clause C Distribution and any Conversion Rate adjustment required by Section 14.04(a) and Section 14.04(b) with respect thereto shall then be made, except that, if determined by the Company (I) the “Ex-Dividend Date” of the Clause A Distribution and the Clause B Distribution shall be deemed to be the Ex-Dividend Date of the Clause C Distribution and (II) any shares of Common Stock included in the Clause A Distribution or Clause B Distribution shall be deemed not to be “outstanding immediately prior to the open of business on such Ex-Dividend Date or effective date” within the meaning of Section 14.04(a) or “outstanding immediately prior to the open of business on such Ex-Dividend Date” within the meaning of Section 14.04(b).

(d) If any cash dividend or distribution is made to all or substantially all holders of the Common Stock, the Conversion Rate shall be increased based on the following formula:

CR1	=	CR0	x	SP0
				(SP0 - C)

where,

CR0	=	the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such dividend or distribution;
CR1	=	the Conversion Rate in effect immediately after the open of business on the Ex-Dividend Date for such dividend or distribution;
SP0	=	the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution; and
C	=	the amount in cash per share the Company distributes to all or substantially all holders of the Common Stock.

Any increase made pursuant to this Section 14.04(d) 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 the Board of Directors determines not to make or pay such dividend or distribution, to 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), in lieu of the foregoing increase, each Holder of a Note shall receive, for each $1,000 principal amount of Notes, at the same time and upon the same terms as holders of shares of the Common Stock, the amount of cash that such Holder would have received if such Holder owned a number of shares of Common Stock equal to the Conversion Rate on the Ex-Dividend Date for such cash dividend or distribution.

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(e) If the Company or any of its Subsidiaries makes a payment in respect of a tender or exchange offer for the Common Stock, to the extent that the cash and value of any other consideration included in the payment per share of the Common Stock exceeds the average of the Last Reported Sale Prices of the 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 (such date, the “Expiration Date”), the Conversion Rate shall be increased based on the following formula:

CR1	=	CR0	x	(AC + (SP1 x OS1))
				(OS0 - SP1)

where,

CR0	=	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 Expiration Date;
CR1	=	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 Expiration Date;
AC	=	the aggregate value of all cash and any other consideration (as determined by the Company in good faith) paid or payable for shares of Common Stock purchased in such tender or exchange offer;
OS0	=	the number of shares of Common Stock outstanding immediately prior to the Expiration Date (prior to giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer);
OS1	=	the number of shares of Common Stock outstanding immediately after the Expiration Date (after giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer); and
SP1	=	the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the Expiration Date.

The increase to the Conversion Rate under this Section 14.04(e) shall 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

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have elapsed between such Expiration Date of such tender or exchange offer and the 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, 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 between the Expiration Date of such tender or exchange offer and such Trading Day in determining the Conversion Rate as of such Trading Day. In addition, if the Trading Day next succeeding the Expiration Date 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 Expiration Date of such tender or exchange offer to, and including, last VWAP Trading Day of such Observation Period.

In the event that the Company or one of its Subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender or exchange offer had not been made or had been made only in respect of the purchases that have been effected.

(f) Notwithstanding anything to the contrary in this Section 14.04 or any other provision of this Indenture or the Notes, if a Conversion Rate adjustment becomes effective on any Ex-Dividend Date and a Holder that has converted its Notes on or after such Ex-Dividend Date and on or prior to the related Record Date would be treated as the record holder of the shares of Common Stock as of the related Conversion Date as described under Section 14.02(h) based on an adjusted Conversion Rate for such Ex-Dividend Date, then, notwithstanding the Conversion Rate adjustment provisions in this Section 14.04, the Conversion Rate adjustment relating to such Ex-Dividend Date shall not be made for such converting Holder. Instead, such Holder shall be treated as if such Holder were the record owner of the shares of Common Stock on an unadjusted basis and participate in the related dividend, distribution or other event giving rise to such adjustment.

(g) All calculations and other determinations under this Article 14 shall be made by the Company and all adjustments to the Conversion Rate shall be made to the nearest one-ten thousandth (1/10,000th) of a share.

(h) In addition to those adjustments required by clauses (a), (b), (c), (d) and (e) of this Section 14.04, the Company from time to time may increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the Company’s best interest. In addition, the Company may also (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of Common Stock or rights to purchase shares of Common Stock in connection with a dividend or distribution of shares of Common Stock (or rights to acquire shares of Common Stock) or

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similar event. Whenever the Conversion Rate is increased pursuant to either of the preceding two sentences, the Company shall send to the Holder of each Note at its last address appearing on the Note Register a notice of the increase at least 15 days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect.

(i) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of shares of the Common Stock or any securities convertible into or exchangeable for shares of the Common Stock or the right to purchase shares of the Common Stock or such convertible or exchangeable securities.

(j) [Reserved.]

(k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee (and the Conversion Agent if not the Trustee) an Officer’s Certificate setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Unless and until a Responsible Officer of the Trustee shall have received such Officer’s Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume without inquiry that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment becomes effective and shall send such notice of such adjustment of the Conversion Rate to each Holder at its last address appearing on the Note Register of this Indenture. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

(l) For purposes of this Section 14.04, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company so long as the Company does not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company, but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.

(m) If, in connection with any adjustment to the Conversion Rate as set forth in Section 14.03 or this Section 14.04, a Holder shall be deemed for U.S. federal tax purposes to have received a distribution and the Company determines it is required to collect withholding tax with respect to any such deemed distribution, the Company may withhold from cash payments of interest in accordance with the provisions of Section 2.03 hereof or from cash and Common Stock, if any, otherwise deliverable to a Holder upon a conversion of Securities in accordance with the provisions of Section 14.02 hereof or repurchase of a Security in accordance with the provisions of Article 15 hereof.

Section 14.05. Adjustments of Prices.Whenever any provision of this Indenture requires the Company 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, without limitation, an Observation Period and the period, if any, for determining the Stock Price for purposes of a Make-Whole Fundamental Change or Optional Redemption), the Company shall make appropriate adjustments in its good faith judgment to each to account for any adjustment to

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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.

Section 14.06. Shares to Be Fully Reserved. The Company shall reserve, on or prior to the date of this Indenture, and from time to time as may be necessary, out of its authorized but unissued shares, sufficient shares of Common Stock to provide for conversion of the Notes from time to time as such Notes are presented for conversion (assuming that at the time of computation of such number of shares, all such Notes would be converted by a single Holder and that Physical Settlement is applicable, and including the maximum number of Additional Shares that could be included in the Conversion Rate for a conversion in connection with a Make-Whole Fundamental Change).

Section 14.07. Effect of Recapitalizations, Reclassifications and Changes of the Common Stock.

(a) In the case of:

(i) any recapitalization, reclassification or change of the Common Stock (other than changes in par value or resulting from a subdivision or combination);

(ii) any consolidation, merger or combination involving the Company; or

(iii) any sale, lease or other transfer to a third party of all or substantially all of the Company’s and its Subsidiaries’ consolidated assets, taken as a whole; or

(iv) any statutory share exchange,

in each case, as a result of which the Common Stock would be converted into, or exchanged for stock, other securities, other property or assets (including cash or any combination thereof) (any such event, a “Specified Corporate Event” and any such stock, other securities, other property or assets (including cash or any combination thereof), “Reference Property” and the amount of Reference Property that a holder of one share of the Common Stock immediately prior to such Specified Corporate Event would have been entitled to receive upon the occurrence of such Specified Corporate Event, a “Unit of Reference Property”), then the Company, or the successor or purchasing corporation, as the case may be, will execute with the Trustee, without the consent of the Holders, a supplemental indenture providing that, at and after the effective time of the Specified Corporate Event, 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 Reference Property that a holder of a number of shares of the Common Stock equal to the Conversion Rate immediately prior to such Specified Corporate Event would have been entitled to receive upon such Specified Corporate Event; provided, however, that at and after the effective time of such Specified Corporate Event:

(A) the Company shall continue to have the right to determine the form of consideration to be paid or delivered, as the case may be, upon conversion of Notes in accordance with Section 14.02; and

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(B) (I) any amount payable in cash upon conversion of the Notes in accordance with Section 14.02 shall continue to be payable in cash, (II) any shares of Common Stock that the Company would have been required to deliver upon conversion of the Notes in accordance with Section 14.02 shall instead be deliverable in Units of Reference Property that a holder of that number of shares of Common Stock would have received in such Specified Corporate Event and (III) the Daily VWAP shall be calculated based on the value of a Unit of Reference Property; provided, however, that if the holders of Common Stock receive only cash in such Specified Corporate Event, then for all conversions that occur after the effective time of such Specified Corporate Event (x) the consideration due upon conversion of each $1,000 principal aggregate 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 by any Additional Shares pursuant to Section 14.03), multiplied by the price paid per share of Common Stock in such Specified Corporate Event and (y) the Company shall satisfy the Conversion Obligation by paying such cash to the converting Holder on the third Business Day immediately following the Conversion Date.

If the Specified Corporate Event causes the 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), then the Reference Property used to calculate the Daily VWAP shall be deemed to be based on: (A) the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election; and (B) if no holder of Common Stock affirmatively make such an election, the types and amounts of consideration actually received by the holder of Common Stock. The Company shall notify, in writing, the Holders, the Trustee and the Conversion Agent (if other than the Trustee) of the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election as soon as reasonably practicable after such determination is made.

Such supplemental indenture described in the second immediately preceding paragraph shall provide for anti-dilution and other adjustments that shall be as nearly equivalent as is possible to the adjustments provided for in this Article 14. If the Reference Property in respect of any Specified Corporate Event includes shares of stock, securities or other property or assets (including any combination thereof) of a company other than the Company or the successor or purchasing corporation, as the case may be, in such Specified Corporate Event, then such other company shall also execute such supplemental indenture, and such supplemental indenture shall contain such additional provisions to protect the interests of the Holders, including the right of Holders to require the Company to repurchase their Notes in connection with a Fundamental Change in accordance with Article 15, as the Board of Directors shall reasonably consider necessary by reason of the foregoing.

(b) In the event the Company shall execute a supplemental indenture pursuant to Section 14.07(a), the Company shall promptly file with the Trustee an Officer’s Certificate briefly stating the reasons therefor, the kind or amount of cash, securities or other assets (including any combination thereof) that will comprise the Reference Property after any such

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Specified Corporate Event, any adjustment to be made with respect thereto and that all conditions precedent have been complied with, and shall promptly send notice thereof to all Holders. The Company shall cause notice of the execution of such supplemental indenture to be sent to each Holder, at its address appearing on the Note Register provided for in this Indenture, within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

(c) [Reserved].

(d) The Company shall not become a party to any Specified Corporate Event unless its terms are consistent with this Section 14.07. None of the foregoing provisions shall affect the right of a holder of Notes to convert its Notes into cash, shares of Common Stock or a combination of cash and shares of Common Stock, as applicable, as set forth in Section 14.01 and Section 14.02 prior to the effective date of such Specified Corporate Event.

(e) The above provisions of this Section shall similarly apply to successive Specified Corporate Events.

Section 14.08. Certain Covenants.

(a) The Company covenants that all shares of Common Stock issued upon conversion of Notes shall be duly authorized, fully paid and non-assessable and free from all preemptive or similar rights of any securityholder of the Company and, except for any transfer taxes payable by the Company or a Holder, as the case may be, pursuant to Sections 14.02(d) and 14.02(e), free from all transfer or similar taxes, liens, charges and adverse claims as the result of any action by the Company.

(b) The Company shall comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of the Notes, including that if any shares of Common Stock to be provided for the purpose of conversion of Notes hereunder require registration with or approval of any governmental authority under any federal or state law before such shares may be validly issued upon conversion, the Company shall, to the extent then permitted by the rules and interpretations of the Commission, secure such registration or approval, as the case may be.

(c) The Company further covenants that if at any time the Common Stock shall be listed on any national securities exchange or automated quotation system, the Company shall list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, any Common Stock issuable upon conversion of the Notes.

Section 14.09. Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty or responsibility to any Holder to determine the Conversion Rate (or any adjustment thereto) or whether any facts exist that may require any adjustment (including any increase) of the Conversion Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind

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or amount) of any shares of Common Stock, or of any securities, property or cash that may at any time be issued or delivered upon the conversion of any Note; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or cash upon the surrender of any Note for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 14.07 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Holders upon the conversion of their Notes after any event referred to in such Section 14.07 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 7.01, may accept (without any independent investigation) as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officer’s Certificate (which the Company shall be obligated to file with the Trustee prior to the execution of any such supplemental indenture) with respect thereto. Neither the Trustee nor the Conversion Agent shall be responsible for determining whether any event contemplated by Section 14.01(b) has occurred that makes the Notes eligible for conversion or no longer eligible therefor until the Company has delivered to the Trustee and the Conversion Agent the notices referred to in Section 14.01(b) with respect to the commencement or termination of such conversion rights, on which notices the Trustee and the Conversion Agent may conclusively rely, and the Company agrees to deliver such notices to the Trustee and the Conversion Agent immediately after the occurrence of any such event or at such other times as shall be provided for in Section 14.01(b). The parties hereto agree that all notices to the Trustee or the Conversion Agent under this Article 14 shall be in writing.

Section 14.10. Notice to Holders Prior to Certain Actions. In case of any:

(a) action by the Company or one of its Subsidiaries that would require an adjustment in the Conversion Rate pursuant to Section 14.04 or Section 14.11;

(b) Specified Corporate Event or any consolidation, merger, sale, assignment, lease, conveyance or other transfer or disposition of all or substantially all assets in accordance with Article 11; or

(c) voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, in each case (unless notice of such event is otherwise required pursuant to another provision of this Indenture), the Company shall cause to be filed with the Trustee and the Conversion Agent (if other than the Trustee) and to be sent to each Holder at its address appearing on the Note Register, as promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if a record is not to be taken, the date as of which the holders of Common Stock of record are to be determined for the purposes of such action by the Company or one of its Subsidiaries, or (ii) the date on which such Specified Corporate Event, any consolidation, merger, sale, assignment, lease, conveyance or other transfer or disposition of all or substantially all assets in accordance with

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Article 11, or any dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such Specified Corporate Event, consolidation, merger, sale, assignment, lease, conveyance or other transfer or disposition of all or substantially all assets in accordance with Article 11, dissolution, liquidation or winding-up; provided, however, that if on such date, the Company does not have knowledge of such event or the adjusted Conversion Rate cannot be calculated, the Company shall deliver such notice as promptly as practicable upon obtaining knowledge of such event or information sufficient to make such calculation, as the case may be, and in no event later than the effective date of such adjustment. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such action by the Company or one of its Subsidiaries, Specified Corporate Event, or any consolidation, merger, sale, assignment, lease, conveyance or other transfer or disposition of all or substantially all assets in accordance with Article 11, dissolution, liquidation or winding-up.

Section 14.11. Stockholder Rights Plans. To the extent that the Company has a rights plan in effect upon conversion of the Notes into Common Stock, Holders that convert their Notes shall receive, in addition to any shares of Common Stock received in connection with such conversion, the appropriate number of rights under the rights plan, if any, and any certificate representing the share of Common Stock issued upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any such rights plan, as the same may be amended from time to time. 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 shall be adjusted at the time of separation as if the Company distributed to all or substantially all holders of shares of Common Stock, Distributed Property pursuant to Section 14.04(c), subject to readjustment in the event of the expiration, termination or redemption of such rights.

ARTICLE 15

PURCHASE OF NOTES AT OPTION OF HOLDERS

Section 15.01. Intentionally Omitted.

Section 15.02. Repurchaseat Option of Holders Upon a Fundamental Change. (a) If a Fundamental Change occurs at any time prior to the Maturity Date, each Holder shall have the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes, or any portion of the principal amount thereof that is equal to $1,000 or an integral multiple of $1,000 thereof, on the date (the “Fundamental Change Repurchase Date,” which definition reflects postponement, if any, permitted by the last sentence of this Section 15.02(a)) specified by the Company that is not less than 20 nor more than 35 calendar days following the date of the Fundamental Change Company Notice, at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon to, but excluding, the Fundamental Change Repurchase Date (the “Fundamental Change Repurchase Price”), 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 the Company shall instead pay the full amount of accrued and unpaid interest to Holders of record as

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of such Regular Record Date, and the Fundamental Change Repurchase Price shall be equal to 100% of the principal amount of Notes to be purchased pursuant to this Article 15. The Fundamental Change Repurchase Date shall be subject to postponement in order to allow the Company to comply with applicable law.

(b) Repurchases of Notes under this Section 15.02 shall be made, at the option of the Holder thereof, upon:

(i) delivery to the Paying Agent by a Holder of a duly completed notice (the “Fundamental Change Repurchase Notice”) in the form set forth in Attachment 2 to the Form of Note attached hereto as Exhibit A, if the Notes are Certificated Notes, or in compliance with the Applicable Procedures for surrendering interests in Global Notes, if the Notes are Global Notes, in each case on or before the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date; and

(ii) delivery of the Notes, if the Notes are Certificated Notes, to the Paying Agent on or before the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date (together with all necessary endorsements for transfer) at the Corporate Trust Office of the Paying Agent, or book-entry transfer of the Notes, if the Notes are Global Notes, in compliance with the Applicable Procedures, in each case such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price therefor.

The Fundamental Change Repurchase Notice in respect of any Notes to be repurchased shall state:

A. in the case of Certificated Notes, the certificate numbers of the Notes to be delivered for repurchase;

B. the portion of the principal amount of Notes to be repurchased, which must be $1,000 or an integral multiple of $1,000; and

C. that the Notes are to be purchased by the Company pursuant to the applicable provisions of the Notes and this Indenture;

provided, however, that if the Notes are Global Notes, the Fundamental Change Repurchase Notice must comply with the Applicable Procedures.

Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Fundamental Change Repurchase Notice contemplated by this Section 15.02 shall have the right to withdraw, in whole or in part, such Fundamental Change Repurchase Notice at any time prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 15.03.

If a Holder has already delivered a Fundamental Change Repurchase Notice with respect to a Note, such Holder may not surrender such Note for conversion until such Holder has validly

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withdrawn such Fundamental Change Repurchase Notice (or, in the case of a Global Note, has complied with the Applicable Procedures with respect to such a withdrawal) in accordance with the terms of Section 15.03.

The Paying Agent shall promptly notify the Company of the receipt by it of any Fundamental Change Repurchase Notice or written notice of withdrawal thereof.

(c) On or before the 20th Business Day after the occurrence of a Fundamental Change, the Company shall provide to all Holders of Notes and the Trustee and the Paying Agent (if other than the Trustee) a notice (the “Fundamental Change Company Notice”) of the occurrence of the Fundamental Change and of the repurchase right at the option of the Holders arising as a result thereof. Each Fundamental Change Company Notice shall specify:

(i) the events causing the Fundamental Change;

(ii) the date the Fundamental Change became effective;

(iii) the last date on which a Holder may exercise the repurchase right pursuant to this Article 15;

(iv) the Fundamental Change Repurchase Price;

(v) the Fundamental Change Repurchase Date;

(vi) the name and address of the Paying Agent and the Conversion Agent (if other than the Trustee);

(vii) if applicable, the Conversion Rate and any adjustments to the Conversion Rate;

(viii) 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 this Indenture (or, in the case of a Global Note, complies with the Applicable Procedures with respect to such a withdrawal); and

(ix) the procedures that Holders must follow to require the Company to repurchase their Notes.

At the Company’s written request, the Trustee shall give such notice in the Company’s name and at the Company’s expense; provided, however, that, in all cases, the text of such Fundamental Change Company Notice shall be prepared by the Company. In such a case, the Company shall deliver such notice to the Trustee at least two Business Days prior to the date that the notice is required to be given to the Holders (unless a shorter notice period shall be agreed to by the Trustee), together with an Officer’s Certificate requesting that the Trustee give such notice.

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Such notice shall be delivered to the Trustee, to the Paying Agent (if other than the Trustee) and to each Holder at its address shown in the Note Register (and to the beneficial owner as required by applicable law) or, in the case of Global Notes, in accordance with the Applicable Procedures.

No failure of the Company to give the foregoing notices and no defect therein shall limit the Holders’ repurchase rights or affect the validity of the proceedings for the repurchase of the Notes pursuant to this Section 15.02.

(d) Notwithstanding the foregoing, no Notes may be repurchased by the Company on any date at the option of the 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 the Company in the payment of the Fundamental Change Repurchase Price with respect to such Notes). The Paying Agent will promptly return to the respective Holders thereof any Certificated Notes held by it during the acceleration of the Notes (except in the case of an acceleration resulting from a Default by the Company in the payment of the Fundamental Change Repurchase Price with respect to such Notes), or any instructions for book-entry transfer of the Notes in compliance with the Applicable Procedures shall be deemed to have been cancelled, and, upon such return or cancellation, as the case may be, the Fundamental Change Repurchase Notice with respect thereto shall be deemed to have been withdrawn.

(e) Notwithstanding the foregoing, the Company shall not be required to repurchase, or to make an offer to repurchase, the Notes upon a Fundamental Change:

(i) if a third party makes such an offer in the manner and at the times required and otherwise in compliance with the requirements for an offer made by the Company pursuant to this Article 15 and such third party purchases all Notes properly surrendered and not validly withdrawn under its offer on the Fundamental Change Repurchase Date; or

(ii) pursuant to clause (2) of the definition of “Fundamental Change” (or a Fundamental Change pursuant to clause (1) of such definition which also results in a Fundamental Change pursuant to clause (2) of such definition) if (x) such Fundamental Change results in the Notes becoming convertible (pursuant to the provisions described in clause 14.07) into an amount of cash per Note that is 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) the Company provides timely notice of the Holders’ right to convert their Notes based on such Fundamental Change as described under Section 14.01.

Section 15.03. Withdrawal of Fundamental Change Repurchase Notice. A Fundamental Change Repurchase Notice may be withdrawn (in whole or in part) by means of a written notice of withdrawal delivered to the Paying Agent in accordance with this Section 15.03 at any time

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prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date, specifying:

(a) the principal amount of the Notes with respect to which such notice of withdrawal is being submitted, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000,

(b) if Certificated Notes have been issued, the certificate number of the Notes in respect of which such notice of withdrawal is being submitted, and

(c) the principal amount, if any, of such Notes that remains subject to the original Fundamental Change Repurchase Notice, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000;

provided, however, that if the Notes are Global Notes, the withdrawal notice must comply with the Applicable Procedures.

Section 15.04. Deposit of Fundamental Change Repurchase Price. (a) The Company shall deposit with the Trustee (or other Paying Agent appointed by the Company, or if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust as provided in Section 4.04) on or prior to 11:00 a.m., New York City time, on the Fundamental Change Repurchase Date an amount of money sufficient to repurchase all of the Notes to be purchased at the appropriate Fundamental Change Repurchase Price; provided, however, that to the extent any such deposit is received by the Trustee (or applicable Paying Agent) after 11:00 a.m., New York City time on any Fundamental Change Repurchase Date, such deposit will be deemed deposited on the next Business Day. Subject to receipt of funds by the Trustee (or other Paying Agent appointed by the Company), payment for Notes surrendered for repurchase (and not validly withdrawn prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date) will be made on the later of (i) the Fundamental Change Repurchase Date with respect to such Note (provided the Holder has satisfied the conditions in Section 15.02) and (ii) the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the Holder thereof in the manner required by Section 15.02, by mailing checks for the amount payable to the Holders of such Notes entitled thereto as they shall appear in the Note Register; provided, however, that payments to the Depositary shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. The Trustee shall, promptly after such payment and upon written demand by the Company, return to the Company any funds in excess of the Fundamental Change Repurchase Price.

(b) If by 11:00 a.m. New York City time, on the Fundamental Change Repurchase Date, the Trustee (or other Paying Agent appointed by the Company) holds money sufficient to make payment on all the Notes or portions thereof that are to be purchased on such Fundamental Change Repurchase Date, then, with respect to Notes that have been properly tendered and not validly withdrawn:

(i) such Notes shall cease to be outstanding and interest shall cease to accrue on such Notes (whether or not book-entry transfer of the Notes has been made or the Notes have been delivered to the Trustee or Paying Agent); and

(ii) all other rights of the Holders of such Notes will terminate on the Fundamental Change Repurchase Date (other than (x) the right to receive the Fundamental

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Change Repurchase Price and (y) if the Fundamental Change Repurchase Date falls after a Regular Record Date but on or prior to the related Interest Payment Date, the right of the Holder on such Regular Record Date to receive the accrued and unpaid interest to, but not including, the Fundamental Change Repurchase Date).

(c) Upon surrender of a Note that is to be purchased in part pursuant to Section 15.02, the Company shall execute and upon receipt of a Company Order, the Trustee shall authenticate and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unpurchased portion of the Note surrendered, without payment of any service charge.

Section 15.05. Covenant to Comply with Applicable Laws Upon Repurchase of Notes. In connection with any repurchase offer, the Company will, if required:

(a) 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;

(b) file a Schedule TO or any other required schedule under the Exchange Act; and

(c) otherwise comply with all federal and state securities laws in connection with any offer by the Company to repurchase the Notes;

in each case, so as to permit the rights and obligations under this Article 15 to be exercised in the time and in the manner specified in this Article 15. To the extent that any securities laws or regulations conflict with the provisions of this Indenture relating to the Company’s obligations to repurchase Notes in connection with a Fundamental Change, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Indenture by virtue of such conflict.

ARTICLE 16

OPTIONAL REDEMPTION

Section 16.01. Optional Redemption. No sinking fund is provided for the Notes. The Notes shall not be redeemable by the Company prior to April 5, 2020. On or after April 5, 2020, the Company may redeem (an “Optional Redemption”) for cash all or any portion of the Notes, at the Redemption Price, if the Last Reported Sale Price of the Common Stock has been at least 130% of the Conversion Price then in effect for at least 20 Trading Days (whether or not consecutive), during any 30 consecutive Trading Day period ending on the Trading Day immediately preceding the date on which the Company provides the Redemption Notice in accordance with Section 16.02.

Section 16.02. Notice of Optional Redemption; Selection of Notes. (a) In case the Company exercises its Optional Redemption right to redeem all or any portion of the Notes pursuant to Section 16.01, it shall fix a date for redemption (each, a “Redemption Date”) and the Company or, at its written request received by the Trustee not less than two Scheduled Trading Days prior to the date of the Redemption Notice (or such shorter period of time as may be acceptable to the Trustee), the Trustee, in the name of and at the expense of the Company, shall deliver or cause to

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be delivered a notice of such Optional Redemption (a “Redemption Notice”) not less than 40 nor more than 55 Scheduled Trading Days prior to the Redemption Date to each Holder of Notes so to be redeemed as a whole or in part, the Trustee and the Paying Agent (if other than the Trustee). The Redemption Date must be a Business Day, and the Company may not specify a Redemption Date that falls on or after the 32nd Scheduled Trading Day immediately preceding the Maturity Date as determined by the Company.

(b) The Redemption Notice, if delivered in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such Redemption Notice by mail or any defect in the Redemption Notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note.

(c) Each Redemption Notice shall be irrevocable and may not be conditional and shall specify:

(i) the Redemption Date;

(ii) the Redemption Price;

(iii) that on the Redemption Date, the Redemption Price will become due and payable upon each Note to be redeemed, and that interest thereon, if any, shall cease to accrue on and after the Redemption Date;

(iv) the place or places where such Notes are to be surrendered for payment of the Redemption Price;

(v) that Holders may surrender their Notes for conversion at any time prior to the close of business on the second Scheduled Trading Day immediately preceding the Redemption Date (unless the Company fails to pay the Redemption Price, in which case a Holder may convert such Notes until the close of business on the Business Day immediately preceding the date on which the Redemption Price has been paid or duly provided for);

(vi) the procedures a converting Holder must follow to convert its Notes and the Settlement Method and Specified Cash Amount, if applicable;

(vii) the Conversion Rate and, if applicable, the number of Additional Shares added to the Conversion Rate in accordance with Section 14.03;

(viii) the CUSIP, ISIN or other similar numbers, if any, assigned to such Notes; and

(ix) in case any Note is to be redeemed in part only, the portion of the principal amount thereof to be redeemed and on and after the Redemption Date, upon surrender of such Note, a new Note in principal amount equal to the unredeemed portion thereof shall be issued.

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(d) If fewer than all of the outstanding Notes are to be redeemed, the Trustee shall select the Notes or portions thereof of a Global Note or the Notes in certificated form to be redeemed (in principal amounts of $1,000 or integral multiples of $1,000 in excess thereof) by lot, on a pro rata basis or by another method the Trustee considers to be fair and appropriate or as required by the rules and procedures of the applicable Depositary. If any Note selected for partial redemption is submitted for conversion in part after such selection, the portion of the Note submitted for conversion shall be deemed (so far as may be possible) to be the portion selected for redemption.

Section 16.03. Payment of Notes Called for Redemption. (a) If any Redemption Notice has been given in respect of the Notes in accordance with Section 16.02, the Notes shall become due and payable on the Redemption Date at the place or places stated in the Redemption Notice and at the applicable Redemption Price. On presentation and surrender of the Notes at the place or places stated in the Redemption Notice, the Notes shall be paid and redeemed by the Company at the applicable Redemption Price.

(b) Prior to 11:00 a.m., New York City time, on the Redemption Date, the Company shall deposit with the Paying Agent or, if the Company or a Subsidiary of the Company is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 4.04 an amount of cash (in immediately available funds if deposited on the Redemption Date), sufficient to pay the Redemption Price of all of the Notes to be redeemed on such Redemption Date; provided, however, that to the extent any such deposit is received by the Trustee (or applicable Paying Agent) after 11:00 a.m., New York City time on any such due date, such deposit will be deemed deposited on the next Business Day. Subject to receipt of funds by the Paying Agent, payment for the Notes to be redeemed shall be made on the Redemption Date for such Notes.

The Paying Agent shall, promptly after such payment and upon written demand by the Company, return to the Company any funds in excess of the Redemption Price and any amounts due and owing to the Trustee or Paying Agent.

(c) Upon surrender of a Note that is to be redeemed in part pursuant to this Article 16, the Company shall execute and upon receipt of a Company Order the Trustee shall authenticate and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unredeemed portion of the Note surrendered, without payment of any service charge.

Section 16.04. Restrictions on Redemption. The Company may not redeem any Notes on any date if the principal amount of the Notes has been accelerated in accordance with the terms of this Indenture, and such acceleration has not been rescinded, on or prior to the Redemption Date (except in the case of an acceleration resulting from a Default by the Company in the payment of the Redemption Price with respect to such Notes).

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ARTICLE 17

MISCELLANEOUS PROVISIONS

Section 17.01. Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.

Section 17.02. Official Acts by Successor Entity. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or Officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the Company.

Section 17.03. Addresses for Notices, Etc. Any notice or demand that by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders on the Company shall be in writing (including facsimile and electronic mail in PDF format) and shall be deemed to have been sufficiently given or made, for all purposes if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Trustee) to Carbonite, Inc., Two Avenue de Lafayette, Boston, Massachusetts 02111, Attention: General Counsel, with a copy sent to Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, Attention: Roxane Reardon and Lia Toback. Any notice, direction, request or demand hereunder to or upon the Trustee shall be in writing (including facsimile and electronic mail in PDF format) and shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to the Corporate Trust Office.

The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.

Any notice or communication delivered or to be delivered to a Holder of Certificated Notes shall be mailed to it by first class mail, postage prepaid, at its address as it appears on the Note Register and shall be sufficiently given to it if so mailed within the time prescribed. Any notice or communication delivered or to be delivered to a Holder of Global Notes shall be delivered in accordance with the Applicable Procedures of the Depositary and shall be sufficiently given to it if so delivered within the time prescribed.

Failure to send a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is sent in the manner provided above, it is duly given, whether or not the addressee receives it.

In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.

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In addition to the foregoing, the Trustee agrees to accept and act upon notice, instructions or directions pursuant to this Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods. If the party elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The party providing electronic instructions agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.

Section 17.04. Governing Law. THIS INDENTURE AND EACH NOTE, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS INDENTURE AND EACH NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 17.05. Intentionally Omitted.

Section 17.06. Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officer’s Certificate and Opinion of Counsel stating that in the opinion of the signors, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied.

Each Officer’s Certificate and Opinion of Counsel provided for, by or on behalf of the Company in this Indenture and delivered to the Trustee with respect to compliance with this Indenture (other than the Officer’s Certificates provided for in Section 4.08) shall include (i) a statement that the Person making such certificate has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statement contained in such certificate is based; (iii) a statement that, in the judgment of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed judgment as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the judgment of such Person, such covenant or condition has been complied with.

Notwithstanding anything to the contrary in this Section 17.06, if any provision in this Indenture specifically provides that the Trustee shall receive an Officer’s Certificate or Opinion of Counsel in connection with any action to be taken by the Trustee or the Company hereunder, the Trustee shall be entitled to such Opinion of Counsel.

Section 17.07. Legal Holidays. If any Interest Payment Date, Fundamental Change Repurchase Date, Conversion Date or Maturity Date is not a Business Day, then any action to be taken on such date need not be taken on such date, but may be taken on the next succeeding Business Day with the same force and effect as if taken on such date, and no interest shall accrue in respect of the delay.

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Section 17.08. No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction.

Section 17.09. Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Custodian, any Bid Solicitation Agent, any Conversion Agent, any authenticating agent, any Note Registrar and their successors hereunder or the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 17.10. Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

Section 17.11. Authenticating Agent. The Trustee may appoint an authenticating agent that shall be authorized to act on its behalf and subject to its direction in the authentication and delivery of Notes in connection with the original issuance thereof and transfers and exchanges of Notes hereunder, including under Section 2.04, Section 2.05, Section 2.06, Section 2.07, Section 10.04, Section 15.04 and Section 16.03 as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this Indenture and those Sections to authenticate and deliver Notes. For all purposes of this Indenture, the authentication and delivery of Notes by the authenticating agent shall be deemed to be authentication and delivery of such Notes “by the Trustee” and a certificate of authentication executed on behalf of the Trustee by an authenticating agent shall be deemed to satisfy any requirement hereunder or in the Notes for the Trustee’s certificate of authentication. Such authenticating agent shall at all times be a Person eligible to serve as trustee hereunder pursuant to Section 7.08.

Any corporation or other entity into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, consolidation or conversion to which any authenticating agent shall be a party, or any corporation or other entity succeeding to all or substantially all the corporate trust business of any authenticating agent, shall be the successor of the authenticating agent hereunder, if such successor corporation or other entity is otherwise eligible under this Section 17.11, without the execution or filing of any paper or any further act on the part of the parties hereto or the authenticating agent or such successor corporation or other entity.

Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any authenticating agent by giving written notice of termination to such authenticating agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any authenticating agent shall cease to be eligible under this Section, the Trustee may appoint a successor authenticating agent (which may be the Trustee), shall give written notice of such appointment to the Company and shall mail notice of such appointment to all Holders as the names and addresses of such Holders appear on the Note Register.

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The Company agrees to pay to the authenticating agent from time to time reasonable compensation for its services although the Company may terminate the authenticating agent, if it determines such agent’s fees to be unreasonable.

The provisions of Section 7.02, Section 7.03, Section 7.04, Section 7.06, Section 8.03 and this Section 17.11 shall be applicable to any authenticating agent.

If an authenticating agent is appointed pursuant to this Section 17.11, the Notes may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternative certificate of authentication in the following form:

,

as Authenticating Agent, certifies that this is one of the Notes described in the within-named Indenture.

By:

Authorized Officer.

Section 17.12. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

Section 17.13. Severability. In the event any provision of this Indenture or in the Notes shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired.

Section 17.14. Waiver of Jury Trial; Submission of Jurisdiction. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.

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Section 17.15. Force Majeure. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

Section 17.16. Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations called for under the Notes or this Indenture. These calculations include, but are not limited to, determinations of the Stock Price or Trading Price, the Last Reported Sale Prices of the 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. The Company shall make all these calculations in good faith and, absent manifest error, such calculations shall be final and binding on Holders of Notes. The Company shall provide a schedule of its calculations to each of the Trustee and the Conversion Agent, and each of the Trustee and Conversion Agent is entitled to rely conclusively upon the accuracy of such calculations without independent verification. The Trustee will forward the Company’s calculations to any Holder of Notes upon the written request of that Holder at the sole cost and expense of the Company. In no event shall the Trustee or the Conversion Agent be charged with knowledge of or have any duty to monitor Stock Price or Measurement Period. Neither the Trustee nor the Conversion Agent shall have any responsibility for calculations or determinations of amounts, determining whether events requiring or permitting conversion have occurred, determining whether any adjustment is required to be made with respect to conversion rights and, if so, how much, or for the delivery of shares of Common Stock.

Section 17.17. U.S.A. Patriot Act.The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to this Indenture agree that they will provide the Trustee with such information as is required to satisfy the requirements of the U.S.A. Patriot Act.

Section 17.18. Tax Withholding.Notwithstanding any other provision of this Indenture, the Company or the Trustee, as the case may be, shall be entitled to make a deduction or withholding from any payment which it makes under this Indenture for or on account of any present or future taxes, duties or charges if and to the extent so required by any applicable law and any current or future regulations or agreements thereunder or official interpretations thereof or any law implementing an intergovernmental approach thereto or by virtue of the relevant Holder failing to satisfy any certification or other requirements in respect of the Notes, in which event the Company or the Trustee, as the case may be, shall make such payment after such withholding or deduction has been made and shall account to the relevant authorities for the amount so withheld or deducted and shall have no obligation to gross up any payment hereunder or pay any additional amount as a result of such withholding tax.

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

ISSUER:
CARBONITE, INC.
By:
	Name:	Anthony Folger
	Title:	Chief Financial Officer and Treasurer

[Signature Page to Indenture]

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
	Name:	Karen R. Beard
	Title:	Vice President

[Signature Page to Indenture]

EXHIBIT A

[FORM OF FACE OF NOTE]

[INCLUDE FOLLOWING LEGEND IF A GLOBAL NOTE]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

[INCLUDE FOLLOWING LEGEND IF A RESTRICTED SECURITY]

[THIS SECURITY AND THE COMMON STOCK, IF ANY, ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND

(2) AGREES FOR THE BENEFIT OF CARBONITE, INC. (THE “COMPANY”) THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE ISSUE DATE HEREOF OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW EXCEPT:

(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF;

(B) PURSUANT TO, AND IN ACCORDANCE WITH, A REGISTRATION STATEMENT THAT IS EFFECTIVE UNDER THE SECURITIES ACT AT THE TIME OF SUCH TRANSFER;

Exhibit A-1

(C) TO A PERSON THAT YOU REASONABLY BELIEVE TO BE A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT; OR

(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH CLAUSE (2)(D) ABOVE, THE COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. ¹]

1	The legend set forth on this page [Insert if a Global Note: (other than the first paragraph hereof)] shall be deemed removed from the face of this Security, without further action of the Company, the Trustee or the Holder(s) of this Security, at such time when the Company delivers written notice to the Trustee of such deemed removal pursuant to Section 2.05(c) of the within-mentioned Indenture
.

Exhibit A-2

CARBONITE, INC.

2.50% Convertible Senior Note due 2022

No. R-[ ] [Initially]² $[ ]

CUSIP No. [141337 AA3]³

ISIN No.: [US141337AA38]³

Carbonite, Inc., a corporation duly organized and validly existing under the laws of the State of Delaware (the “Company,” which term includes any successor corporation or other entity under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to [CEDE & CO.] ⁴[ ]⁵, or registered assigns, the principal amount [as set forth in the “Schedule of Exchanges of Notes” attached hereto]⁶ [of $[ ]] ⁷ or such other amount as reflected on the books and records of the Trustee and the Depositary, on April 1, 2022 and interest thereon as set forth below.

This Note shall bear interest at the rate of 2.50% per year from April 4, 2017 or from the most recent date to which interest had been paid or provided for to, but excluding, the next scheduled Interest Payment Date until April 1, 2022, unless earlier repurchased, redeemed or converted. Accrued interest on this Note shall be computed on the basis of a 360-day year composed of twelve 30-day months and, for a partial month, on the basis of the number of days actually elapsed in a 30-day month. Interest is payable semi-annually in arrears on each April 1 and October 1, commencing on October 1, 2017, to Holders of record at the close of business on the preceding March 15 and September 15 (whether or not such day is a Business Day), respectively. Additional Interest will be payable as set forth in Section 4.06(d), Section 4.06(e) and Section 6.03 of the within-mentioned Indenture, and any reference to interest on, or in respect of, any Note therein shall be deemed to include Additional Interest if, in such context, Additional Interest is, was or would be payable pursuant to any of such Section 4.06(d), Section 4.06(e) or Section 6.03 and any express mention of the payment of Additional Interest in any provision therein and herein shall not be construed as excluding Additional Interest in those provisions thereof and hereof where such express mention is not made.

2	Include if a global note.
3	At such time as the Company notifies the Trustee of the deemed removal of the legend set forth on the immediately preceding page [Insert if a Global Note: (other than the first paragraph thereof)] pursuant to Section 2.05(c) of the within-mentioned Indenture, the CUSIP number for this Note shall be deemed to be CUSIP No. [141337 AB1] and the ISIN No. for this Note shall be deemed to be [US141337AB11].
4	Include if a global note.
5	Include if a certificated note.
6	Include if a global note.
7	Include if a certificated note.

Exhibit A-3

Any Defaulted Amounts shall accrue interest per annum at the rate borne by the Notes from, and including, the relevant payment date to, but excluding, the date on which such Defaulted Amounts shall have been paid by the Company, at its election in accordance with Section 2.03(c) of the Indenture.

The Company shall pay the principal of and interest on this Note, so long as such Note is a Global Note, in immediately available funds to the Depositary or its nominee, as the case may be, as the registered Holder of such Note. As provided in and subject to the provisions of the Indenture, the Company shall pay the principal of any Notes (other than Notes that are Global Notes) upon presentation thereof at the office or agency designated by the Company for that purpose. The Company has initially designated the Trustee as its Paying Agent and Note Registrar in respect of the Notes and the Corporate Trust Office as a place where Notes may be presented for payment or for registration of transfer.

Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note, and any claim, controversy or dispute arising under or related to this Note, shall be construed in accordance with and governed by the laws of the State of New York.

In the case of any conflict between this Note and the Indenture, the provisions of the Indenture shall control and govern.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture.

[Remainder of page intentionally left blank]

Exhibit A-4

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

CARBONITE, INC.
By:
	Name:
	Title:

Dated:
TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
U.S. BANK NATIONAL ASSOCIATION, as Trustee.
By:
	Authorized Signatory

Exhibit A-5

[FORM OF REVERSE OF NOTE]

CARBONITE, INC.

2.50% Convertible Senior Note due 2022

This Note is one of a duly authorized issue of Notes of the Company, designated as its 2.50% Convertible Senior Notes due 2022 (the “Notes”), limited to the aggregate principal amount of $143,750,000 all issued under and pursuant to an Indenture dated as of April 4, 2017 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Conversion Agent, the Company and the Holders of the Notes. Additional Notes may be issued in an unlimited aggregate principal amount, subject to certain conditions specified in the Indenture. The Notes represent that aggregate principal amount of outstanding Notes from time to time endorsed hereon and the aggregate principal amount of outstanding Notes represented hereby may from time to time be increased or reduced to reflect purchases, cancellations, conversions or transfers permitted by the Indenture.

In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of, and interest on, all Notes may be declared, by either the Trustee or Holders of at least 25% in aggregate principal amount of Notes then outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions and certain exceptions set forth in the Indenture.

Subject to the terms and conditions of the Indenture, the Company will make all payments and deliveries in respect of the Fundamental Change Repurchase Price, the Redemption Price and the principal amount on the Maturity Date, as the case may be, to the Holder who surrenders a Note to a Paying Agent to collect such payments in respect of the Note. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. Upon conversion of any Note, the Company shall, at its election, pay or deliver, as the case may be, cash, shares of Common Stock or a combination of cash and shares of Common Stock.

The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the Holders of the Notes, and in certain other circumstances, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures modifying the terms of the Indenture and the Notes as described therein. It is also provided in the Indenture that, subject to certain exceptions, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of all of the Notes waive any past Default or Event of Default under the Indenture and its consequences.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal (including the Fundamental Change Repurchase Price and the Redemption Price, if applicable) of or the consideration due upon conversion of, as the case may be, and accrued and unpaid interest on this Note at the place, at the respective times, at the rate and in the lawful money herein prescribed.

Exhibit A-6

The Notes are issuable in registered form without coupons in denominations of $1,000 principal amount and integral multiples thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations, without payment of any service charge but, if required by the Company or Trustee, with payment of a sum sufficient to cover any transfer or similar tax that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such exchange of Notes being different from the name of the Holder of the old Notes surrendered for such exchange.

The Notes shall not be redeemable at the Company’s option prior to April 5, 2020. On or after April 5, 2020, the Notes may be redeemed by the Company, subject to the satisfaction of certain conditions and in accordance with the terms specified in the Indenture.

Upon the occurrence of a Fundamental Change, the Holder has the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes or any portion thereof (in principal amounts of $1,000 or integral multiples thereof) on the Fundamental Change Repurchase Date at a price equal to the Fundamental Change Repurchase Price.

Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, during certain periods and upon the occurrence of certain conditions specified in the Indenture, prior to the close of business on the second Scheduled Trading Day immediately preceding the Maturity Date, to convert any Notes or portion thereof that is $1,000 or an integral multiple thereof, at the Conversion Rate specified in the Indenture, as adjusted from time to time as provided in the Indenture.

Terms used in this Note and defined in the Indenture are used herein as therein defined.

Exhibit A-7

ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM = as tenants in common

UNIF GIFT MIN ACT = Uniform Gifts to Minors Act

CUST = Custodian

TEN ENT = as tenants by the entireties

JT TEN = joint tenants with right of survivorship and not as tenants in common

Additional abbreviations may also be used though not in the above list.

Exhibit A-8

SCHEDULE OF EXCHANGES OF NOTES⁸

Carbonite, Inc.

2.50% Convertible Senior Notes due 2022

The initial principal amount of this Global Note is [ ] DOLLARS ($[ ]). The following increases or decreases in this Global Note have been made:

Date		Amount of decrease in principal amount of this Global Note	Amount of increase in principal amount of this Global Note	Principal amount of this Global Note following such decrease or increase	Signature of authorized signatory of Trustee or Custodian
8	To be inserted for Global Notes.

Exhibit A-9

ATTACHMENT 1

[FORM OF NOTICE OF CONVERSION]

To: Carbonite, Inc.

The undersigned registered owner of this Note hereby exercises the option to convert this Note, or the portion hereof (that is $1,000 principal amount or an integral multiple thereof) below designated, into cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election, in accordance with the terms of the Indenture referred to in this Note, and directs that any cash payable and any shares of Common Stock issuable and deliverable upon such conversion, together with any cash for any fractional share, and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any shares of Common Stock or any portion of this Note not converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all documentary, stamp or similar issue or transfer taxes, if any in accordance with Section 14.02(d) and Section 14.02(e) of the Indenture. Any amount required to be paid to the undersigned on account of interest accompanies this Note.

In the case of Certificated Notes, the certificate numbers of the Notes to be converted are as set forth below:

Dated:
	Signature(s)
Signature Guarantee
Signature(s) must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or

Attachment 1-1

Notes are to be delivered, other than to and in the name of the registered holder.

Fill in for registration of shares if to be issued, and Notes if to be delivered, other than to and in the name of the registered holder:

(Name)

(Street Address)

(City, State and Zip Code)

Please print name and address

Principal amount to be converted (if less than all): $,000

NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

Social Security or Other Taxpayer

Identification Number

Attachment 1-2

ATTACHMENT 2

[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]

To: Carbonite, Inc.

The undersigned registered owner of this Note hereby acknowledges receipt of a notice from Carbonite, Inc. (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and requests and instructs the Company to pay to the registered holder hereof in accordance with Section 15.02 of the Indenture referred to in this Note (1) the entire principal amount of this Note, or the portion thereof (that is $1,000 principal amount or an integral multiple thereof) below designated, and (2) if such Fundamental Change Repurchase Date does not fall during the period after a Regular Record Date and on or prior to the corresponding Interest Payment Date, accrued and unpaid interest, if any, thereon to, but excluding, such Fundamental Change Repurchase Date.

In the case of Certificated Notes, the certificate numbers of the Notes to be repurchased are as set forth below:

Dated:

Signature(s)

Social Security or Other Taxpayer

Identification Number

Principal amount to be repaid (if less than all): $,000

NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

Attachment 2-1

ATTACHMENT 3

[FORM OF ASSIGNMENT AND TRANSFER]

For value received hereby sell(s), assign(s) and transfer(s) unto (Please insert social security or Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises.

In connection with any transfer of the within Note occurring prior to the Resale Restriction Termination Date, as defined in the Indenture governing such Note, the undersigned confirms that such Note is being transferred:

☐ To Carbonite, Inc. or a Subsidiary thereof; or

☐ Pursuant to a registration statement that has become or been declared effective under the Securities Act of 1933, as amended; or

☐ Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or

☐ Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended, or any other available exemption from the registration requirements of the Securities Act of 1933, as amended.

Attachment 3-1

Dated:

Signature(s)

Signature Guarantee

Signature(s) must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if Notes are to be delivered, other than to and in the name of the registered holder.

NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

Attachment 3-2

EX-4.3

Exhibit 4.3

FIRST SUPPLEMENTAL INDENTURE

FIRST SUPPLEMENTAL INDENTURE, dated as of December 24, 2019 (this “Supplemental Indenture”), by and between Carbonite, Inc., a Delaware corporation, as issuer (the “Company”), and U.S. Bank National Association, as trustee (the “Trustee”), supplements the Indenture dated April 4, 2017 (the “Indenture”), between the Company and the Trustee.

RECITALS OF THE COMPANY

WHEREAS, pursuant to the Indenture, the Company issued $143,750,000 aggregate principal amount of 2.50% Convertible Senior Notes due 2024 (the “Notes”);

WHEREAS, on November 10, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Open Text Corporation (“OpenText”) and Coral Merger Sub Inc., a wholly-owned subsidiary of OpenText (“Merger Sub”);

WHEREAS, pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, Merger Sub commenced a tender offer (the “Offer”) to acquire all of the outstanding shares of Common Stock (the “Shares”), at an offer price of $23.00 per Share in cash, without interest and net of any applicable withholding taxes;

WHEREAS, subject to the satisfaction or waiver of certain conditions, Merger Sub will (i) promptly after the expiration date of the Offer accept for payment all Shares tendered (and not validly withdrawn) pursuant to the Offer (the time of such acceptance, the “Offer Acceptance Time”) and (ii) promptly after the Offer Acceptance Time pay for such Shares;

WHEREAS, upon the terms and subject to the conditions set forth in the Merger Agreement and in accordance with Section 251(h) of the Delaware General Corporation Law, Merger Sub will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of OpenText (the “Merger”), without a meeting or vote of stockholders of the Company. At the effective time of the Merger (the “Effective Time”), the Shares not purchased pursuant to the Offer (other than Shares held by the Company, OpenText, Merger Sub, any wholly-owned subsidiary of the Company, OpenText or Merger Sub or by stockholders of the Company who have perfected their statutory rights of appraisal under Delaware law) will each be converted into the right to receive $23.00 per Share in cash, in each case without interest and net of any withholding;

WHEREAS, pursuant to Section 14.07(a) of the Indenture, the Merger constitutes a Specified Corporate Event, and the Company is required to execute with the Trustee a supplemental indenture providing that, at and after the Effective Time, 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 number of Units of Reference Property that a holder of a number of shares of Common Stock equal to the Conversion Rate immediately prior to the Merger would have been entitled to receive upon such Specified Corporate Event;

WHEREAS, pursuant to the terms of the Merger Agreement and Section 14.07(a) of the Indenture, at and after the Effective Time, a Unit of Reference Property will be comprised of $23.00 in cash;

WHEREAS, Section 10.01(g) of the Indenture provides that the Company and the Trustee may amend or supplement the Indenture and the Notes, without the consent of Holders of any of the Notes at the time outstanding, in connection with any Specified Corporate Event, provided that the Notes are convertible into Reference Property, subject to Section 14.02 of the Indenture, and to make certain related changes to the terms of the Indenture and the Notes to the extent expressly required by the Indenture;

WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture;

WHEREAS, in connection with the execution and delivery of this Supplemental Indenture, the Trustee has received an Officer’s Certificate as contemplated by Sections 7.02(b), 7.07, 10.05, 14.07 and 17.06 of the Indenture and an Opinion of Counsel as contemplated by Sections 10.05 and 17.06 of the Indenture; and

WHEREAS, all conditions precedent provided for in the Indenture relating to the execution of this Supplemental Indenture have been complied with.

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

That for and in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as otherwise provided below) as follows:

ARTICLE I

TERMS

Section 1.01 Definitions. Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Indenture. The terms defined in this Section 1.01 for all purposes of the Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01.

“Daily VWAP” means $23.00;

“Last Reported Sale Price” of the Common Stock means $23.00;

“Reference Property” means cash;

“Stock Price” means $23.00; and

“Unit of Reference Property” means $23.00 in cash.

2

ARTICLE II

EFFECT OF MERGER

Section 2.01 Conversion Right. Pursuant to Section 14.07(a) of the Indenture, at and after the Effective Time, the right to convert each $1,000 principal amount of Notes shall be changed into a right to convert such principal amount of Notes into the number of Units of Reference Property equal to the Conversion Rate in effect immediately prior to the Effective Time; provided, however, that for all conversions that occur after the Effective Time, (i) the consideration due upon conversion of each $1,000 principal aggregate 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 by any Additional Shares pursuant to Section 14.03 of the Indenture), multiplied by one Unit of Reference Property, and (ii) the Company shall satisfy the conversion obligation by paying such cash to the converting Holder on the third Business Day immediately following the Conversion Date.

ARTICLE III

ACCEPTANCE OF SUPPLEMENTAL INDENTURE

Section 3.01 Trustee’s Acceptance. The Trustee hereby accepts this Supplemental Indenture and agrees to perform the same under the terms and conditions set forth in the Indenture.

ARTICLE IV

MISCELLANEOUS PROVISIONS

Section 4.01 Governing Law; Waiver of Trial by Jury. THIS SUPPLEMENTAL INDENTURE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 4.02 Benefits of Supplemental Indenture. Nothing in this Supplemental Indenture, expressed or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Custodian, any Bid Solicitation Agent, any Conversion Agent, any authenticating agent, any Note Registrar and their successors hereunder or the Holders, any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture.

Section 4.03 Execution in Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may

3

be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

Section 4.04 Ratification of Indenture. The Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein provided.

Section 4.05 The Trustee. The recitals in this Supplemental Indenture are made by the Company only and not by the Trustee, and all of the rights, privileges, protections, immunities and benefits afforded to the Trustee under the Indenture are deemed to be incorporated herein, and shall be enforceable by the Trustee hereunder, in each of its capacities hereunder as if set forth herein in full.

Section 4.07 Headings, Etc. The titles and headings of the articles and sections of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

[Signature pages follow]

4

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first written above.

CARBONITE, INC.
By:
Name:	Stephen Munford
Title:	Interim Chief Executive Officer

[Signature Page to Supplemental Indenture]

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
Name:	Karen R. Beard
Title:	Vice President

[Signature Page to Supplemental Indenture]

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Mark J. Barrenechea, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Open Text Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By:		/s/ MARK J. BARRENECHEA
	Mark J. Barrenechea Vice Chair, Chief Executive Officer and Chief Technology Officer

Date: January 30, 2020

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Madhu Ranganathan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Open Text Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By:		/s/ MADHU RANGANATHAN
	Madhu Ranganathan Executive Vice President and Chief Financial Officer
		(Acting Principal Accounting Officer)

Date: January 30, 2020

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Open Text Corporation (the “Company”) for the quarter ended December 31, 2019 as filed with the Securities and Exchange Commission (the “Report”), I, Mark J. Barrenechea, Vice Chair, Chief Executive Officer and Chief Technology Officer of the Company, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:		/s/ MARK J. BARRENECHEA
	Mark J. Barrenechea Vice Chair, Chief Executive Officer and Chief Technology Officer

Date: January 30, 2020

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Open Text Corporation (the “Company”) for the quarter ended December 31, 2019 as filed with the Securities and Exchange Commission (the “Report”), I, Madhu Ranganathan, Executive Vice President and Chief Financial Officer of the Company, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:		/s/ MADHU RANGANATHAN
	Madhu Ranganathan Executive Vice President and Chief Financial Officer
		(Acting Principal Accounting Officer)

Date: January 30, 2020

XML

Other Assets

6 Months Ended

Dec. 31, 2019

Other Assets, Noncurrent Disclosure [Abstract]

OTHER ASSETS

OTHER ASSETS

	As of December 31, 2019		As of June 30, 2019
Deposits and restricted cash	$	13,527	$	13,671
Capitalized costs to obtain a contract	37,692		35,593
Investments	69,712		67,002
Long-term prepaid expenses and other long-term assets	37,127		32,711
Total	$	158,058	$	148,977

Deposits and restricted cash primarily relate to security deposits provided to landlords in accordance with facility lease agreements and cash restricted per the terms of certain contractual-based agreements.

Capitalized costs to obtain a contract relate to incremental costs of obtaining a contract, such as sales commissions, which are eligible for capitalization on contracts to the extent that such costs are expected to be recovered (see note 3 "Revenues").

Investments relate to certain non-marketable equity securities in which we are a limited partner. Our interests in each of these investees range from 4% to below 20%. These investments are accounted for using the equity method. Our share of net income or losses based on our interest in these investments is recorded as a component of other income (expense), net in our Condensed Consolidated Statements of Income. During the three and six months ended December 31, 2019, our share of income (loss) from these investments was $1.3 million and $1.9 million, respectively, (three and six months ended December 31, 2018 — $5.5 million and $7.9 million, respectively).

Long-term prepaid expenses and other long-term assets includes advance payments on long-term licenses that are being amortized over the applicable terms of the licenses and other miscellaneous assets.

XML

Acquisitions - Acquisition of Carbonite, Inc., Preliminary Purchase Price Allocation (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 24, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Goodwill	$ 4,656,492		$ 3,769,908
Carbonite
Business Acquisition [Line Items]
Current assets		$ 131,119
Cash		62,900
Non-current tangible assets		93,111
Liabilities assumed		(578,747)
Total identifiable net assets		485,483
Goodwill		885,547
Net assets acquired		1,371,030
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Restricted Cash and Equivalents		2,400
Carbonite | Customer assets
Business Acquisition [Line Items]
Intangible assets		549,000
Carbonite | Technology assets
Business Acquisition [Line Items]
Intangible assets		$ 291,000

XML

Special Charges (Recoveries) - Schedule of Special Charges Related to Restructuring Plan (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Restructuring Cost and Reserve [Line Items]
Acquisition-related costs	$ 7,779	$ 3,197	$ 10,445	$ 3,704
Other charges (recoveries)	2,686	294	3,245	1,763
Total	10,072	9,380	15,173	32,691
Fiscal 2019 Restructuring Plan
Restructuring Cost and Reserve [Line Items]
Special charges	23	5,993	1,679	26,239
Fiscal 2018 Restructuring Plan
Restructuring Cost and Reserve [Line Items]
Special charges	65	(25)	86	510
Restructuring Plans prior to Fiscal 2018 Restructuring Plan
Restructuring Cost and Reserve [Line Items]
Special charges	$ (481)	$ (79)	$ (282)	$ 475

XML

Property and Equipment

6 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

	As of December 31, 2019
	Cost		Accumulated Depreciation			Net
Furniture and fixtures	$	45,392	$	(29,191	)	$	16,201
Office equipment	2,152		(1,244		)	908
Computer hardware	286,043		(186,562		)	99,481
Computer software	125,736		(95,262		)	30,474
Capitalized software development costs	102,560		(62,420		)	40,140
Leasehold improvements	125,155		(73,802		)	51,353
Land and buildings	49,547		(14,656		)	34,891
Total	$	736,585	$	(463,137	)	$	273,448

 

	As of June 30, 2019
	Cost		Accumulated Depreciation			Net
Furniture and fixtures	$	40,260	$	(26,492	)	$	13,768
Office equipment	1,993		(1,576		)	417
Computer hardware	258,802		(177,402		)	81,400
Computer software	119,018		(87,240		)	31,778
Capitalized software development costs	95,729		(56,205		)	39,524
Leasehold improvements	113,510		(66,520		)	46,990
Land and buildings	49,557		(13,981		)	35,576
Total	$	678,869	$	(429,416	)	$	249,453

XML

Acquisitions - Acquisition of Catalyst Repository Systems Inc. Preliminary Purchase Price Allocation (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019	Jan. 31, 2019
Business Acquisition [Line Items]
Goodwill	$ 4,656,492	$ 3,769,908
Catalyst Repository Systems Inc
Business Acquisition [Line Items]
Current assets			$ 9,699
Non-current tangible assets			5,754
Liabilities assumed			(17,891)
Total identifiable net assets			39,827
Goodwill			30,973
Net assets acquired			70,800
Catalyst Repository Systems Inc | Customer assets
Business Acquisition [Line Items]
Intangible assets			30,607
Catalyst Repository Systems Inc | Technology assets
Business Acquisition [Line Items]
Intangible assets			$ 11,658

XML

Basis of Presentation

6 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements include the accounts of Open Text Corporation and our subsidiaries, collectively referred to as "OpenText" or the "Company". We wholly own all of our subsidiaries with the exception of Open Text South Africa Proprietary Ltd. (OT South Africa) and EC1 Pte. Ltd. (GXS Singapore), which as of December 31, 2019, were 70% and 81% owned, respectively, by OpenText. All inter-company balances and transactions have been eliminated.

Throughout this Quarterly Report on Form 10-Q: (i) the term “Fiscal 2020” means our fiscal year beginning on July 1, 2019 and ending June 30, 2020; (ii) the term “Fiscal 2019” means our fiscal year beginning on July 1, 2018 and ended June 30, 2019; (iii) the term “Fiscal 2018” means our fiscal year beginning on July 1, 2017 and ended June 30, 2018; (iv) the term “Fiscal 2017” means our fiscal year beginning on July 1, 2016 and ended June 30, 2017; and (v) the term “Fiscal 2016” means our fiscal year beginning on July 1, 2015 and ended June 30, 2016.

These Condensed Consolidated Financial Statements are expressed in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The information furnished reflects all adjustments necessary for a fair presentation of the results for the periods presented and includes certain assets and liabilities of Dynamic Solutions Group Inc. (The Fax Guys), with effect from December 2, 2019, and the financial results of Carbonite, Inc. (Carbonite), with effect from December 24, 2019 (see note 19 "Acquisitions").

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. In particular, key estimates, judgments and assumptions include those related to: (i) revenue recognition, (ii) accounting for income taxes, (iii) testing of goodwill for impairment, (iv) the valuation of acquired intangible assets, (v) the valuation of long-lived assets, (vi) the recognition of contingencies, (vii) restructuring accruals, (viii) acquisition accruals and pre-acquisition contingencies, (ix) the realization of investment tax credits, (x) the valuation of stock options granted and obligations related to share-based payments, including the valuation of our long-term incentive plans, and (xi) the valuation of pension obligations.

Impact of Recently Adopted Accounting Pronouncements

Leases

Effective July 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02 “Leases (Topic 842)” (Topic 842) using the modified retrospective transition approach. In accordance with this adoption method, results for reporting periods as of July 1, 2019 are presented under the new standard, while prior period results continue to be reported under the previous standard. Additionally, we elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to (i) carry forward the historical lease classification for any expired or existing leases, (ii) not reassess whether any expired or existing contracts contain leases and (iii) not reassess any initial direct cost for existing leases. We did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date. As a result of this adoption, we recorded the following adjustments as of July 1, 2019 on the Consolidated Balance Sheets:

• An increase in operating lease right of use assets of approximately $217.5 million;

• An increase in total operating lease liabilities of approximately $253.5 million;

• A decrease in prepaid expenses and other current assets of approximately $6.6 million in connection with lease fair value adjustments and prepaid rent;

• A decrease in other assets of approximately $0.2 million in connection with lease fair value adjustments; and

• A decrease in total accrued liabilities of approximately $42.8 million in connection with tenant allowances, deferred rent, lease fair value adjustments, and amounts payable in respect of restructured facilities.

The adoption of Topic 842 had no impact to the Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statement of Shareholders' Equity or Condensed Consolidated Statements of Cash Flows. Please refer to Note 6, “Leases,” for additional information.

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Recent Accounting Pronouncements (Policies)

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. In particular, key estimates, judgments and assumptions include those related to: (i) revenue recognition, (ii) accounting for income taxes, (iii) testing of goodwill for impairment, (iv) the valuation of acquired intangible assets, (v) the valuation of long-lived assets, (vi) the recognition of contingencies, (vii) restructuring accruals, (viii) acquisition accruals and pre-acquisition contingencies, (ix) the realization of investment tax credits, (x) the valuation of stock options granted and obligations related to share-based payments, including the valuation of our long-term incentive plans, and (xi) the valuation of pension obligations.

Accounting Pronouncements

Leases

Effective July 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02 “Leases (Topic 842)” (Topic 842) using the modified retrospective transition approach. In accordance with this adoption method, results for reporting periods as of July 1, 2019 are presented under the new standard, while prior period results continue to be reported under the previous standard. Additionally, we elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to (i) carry forward the historical lease classification for any expired or existing leases, (ii) not reassess whether any expired or existing contracts contain leases and (iii) not reassess any initial direct cost for existing leases. We did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date. As a result of this adoption, we recorded the following adjustments as of July 1, 2019 on the Consolidated Balance Sheets:

• An increase in operating lease right of use assets of approximately $217.5 million;

• An increase in total operating lease liabilities of approximately $253.5 million;

• A decrease in prepaid expenses and other current assets of approximately $6.6 million in connection with lease fair value adjustments and prepaid rent;

• A decrease in other assets of approximately $0.2 million in connection with lease fair value adjustments; and

• A decrease in total accrued liabilities of approximately $42.8 million in connection with tenant allowances, deferred rent, lease fair value adjustments, and amounts payable in respect of restructured facilities.

The adoption of Topic 842 had no impact to the Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statement of Shareholders' Equity or Condensed Consolidated Statements of Cash Flows. Please refer to Note 6, “Leases,” for additional information.

Accounting Pronouncements Adopted in Fiscal 2020

During Fiscal 2020, we have adopted the following ASUs, in addition to those discussed in note 1 "Basis of Presentation". The ASUs listed below did not have a material impact to our reported financial position, results of operations or cash flows:

• ASU No. 2017-12 “Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities” (ASU 2017-12)

• ASU No. 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”

Accounting Pronouncements Not Yet Adopted

Retirement Benefits

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-14 “Compensation-Retirement Benefits-Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (ASU 2018-14), which modifies the disclosure requirements for defined benefit pension plans and other post retirement plans. ASU 2018-14 is effective for us in the first quarter of our fiscal year ending June 30, 2021. We are currently evaluating the impact of our pending adoption of ASU 2018-14 on our consolidated financial statements.

Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward looking information to calculate credit loss estimates. Topic 326 is effective for us in our first quarter of our fiscal year ending June 30, 2021. Topic 326 must be adopted by applying a cumulative effect adjustment to retained earnings. We are currently evaluating Topic 326, including its potential impact to our process and controls. We believe the effect on our consolidated financial statements will largely depend on the composition and credit quality of our financial assets and the economic conditions at the time of adoption.

Revenues

In accordance with Accounting Standards Codification (ASC) Topic 606 "Revenue from Contracts with Customers" (Topic 606), we account for a customer contract when we obtain written approval, the contract is committed, the rights of the parties, including the payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Revenue is recognized when, or as, control of a promised product or service is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for our products and services (at its transaction price). Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based on readily available information, which may include historical, current and forecasted information, taking into consideration the type of customer, the type of transaction and specific facts and circumstances of each arrangement. We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue producing transactions.

We have four revenue streams: license, cloud services and subscriptions, customer support, and professional service and other.

License revenue

Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premises (on-premise).

Perpetual licenses: We sell perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which is generally paid at contract inception. Our perpetual licenses provide a right to use intellectual property (IP) that is functional in nature and have significant stand-alone functionality. Accordingly, for perpetual licenses of functional IP, revenue is recognized at the point-in-time when control has been transferred to the customer, which normally occurs once software activation keys have been made available for download.

Term licenses and Subscription licenses: We sell both term and subscription licenses which provide customers the right to use software for a specified period in exchange for a fee, which may be paid at contract inception or paid in installments over the period of the contract. Like perpetual licenses, both our term licenses and subscription licenses are functional IP that have significant stand-alone functionality. Accordingly, for both term and subscription licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.

Cloud services and subscriptions revenue

Cloud services and subscriptions revenue are from hosting arrangements where in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements). The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis. Our cloud arrangements can be broadly categorized as "platform as a service" (PaaS), "software as a service" (SaaS), cloud subscriptions and managed services.

PaaS/ SaaS/ Cloud Subscriptions (collectively referred to here as cloud-based solutions): We offer cloud-based solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. These services are made available to the customer continuously throughout the contractual period, however, the extent to which the customer uses the services may vary at the customer’s discretion. The payment for cloud-based solutions may be received either at inception of the arrangement, or over the term of the arrangement.

These cloud-based solutions are considered to have a single performance obligation where the customer simultaneously receives and consumes the benefit, and as such we recognize revenue for these cloud-based solutions ratably over the term of the contractual agreement. For example, revenue related to cloud-based solutions that are provided on a usage basis, such as the number of users, is recognized based on a customer’s utilization of the services in a given period.

Additionally, a software license is present in a cloud-based solutions arrangement if all of the following criteria are met:

(i) The customer has the contractual right to take possession of the software at any time without significant penalty; and

(ii) It is feasible for the customer to host the software independent of us.

In these cases where a software license is present in a cloud-based solutions arrangement it is assessed to determine if it is distinct from the cloud-based solutions arrangement. The revenue allocated to the distinct software license would be recognized at the point in time the software license is transferred to the customer, whereas the revenue allocated to the hosting performance obligation would be recognized ratably on a monthly basis over the contractual term unless evidence suggests that revenue is earned, or obligations are fulfilled in a different pattern over the contractual term of the arrangement.

Managed services: We provide comprehensive B2B process outsourcing services for all day-to-day operations of a customers’ B2B integration program. Customers using these managed services are not permitted to take possession of our software and the contract is for a defined period, where customers pay a monthly or quarterly fee. Our performance obligation is satisfied as we provide services of operating and managing a customer's electronic data interchange (EDI) environment. Revenue relating to these services is recognized using an output method based on the expected level of service we will provide over the term of the contract.

In connection with cloud subscription and managed service contracts, we often agree to perform a variety of services before the customer goes live, such as for example, converting and migrating customer data, building interfaces and providing training. These services are considered an outsourced suite of professional services which can involve certain project-based activities. These services can be provided at the initiation of a contract, during the implementation or on an ongoing basis as part of the customer life cycle. These services can be charged separately on a fixed fee or time and materials basis, or the costs associated may be recovered as part of the ongoing cloud subscription or managed services fee. These outsourced professional services are considered to be distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements. The obligation to provide outsourced professional services is satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance

obligations. For outsourced professional services, we recognize revenue by measuring progress toward the satisfaction of our performance obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we recognize revenue at that amount.

Customer support revenue

Customer support revenue is associated with perpetual, term license and on-premise subscription arrangements. As customer support is not critical to the customer's ability to derive benefit from its right to use our software, customer support is considered as a distinct performance obligation when sold together in a bundled arrangement along with the software.

Customer support consists primarily of technical support and the provision of unspecified updates and upgrades on a when-and-if-available basis. Customer support for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Customer support for term and subscription licenses is renewable concurrently with such licenses for the same duration of time. Payments for customer support are generally made at the inception of the contract term or in installments over the term of the maintenance period. Our customer support team is ready to provide these maintenance services, as needed, to the customer during the contract term. As the elements of customer support are delivered concurrently and have the same pattern of transfer, customer support is accounted for as a single performance obligation. The customer benefits evenly throughout the contract period from the guarantee that the customer support resources and personnel will be available to them, and that any unspecified upgrades or unspecified future products developed by us will be made available. Revenue for customer support is recognized ratably over the contract period based on the start and end dates of the maintenance term, in line with how we believe services are provided.

Professional service and other revenue

Our professional services, when offered along with software licenses, consists primarily of technical services and training services. Technical services may include installation, customization, implementation or consulting services. Training services may include access to online modules or delivering a training package customized to the customer’s needs. At the customer’s discretion, we may offer one, all, or a mix of these services. Payment for professional services is generally a fixed fee or is a fee based on time and materials.

Professional services can be arranged in the same contract as the software license or in a separate contract.

As our professional services do not significantly change the functionality of the license and our customers can benefit from our professional services on their own or together with other readily available resources, we consider professional services as distinct within the context of the contract.

Professional service revenue is recognized over time so long as: (i) the customer simultaneously receives and consumes the benefits as we perform them, (ii) our performance creates or enhances an asset the customer controls as we perform, and (iii) our performance does not create an asset with alternative use and we have enforceable right to payment.

If all of the above criteria are met, we use an input-based measure of progress for recognizing professional service revenue. For example we may consider total labor hours incurred compared to total expected labor hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we will recognize revenue at that amount.

Material rights

To the extent that we grant our customer an option to acquire additional products or services in one of our arrangements, we will account for the option as a distinct performance obligation in the contract only if the option provides a material right to the customer that the customer would not receive without entering into the contract. For example if we give the customer an option to acquire additional goods or services in the future at a price that is significantly lower than the current price, this would be a material right as it allows the customer to, in effect, pay in advance for the option to purchase future products or services. If a material right exists in one of our contracts then revenue allocated to the option is deferred and we would recognize revenue only when those future products or services are transferred or when the option expires.

Based on history, our contracts do not typically contain material rights and when they do, the material right is not significant to our consolidated financial statements.

Arrangements with multiple performance obligations

Our contracts generally contain more than one of the products and services listed above. Determining whether goods and services are considered distinct performance obligations that should be accounted for separately or as a single performance obligation may require judgment, specifically when assessing whether both of the following two criteria are met:

• the customer can benefit from the product or service either on its own or together with other resources that are readily available to the customer; and

• our promise to transfer the product or service to the customer is separately identifiable from other promises in the contract.

If these criteria are not met, we determine an appropriate measure of progress based on the nature of our overall promise for the single performance obligation.

If these criteria are met, each product or service is separately accounted for as a distinct performance obligation and the total transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis.

Standalone selling price

The SSP reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers. In most cases we are able to establish the SSP based on observable data. We typically establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in facts and circumstances warrant a review.

If the SSP is not directly observable, then we estimate the amount using either the expected cost plus a margin or residual approach. Estimating SSP requires judgment that could impact the amount and timing of revenue recognized. SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or regional specific factors, competitive positioning, internal costs, profit objectives, and pricing practices.

Transaction Price Allocation

In bundled arrangements, where we have more than one distinct performance obligation, we must allocate the transaction price to each performance obligation based on its relative SSP. However, in certain bundled arrangements, the SSP may not always be directly observable. For instance, in bundled arrangements with license and customer support, we allocate the transaction price between the license and customer support performance obligations using the residual approach because we have determined that the SSP for licenses in these arrangements are highly variable. We use the residual approach only for our license arrangements. When the SSP is observable but contractual pricing does not fall within our established SSP range, then an adjustment is required and we will allocate the transaction price between license and customer support at a constant ratio reflecting the mid-point of the established SSP range.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly.

Sales to resellers

We execute certain sales contracts through resellers, distributors and channel partners (collectively referred to as resellers). For these type of agreements, we assess whether we are considered the principal or the agent in the arrangement. We consider factors such as, but not limited to, whether or not the reseller has the ability to set the price for which they sell our software products to end users and whether or not resellers distribution rights are limited such that any potential sales are subject to OpenText’s review and approval before delivery of the software product can be made. If we determine that we are the principal in the arrangement, then revenue is recognized based on the transaction price for the sale of the software product to the end user at the gross amount. If that is not known, then the net amount received from the reseller is the transaction price. If we determine that we are the agent in the agreement, then revenue is recognized based on the transaction price for the sale of the software product to the reseller, less any applicable commissions paid or discounts or rebates, if offered. Costs or commissions paid to the reseller would be recognized as a reduction of revenue unless we received a distinct good or service in return. Similarly, any discounts or rebates offered by the reseller would be recognized as a reduction of revenue.

Typically, we conclude that we are the principal in our reseller agreements, as we have control over the service and products prior to being transferred to the end customer.

We also assess the creditworthiness of each reseller and if they are newly formed, undercapitalized or in financial difficulty, we defer any revenues expected to emanate from such reseller and recognize revenue only when cash is received, and all other revenue recognition criteria under Topic 606 are met.

Rights of return and other incentives

We do not generally offer rights of return or any other incentives such as concessions, product rotation, or price protection and, therefore, do not provide for or make estimates of rights of return and similar incentives. However, we do offer consumers who purchase certain of our products on-line directly from us an unconditional full 70-days money-back guarantee. Distributors and resellers are also permitted to return the consumer products, subject to certain limitations. Revenue is reduced for such rights based on the estimate of future returns originating from contractual agreements with these customers.

Additionally, in some contracts, however, discounts may be offered to the customer for future software purchases and other additional products or services. Such arrangements grant the customer an option to acquire additional goods or services in the future at a discount and therefore are evaluated under guidance related to “material rights” as discussed above.

Other policies

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice date. In certain arrangements, we will receive payment from a customer either before or after the performance obligation to which the invoice relates has been satisfied. As a practical expedient, we do not account for significant financing components if the period between when we transfer the promised good or service to the customer and when the customer pays for the product or service will be one year or less. On that basis, our contracts for license and maintenance typically do not contain a significant financing component, however, in determining the transaction price we consider whether we need to adjust the promised consideration for the effects of the time value of money if the timing of payments provides either the customer or OpenText with a significant benefit of financing. Our managed services contracts may not include an upfront charge for outsourced professional services performed as part of an implementation and are recovered through an ongoing fee. Therefore, these contracts may be expected to have a financing component associated with revenue being recognized in advance of billings.

We may modify contracts to offer customers additional products or services. The additional products and services will be considered distinct from those products or services transferred to the customer before the modification and will be accounted for as a separate contract. We evaluate whether the price for the additional products and services reflects the SSP adjusted as appropriate for facts and circumstances applicable to that contract. In determining whether an adjustment is appropriate, we evaluate whether the incremental consideration is consistent with the prices previously paid by the customer or similar customers.

Certain of our subscription services and product support arrangements generally contain performance response time guarantees. For subscription services arrangements, we estimate variable consideration using a portfolio approach because performance penalties are tied to standard response time requirements. For product support arrangements, we estimate variable consideration on a contract basis because such arrangements are customer-specific. For both subscription services and product support arrangements, we use an expected value approach to estimate variable consideration based on historical business practices and current and future performance expectations to determine the likelihood of incurring penalties.

Performance Obligations

A summary of our typical performance obligations and when the obligations are satisfied are as follows:

Performance Obligation	When Performance Obligation is Typically Satisfied
License revenue:
Software licenses (Perpetual,Term, Subscription)	When software activation keys have been made available for download (point in time)
Cloud services and subscriptions revenue:
Outsourced Professional Services	As the services are provided (over time)
Managed Services / Ongoing Hosting / SaaS	Over the contract term, beginning on the date that service is made available (i.e. "Go live") to the customer (over time)
Customer support revenue:
When and if available updates and upgrades and technical support	Ratable over the course of the service term (over time)
Professional service and other revenue:
Professional services	As the services are provided (over time)

Contract Balances

A contract asset will be recorded if we have recognized revenue but do not have an unconditional right to the related consideration from the customer. For example, this will be the case if implementation services offered in a cloud arrangement are identified as a separate performance obligation and are provided to a customer prior to us being able to bill the customer. In addition, a contract asset may arise in relation to subscription licenses if the license revenue that is recognized upfront exceeds the amount that we are able to invoice the customer at that time. Contract assets are reclassified to accounts receivable when the rights become unconditional.

We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer for future obligations to transfer products or services. Our deferred revenues primarily relate to customer support agreements which have been paid for by customers prior to the performance of those services.

Incremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not have incurred if the contract had not been obtained, such as sales commissions. We have determined that certain of our commission programs meet the requirements to be capitalized. Some commission programs are not subject to capitalization as the commission expense is paid and recognized as the related revenue is recognized. In assessing costs to obtain a contract, we apply a practical expedient that allows us to assess our incremental costs on a portfolio of contracts with similar characteristics instead of assessing the incremental costs on each individual contract. We do not expect the financial statement effects of applying this practical expedient to the portfolio of contracts to be materially different than if we were to apply the new standard to each individual contract.

We pay commissions on the sale of new customer contracts as well as for renewals of existing contracts to the extent the renewals generate incremental revenue. Commissions paid on renewal contracts are limited to the incremental new revenue and therefore these payments are not commensurate with the commission paid on the original sale. We allocate commission costs to the performance obligations in an arrangement consistent with the allocation of the transaction price. Commissions allocated to the license performance obligation are expensed at the time the license revenue is recognized. Commissions allocated to professional service performance obligations are expensed as incurred, as these contracts are generally for one year or less and we apply a practical expedient to expense costs as incurred if the amortization period would have been one year or less. Commissions allocated to maintenance, managed services, on-going hosting arrangements or other recurring services, are capitalized and amortized consistent with the pattern of transfer to the customer of the services over the period expected to benefit from the commission payment. As commissions paid on renewals are not commensurate with the original sale, the period of benefit considers anticipated renewals. The benefit period is estimated to be approximately six years which is based on our customer contracts and the estimated life of our technology.

Expenses for incremental costs associated with obtaining a contract are recorded within sales and marketing expense in the Condensed Consolidated Statements of Income.

Leases

We account for a contract as a lease when we have the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine the initial classification and measurement of our right of use (ROU) assets and lease liabilities at the lease commencement date and thereafter if modified.

ROU assets represent our right to control the underlying assets under lease, and the lease liability is our obligation to make the lease payments related to the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are recognized on the Consolidated Balance Sheets based on the present value of future minimum lease payments to be made over the lease term. When available, we will use the rate implicit in the lease to discount lease payments to present value. However, real estate leases generally do not provide a readily determinable implicit rate, therefore, we must estimate our incremental borrowing rate to discount the lease payments. We estimate our incremental borrowing rate based on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located.

The ROU asset equals the lease liability, adjusted for any initial direct costs, prepaid rent and lease incentives. Fixed lease costs are included in the recognition of ROU assets and lease liabilities. Variable lease costs are not included in the measurement of the lease liability. These variable lease payments are recognized in the Consolidated Statements of Income in the period in which the obligation for those payments is incurred. Consistent with previous lease accounting rules under ASC Topic 840, lease expense for minimum lease payments continue to be recognized in the Consolidated Statements of Income on a straight-line basis over the lease term.

We have not elected the practical expedient to combine lease and non-lease components in the determination of lease costs for our facility leases. For all other asset classes, we have elected the practical expedient to combine the lease and the non-lease components. The lease liability includes lease payments related to options to extend or renew the lease term only if we are reasonably certain we will exercise those options. Our leases typically do not contain any material residual value guarantees or restrictive covenants.

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Leases (Tables)

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

Lease Costs and Other Information

The following illustrates the various components of operating lease costs, lease term and discount rate for the period indicated:

	Three Months Ended December 31, 2019			Six Months Ended December 31, 2019
Operating lease cost	$	15,955		$	32,102
Short-term lease cost	190			288
Variable lease cost	764			1,507
Sublease income	(1,583		)	(3,137		)
Total lease cost	$	15,326		$	30,760
Weighted-average remaining lease term	6.05 years			6.05 years
Weighted-average discount rate	3.28		%	3.28		%

Supplemental Cash Flow Information

The following table presents supplemental information relating to cash flows arising from lease transactions. Cash payment made for variable lease cost and short-term lease are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below:

	Three Months Ended December 31, 2019		Six Months Ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities:	$	18,461	$	36,070
Right of use assets obtained in exchange for new operating lease liabilities	$	10,557	$	15,417

Maturity of Lease Liabilities

The following table presents the future minimum lease payments under our operating leases liabilities as of December 31, 2019:

Fiscal years ending June 30,
2020 (six months ended June 30)	$	39,817
2021	66,295
2022	54,406
2023	41,187
2024	30,844
Thereafter	81,161
Total Lease payments	$	313,710
Less: Imputed interest	(28,450		)
Total	$	285,260
Reported as
Current operating lease liabilities	66,579
Non-current operating lease liabilities	218,681
Total	$	285,260

Maturity of Non-cancellable Operating Leases

The following table presents the future minimum lease payments under our operating leases, based on the expected due dates of the various agreements as of June 30, 2019, as previously reported in our Annual Report on Form 10-K for the year ended June 30, 2019, prior to the adoption of Topic 842:

Fiscal years ending June 30,
2020	$	72,853
2021	59,451
2022	46,943
2023	33,871
2024	25,570
Thereafter	80,163
Total minimum lease payments (1)	$	318,851

⁽¹⁾ Net of $30.7 million of sublease income to be received from properties which we have subleased to third parties.

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Revenues - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Total revenues	$ 771,557	$ 735,231	$ 1,468,445	$ 1,402,388
Point in time
Disaggregation of Revenue [Line Items]
Total revenues	138,095	132,756	215,993	209,643
Over time (including professional service and other revenue)
Disaggregation of Revenue [Line Items]
Total revenues	633,462	602,475	1,252,452	1,192,745
Recurring revenue
Disaggregation of Revenue [Line Items]
Total revenues	563,848	529,587	1,113,411	1,049,221
Cloud services and subscriptions
Disaggregation of Revenue [Line Items]
Total revenues	248,340	219,233	485,605	427,316
Customer support revenue
Disaggregation of Revenue [Line Items]
Total revenues	315,508	310,354	627,806	621,905
License revenue (perpetual, term and subscriptions)
Disaggregation of Revenue [Line Items]
Total revenues	138,095	132,756	215,993	209,643
Professional service and other revenue
Disaggregation of Revenue [Line Items]
Total revenues	69,614	72,888	139,041	143,524
Americas
Disaggregation of Revenue [Line Items]
Total revenues	450,691	420,696	870,401	810,036
EMEA
Disaggregation of Revenue [Line Items]
Total revenues	252,268	243,937	462,435	458,412
Asia Pacific
Disaggregation of Revenue [Line Items]
Total revenues	$ 68,598	$ 70,598	$ 135,609	$ 133,940

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Earnings Per Share (Tables)

6 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Basic earnings per share
Net income attributable to OpenText	$	107,467	$	104,432	$	181,868	$	140,756
Basic earnings per share attributable to OpenText	$	0.40	$	0.39	$	0.67	$	0.52
Diluted earnings per share
Net income attributable to OpenText	$	107,467	$	104,432	$	181,868	$	140,756
Diluted earnings per share attributable to OpenText	$	0.40	$	0.39	$	0.67	$	0.52
Weighted-average number of shares outstanding (in 000's)
Basic	270,450		268,524		270,232		268,276
Effect of dilutive securities	1,140		876		1,096		1,120
Diluted	271,590		269,400		271,328		269,396
Excluded as anti-dilutive(1)	2,541		3,171		2,360		2,597

⁽¹⁾ Represents options to purchase Common Shares excluded from the calculation of diluted earnings per share because the exercise price of the stock options was greater than or equal to the average price of the Common Shares during the period.

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Other Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments	$ 1,300	$ 5,500	$ 1,948	$ 7,863
Minimum
Schedule of Equity Method Investments [Line Items]
Ownership percentage	4.00%		4.00%
Maximum
Schedule of Equity Method Investments [Line Items]
Ownership percentage	20.00%		20.00%

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Pension Plans and Other Post Retirement Benefits - Components of Net Pension Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Assumptions:
Net pension expense			$ 2,895	$ 2,254
Pension Plan
Assumptions:
Service cost	$ 534	$ 435	1,054	897	$ 1,887
Interest cost	287	352	570	711	1,431
Amortization of actuarial (gains) and losses	224	69	448	138
Net pension expense	1,045	856	2,072	1,746
Pension Plan | CDT defined benefit plan
Assumptions:
Service cost	144	136	286	277	550
Interest cost	115	159	229	324	642
Amortization of actuarial (gains) and losses	235	175	469	351
Net pension expense	494	470	984	952
Pension Plan | GXS GER defined benefit plan
Assumptions:
Service cost	80	140	159	285	566
Interest cost	84	121	168	247	489
Amortization of actuarial (gains) and losses	61	33	122	66
Net pension expense	225	294	449	598
Pension Plan | GXS PHP defined benefit plan
Assumptions:
Service cost	310	159	609	335	771
Interest cost	88	72	173	140	$ 300
Amortization of actuarial (gains) and losses	(72)	(139)	(143)	(279)
Net pension expense	$ 326	$ 92	$ 639	$ 196

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Share Capital, Option Plans and Share-Based Payments - Schedule of Share-Based Payments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	$ 7,783	$ 6,885	$ 14,674	$ 13,440
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	2,667	2,319	4,677	4,921
Performance Share Units | Long Term Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	1,521	851	2,921	1,694
Restricted Stock Units (RSUs) | Long Term Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	1,309	1,626	2,969	3,011
Restricted Stock Units (RSUs) | Other plans
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	10	52	20	133
Deferred Share Units (directors)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	1,124	1,032	1,875	1,693
Employee Share Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total share-based compensation expense	$ 1,152	$ 1,005	$ 2,212	$ 1,988

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Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($)	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Total principal payments due	$ 3,526,250,000	$ 2,637,500,000
Debt issuance costs	(27,199,000)	(28,027,000)
Total amount outstanding	3,514,017,000	2,614,878,000
Less:
Current portion of long-term debt	913,631,000	10,000,000
Non-current portion of long-term debt	2,600,386,000	2,604,878,000
Term Loan B
Debt Instrument [Line Items]
Total principal payments due	982,500,000	987,500,000
Less:
Current portion of long-term debt	10,000,000	10,000,000
Senior Notes | Senior Notes 2026
Debt Instrument [Line Items]
Total principal payments due	850,000,000	850,000,000
Premium on notes	5,085,000	5,405,000
Senior Notes | Senior Notes 2023
Debt Instrument [Line Items]
Total principal payments due	800,000,000	800,000,000
Convertible Debt | Notes due 2022
Debt Instrument [Line Items]
Total principal payments due	143,750,000	0
Premium on notes	9,881,000	0
Less:
Current portion of long-term debt	153,631,000	0
Revolver | Line of Credit
Debt Instrument [Line Items]
Total principal payments due	750,000,000	0	$ 0
Less:
Current portion of long-term debt	$ 750,000,000	$ 0

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Label	Element	Value
Restricted Cash	us-gaap_RestrictedCash	$ 2,805,000
Restricted Cash	us-gaap_RestrictedCash	$ 4,829,000

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Pension Plans and Other Post Retirement Benefits - Additional Information (Details) - Pension Plan	6 Months Ended
	Dec. 31, 2019 USD ($)
CDT defined benefit plan
Assumptions:
Contributions made by employer to plan	$ 0
Amount to be amortized from accumulated other comprehensive income (loss) over the next fiscal year	500,000
GXS GER defined benefit plan
Assumptions:
Contributions made by employer to plan	0
Amount to be amortized from accumulated other comprehensive income (loss) over the next fiscal year	100,000
GXS PHP defined benefit plan
Assumptions:
Contributions made by employer to plan	0
Amount to be amortized from accumulated other comprehensive income (loss) over the next fiscal year	100,000
Fair value of plan assets	$ 30,000.00

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Share Capital, Option Plans and Share-Based Payments - Long-Term Incentive Plans (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of treasury stock (in shares)	255,502	544,929	255,502	547,897
Payments for Repurchase of Common Stock	$ 0	$ 12,800,000	$ 12,424,000	$ 24,534,000
Long Term Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of plan			3 years
Compensation cost related to unvested awards not yet recognized	$ 24,100,000		$ 24,100,000
Unvested stock awards compensation cost, weighted average recognition period			2 years 1 month 6 days
Fiscal 2019 LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of treasury stock (in shares)	255,502
Payments for Repurchase of Common Stock	$ 9,100,000

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Pension Plans and Other Post Retirement Benefits (Tables)

6 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Schedule of Defined Benefit Plan and Long-Term Employee Benefit Obligations

The following table provides details of our defined benefit pension plans and long-term employee benefit obligations for Open Text Document Technologies GmbH (CDT), GXS GmbH (GXS GER), GXS Philippines, Inc. (GXS PHP) and other plans as of December 31, 2019 and June 30, 2019:

	As of December 31, 2019
	Total benefit obligation		Current portion of benefit obligation*		Non-current portion of benefit obligation
CDT defined benefit plan	$	35,221	$	700	$	34,521
GXS GER defined benefit plan	25,650		986		24,664
GXS PHP defined benefit plan	7,113		93		7,020
Other plans	7,964		491		7,473
Total	$	75,948	$	2,270	$	73,678

	As of June 30, 2019
	Total benefit obligation		Current portion of benefit obligation*		Non-current portion of benefit obligation
CDT defined benefit plan	$	35,836	$	675	$	35,161
GXS GER defined benefit plan	26,739		1,012		25,727
GXS PHP defined benefit plan	6,904		124		6,780
Other plans	8,052		481		7,571
Total	$	77,531	$	2,292	$	75,239

* The current portion of the benefit obligation has been included within "Accrued salaries and commissions", all within "Accounts payable and accrued liabilities" in the Condensed Consolidated Balance Sheets (see note 10 "Accounts Payable and Accrued Liabilities").

Schedule of the Change in the Benefit Obligation of Defined Benefit Plan

The following are the details of the change in the benefit obligation for each of the above mentioned pension plans for the periods indicated: 

	As of December 31, 2019												As of June 30, 2019
	CDT			GXS GER			GXS PHP			Total			CDT			GXS GER			GXS PHP			Total
Benefit obligation—beginning of period	$	35,836		$	26,739		$	6,904		$	69,479		$	32,651		$	25,382		$	3,853		$	61,886
Service cost	286			159			609			1,054			550			566			771			1,887
Interest cost	229			168			173			570			642			489			300			1,431
Benefits paid	(313		)	(472		)	(115		)	(900		)	(626		)	(996		)	(140		)	(1,762		)
Actuarial (gain) loss	90			(269		)	(559		)	(738		)	3,365			1,872			1,957			7,194
Foreign exchange (gain) loss	(907		)	(675		)	101			(1,481		)	(746		)	(574		)	163			(1,157		)
Benefit obligation—end of period	35,221			25,650			7,113			67,984			35,836			26,739			6,904			69,479
Less: Current portion	(700		)	(986		)	(93		)	(1,779		)	(675		)	(1,012		)	(124		)	(1,811		)
Non-current portion of benefit obligation	$	34,521		$	24,664		$	7,020		$	66,205		$	35,161		$	25,727		$	6,780		$	67,668

Components of Net Pension Expense for Pension Plan

The following are details of net pension expense relating to the following pension plans:

	Three Months Ended December 31,
	2019									2018
Pension expense:	CDT		GXS GER		GXS PHP			Total		CDT		GXS GER		GXS PHP			Total
Service cost	$	144	$	80	$	310		$	534	$	136	$	140	$	159		$	435
Interest cost	115		84		88			287		159		121		72			352
Amortization of actuarial (gains) and losses	235		61		(72		)	224		175		33		(139		)	69
Net pension expense	$	494	$	225	$	326		$	1,045	$	470	$	294	$	92		$	856

	Six Months Ended December 31,
	2019									2018
Pension expense:	CDT		GXS GER		GXS PHP			Total		CDT		GXS GER		GXS PHP			Total
Service cost	$	286	$	159	$	609		$	1,054	$	277	$	285	$	335		$	897
Interest cost	229		168		173			570		324		247		140			711
Amortization of actuarial (gains) and losses	469		122		(143		)	448		351		66		(279		)	138
Net pension expense	$	984	$	449	$	639		$	2,072	$	952	$	598	$	196		$	1,746

Schedule of Weighted-Average Key Assumptions Used for CDT Pension Plan

In determining the fair value of the pension plan benefit obligations as of December 31, 2019 and June 30, 2019, respectively, we used the following weighted-average key assumptions:

	As of December 31, 2019			As of June 30, 2019
	CDT	GXS GER	GXS PHP	CDT	GXS GER	GXS PHP
Assumptions:
Salary increases	2.50%	2.50%	6.50%	2.50%	2.50%	6.50%
Pension increases	2.00%	2.00%	N/A	2.00%	2.00%	N/A
Discount rate	1.30%	1.30%	5.25%	1.32%	1.32%	5.00%
Normal retirement age	65-67	65-67	60	65-67	65-67	60
Employee fluctuation rate:
to age 20	—%	—%	12.19%	—%	—%	12.19%
to age 25	—%	—%	16.58%	—%	—%	16.58%
to age 30	1.00%	—%	13.97%	1.00%	—%	13.97%
to age 35	0.50%	—%	10.77%	0.50%	—%	10.77%
to age 40	—%	—%	7.39%	—%	—%	7.39%
to age 45	0.50%	—%	3.28%	0.50%	—%	3.28%
to age 50	0.50%	—%	—%	0.50%	—%	—%
from age 51	1.00%	—%	—%	1.00%	—%	—%

Anticipated Pension Payments Under Pension Plan

Anticipated pension payments under the pension plans for the fiscal years indicated below are as follows:

	Fiscal years ending June 30,
	CDT		GXS GER		GXS PHP
2020 (six months ended June 30)	$	331	$	493	$	31
2021	739		985		268
2022	810		1,017		266
2023	909		1,017		222
2024	1,014		1,023		278
2025 to 2029	5,851		5,171		2,890
Total	$	9,654	$	9,706	$	3,955

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Fair Value Measurement (Tables)

6 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our financial assets and liabilities measured at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2019 and June 30, 2019:

December 31, 2019

June 30, 2019

Fair Market Measurements using:

Fair Market Measurements using:

December 31, 2019

Quoted prices in active markets for identical assets/ (liabilities)

Significant other observable inputs

Significant unobservable inputs

June 30, 2019

Quoted prices in active markets for identical assets/ (liabilities)

Significant other observable inputs

Significant unobservable inputs

(Level 1)

(Level 2)

(Level 3)

(Level 1)

(Level 2)

(Level 3)

Financial Assets:

Foreign currency forward contracts designated as cash flow hedges (note 17)

$

1,005

N/A

$

1,005

N/A

$

736

N/A

$

736

N/A

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Derivative Instruments and Hedging Activities - Fair Value in the Condensed Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2019	Jun. 30, 2019
Foreign currency forward contracts
Derivatives, Fair Value [Line Items]
Notional amount of forward contracts held to sell U.S. dollars in exchange for Canadian dollars	$ 64,000	$ 62,000
Prepaid expenses and other current assets | Cash Flow Hedging | Designated As Hedging Instrument | Foreign currency forward contracts
Derivatives, Fair Value [Line Items]
Fair Value Asset (Liability)	$ 1,005
Accounts payable and accrued liabilities | Cash Flow Hedging | Designated As Hedging Instrument | Foreign currency forward contracts
Derivatives, Fair Value [Line Items]
Fair Value Asset (Liability)		$ 736
Minimum
Derivatives, Fair Value [Line Items]
Contract maturity	1 month
Maximum
Derivatives, Fair Value [Line Items]
Contract maturity	12 months

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Acquired Intangible Assets - Calculation Of Acquired Intangibles By Asset Class (Details) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2019	Jun. 30, 2019
Finite-Lived Intangible Assets, Net [Abstract]
Cost	$ 3,078,218	$ 2,233,435
Accumulated Amortization	(1,270,146)	(1,086,931)
Total	1,808,072	1,146,504
Technology assets
Finite-Lived Intangible Assets, Net [Abstract]
Cost	1,126,601	835,498
Accumulated Amortization	(431,856)	(349,259)
Total	$ 694,745	486,239
Weighted-average amortization period (in years) for acquired intangible assets	5 years
Customer assets
Finite-Lived Intangible Assets, Net [Abstract]
Cost	$ 1,951,617	1,397,937
Accumulated Amortization	(838,290)	(737,672)
Total	$ 1,113,327	$ 660,265
Weighted-average amortization period (in years) for acquired intangible assets	7 years

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Leases - Additional Information (Details)	Dec. 31, 2019
Minimum
Lessee, Lease, Description [Line Items]
Operating leases, term of contract	1 year
Operating leases, term of extension option	3 years
Maximum
Lessee, Lease, Description [Line Items]
Operating leases, term of contract	10 years
Operating leases, term of extension option	5 years
Land
Lessee, Lease, Description [Line Items]
Operating leases, term of contract	49 years
Operating leases, term of extension option	49 years

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Income Taxes - Interest and Penalties Related to Liabilities for Income Tax Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Interest expense	$ 2,652	$ 1,570	$ 1,234	$ 4,607
Penalties expense (recoveries)	(156)	67	75	559
Total	$ 2,496	$ 1,637	$ 1,309	$ 5,166

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Share Capital, Option Plans and Share-Based Payments - RSU's, DSU's and ESPP (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)	0	0	0	0
Award vesting period			3 years
Stock issued (in shares)	0	5,826	0	8,794
Stock issued		$ 0.2		$ 0.3
Deferred Stock Units (DSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)	70,609	90,184	74,408	93,342
Employee Share Purchase Plan (ESPP)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards purchase price discount			15.00%
Common shares eligible for issuance (in shares)	139,462	160,088	327,543	336,162
Cash received from employee stock purchase plan	$ 5.2	$ 4.4	$ 11.7	$ 10.1

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Revenues - Transaction Price Allocated to the Remaining Performance Obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01	Dec. 31, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	50.00%
Expected timing of satisfaction, period	12 months

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Supplemental Cash Flow Disclosures (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Supplemental Cash Flow Information [Abstract]
Cash paid during the period for interest	$ 34,685	$ 36,136	$ 68,129	$ 68,763
Cash received during the period for interest	3,474	2,624	7,423	3,359
Cash paid during the period for income taxes	$ 23,037	$ 31,445	$ 33,372	$ 39,812

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Derivative Instruments and Hedging Activities

6 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Foreign Currency Forward Contracts

We are engaged in hedging programs with various banks to limit the potential foreign exchange fluctuations incurred on future cash flows relating to a portion of our Canadian dollar payroll expenses. We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of our business, in particular to changes in the Canadian dollar on account of large costs that are incurred from our centralized Canadian operations, which are denominated in Canadian dollars. As part of our risk management strategy, we use foreign currency forward contracts to hedge portions of our payroll exposure with typical maturities of between one and twelve months. We do not use foreign currency forward contracts for speculative purposes.

We have designated these transactions as cash flow hedges of forecasted transactions under ASC Topic 815 “Derivatives and Hedging” (Topic 815). As the critical terms of the hedging instrument and of the entire hedged forecasted transaction are the same, in accordance with Topic 815, we have been able to conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within other comprehensive income. The fair value of the contracts, as of December 31, 2019, is recorded within "Prepaid expenses and other current assets".

As of December 31, 2019, the notional amount of forward contracts we held to sell U.S. dollars in exchange for Canadian dollars was $64.0 million (June 30, 2019—$62.0 million).

Fair Value of Derivative Instruments and Effect of Derivative Instruments on Financial Performance

The effect of these derivative instruments on our Condensed Consolidated Financial Statements for the periods indicated below were as follows (amounts presented do not include any income tax effects).

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets (see note 16 "Fair Value Measurement")

		As of December 31, 2019		As of June 30, 2019
Derivatives	Balance Sheet Location	Fair Value Asset (Liability)		Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges	Prepaid expenses and other current assets (Accounts payable and accrued liabilities)	$	1,005	$	736

Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI)

Three and Six Months Ended December 31, 2019
Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI on Derivatives  (Effective Portion)						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended December 31, 2019			Six Months Ended December 31, 2019				Three Months Ended December 31, 2019			Six Months Ended December 31, 2019
Foreign currency forward contracts	$	1,134		$	356		Operating expenses	$	98		$	87
Three and Six Months Ended December 31, 2018
Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI on Derivatives  (Effective Portion)						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended December 31, 2018			Six Months Ended December 31, 2018				Three Months Ended December 31, 2018			Six Months Ended December 31, 2018
Foreign currency forward contracts	$	(2,554	)	$	(1,871	)	Operating expenses	$	(636	)	$	(1,134	)

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Share Capital, Option Plans and Share-Based Payments

6 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS

SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS

Cash Dividends

For the three and six months ended December 31, 2019, pursuant to the Company’s dividend policy, we declared total non-cumulative dividends of $0.1746 and $0.3492, respectively, per Common Share in the aggregate amount of $47.1 million and $94.1 million, respectively, which we paid during the same period.

For the three and six months ended December 31, 2018, pursuant to the Company’s dividend policy, we paid total non-cumulative dividends of $0.1518 and $0.3036, respectively, per Common Share in the aggregate amount of $40.7 million and $81.2 million, respectively.

Share Capital

Our authorized share capital includes an unlimited number of Common Shares and an unlimited number of Preference Shares. No Preference Shares have been issued.

Treasury Stock

Repurchase

From time to time we may provide funds to an independent agent to facilitate repurchases of our Common Shares in connection with the settlement of awards under the Long-Term Incentive Plans (LTIP) or other plans.

During the three and six months ended December 31, 2019, we repurchased nil and 300,000, respectively, of our Common Shares in the open market, at a cost of approximately nil and $12.4 million, respectively, for potential reissuance under our LTIP or other plans (three and six months ended December 31, 2018—370,265 and 674,265, respectively, Common Shares at a cost of $12.8 million and $24.5 million, respectively). See below for more details on our various plans.

Reissuance

During the three and six months ended December 31, 2019, we reissued 255,502 Common Shares, respectively, from treasury stock (three and six months ended December 31, 2018—544,929 and 547,897 Common Shares, respectively), in connection with the settlement of awards.

Share-Based Payments

Total share-based compensation expense for the periods indicated below is detailed as follows: 

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Stock options	$	2,667	$	2,319	$	4,677	$	4,921
Performance Share Units (issued under LTIP)	1,521		851		2,921		1,694
Restricted Share Units (issued under LTIP)	1,309		1,626		2,969		3,011
Restricted Share Units (other)	10		52		20		133
Deferred Share Units (directors)	1,124		1,032		1,875		1,693
Employee Share Purchase Plan	1,152		1,005		2,212		1,988
Total share-based compensation expense	$	7,783	$	6,885	$	14,674	$	13,440

Summary of Outstanding Stock Options

As of December 31, 2019, an aggregate of 7,511,605 options to purchase Common Shares were outstanding and an additional 8,573,945 options to purchase Common Shares were available for issuance under our stock option plans. Our stock options generally vest over four years and expire between seven and ten years from the date of the grant. Currently we also have options outstanding that vest over five years, as well as options outstanding that vest based on meeting certain market conditions. The exercise price of all our options is set at an amount that is not less than the closing price of our Common Shares on the NASDAQ on the trading day immediately preceding the applicable grant date.

A summary of activity under our stock option plans for the six months ended December 31, 2019 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic  Value ($’000s)
Outstanding at June 30, 2019	7,102,753		$	31.82
Granted	982,440		39.33
Exercised	(414,682	)	27.39
Forfeited or expired	(158,906	)	34.48
Outstanding at December 31, 2019	7,511,605		$	32.99	4.02	$	83,257
Exercisable at December 31, 2019	2,855,956		$	28.42	2.55	$	44,688

We estimate the fair value of stock options using the Black-Scholes option-pricing model or, where appropriate, the Monte Carlo Valuation Method, consistent with the provisions of ASC Topic 718, "Compensation—Stock Compensation" (Topic 718) and SEC Staff Accounting Bulletin No. 107. The option-pricing models require input of subjective assumptions, including the estimated life of the option and the expected volatility of the underlying stock over the estimated life of the option. We use historical volatility as a basis for projecting the expected volatility of the underlying stock and estimate the expected life of our stock options based upon historical data.

We believe that the valuation techniques and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair value of our stock option grants. Estimates of fair value are not intended, however, to predict actual future events or the value ultimately realized by employees who receive equity awards.

For the periods indicated, the weighted-average fair value of options and weighted-average assumptions were as follows:

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Weighted–average fair value of options granted	$	6.74		$	7.37		$	6.49		$	8.55
Weighted-average assumptions used:
Expected volatility	22.03		%	25.95		%	22.09		%	26.05		%
Risk–free interest rate	1.55		%	2.97		%	1.65		%	2.82		%
Expected dividend yield	1.64		%	1.73		%	1.67		%	1.49		%
Expected life (in years)	4.11			4.32			4.11			4.32
Forfeiture rate (based on historical rates)	7		%	6		%	7		%	6		%
Average exercise share price	$	41.13		$	33.97		$	39.33		$	38.56

As of December 31, 2019, the total compensation cost related to the unvested stock option awards not yet recognized was approximately $24.5 million, which will be recognized over a weighted-average period of approximately 2.9 years.

No cash was used by us to settle equity instruments granted under share-based compensation arrangements in any of the periods presented.

We have not capitalized any share-based compensation costs as part of the cost of an asset in any of the periods presented.

For the three and six months ended December 31, 2019, cash in the amount of $6.8 million and $11.4 million, respectively, was received as the result of the exercise of options granted under share-based payment arrangements. The tax benefit realized by us during the three and six months ended December 31, 2019 from the exercise of options eligible for a tax deduction was $0.6 million and $0.9 million, respectively.

For the three and six months ended December 31, 2018, cash in the amount of $1.8 million and $14.2 million, respectively, was received as the result of the exercise of options granted under share-based payment arrangements. The tax benefit realized by us during the three and six months ended December 31, 2018 from the exercise of options eligible for a tax deduction was $15.0 thousand and $0.9 million, respectively.

Long-Term Incentive Plans

We incentivize certain eligible employees, in part, with long-term compensation pursuant to our LTIP. The LTIP is a rolling three year program that grants eligible employees a certain number of target Performance Share Units (PSUs) and/or Restricted Share Units (RSUs). Target PSUs become vested upon the achievement of certain financial and/or operational performance criteria (the Performance Conditions) that are determined at the time of the grant. Target RSUs become vested when an eligible employee remains employed throughout the vesting period.

PSUs and RSUs granted under the LTIPs have been measured at fair value as of the effective date, consistent with Topic 718, and will be charged to share-based compensation expense over the remaining life of the plan. Stock options granted under the LTIPs have been measured using the Black-Scholes option-pricing model, consistent with Topic 718. We estimate the fair value of PSUs using the Monte Carlo pricing model and RSUs have been valued based upon their grant date fair value.

As of December 31, 2019, the total expected compensation cost related to the unvested LTIP awards not yet recognized was $24.1 million, which is expected to be recognized over a weighted average period of 2.1 years.

LTIP grants that have recently vested, or have yet to vest, are described below. LTIP grants are referred to in this Quarterly Report on Form 10-Q based upon the year in which the grants are expected to vest.

Fiscal 2019 LTIP

Grants made in Fiscal 2017 under the LTIP (collectively referred to as Fiscal 2019 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2017 starting on August 14, 2016. We settled the Fiscal 2019 LTIP awards by issuing 255,502 Common Shares from treasury stock during the three months ended December 31, 2019, with a cost of $9.1 million.

Fiscal 2020 LTIP

Grants made in Fiscal 2018 under the LTIP (collectively referred to as Fiscal 2020 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2018 starting on August 7, 2017. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the Fiscal 2020 LTIP. We expect to settle the Fiscal 2020 LTIP awards in stock.

Fiscal 2021 LTIP

Grants made in Fiscal 2019 under the LTIP (collectively referred to as Fiscal 2021 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2019 starting on August 6, 2018. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the Fiscal 2021 LTIP. We expect to settle the Fiscal 2021 LTIP awards in stock.

Fiscal 2022 LTIP

Grants made in Fiscal 2020 under the LTIP (collectively referred to as Fiscal 2022 LTIP), consisting of PSUs and RSUs, took effect in Fiscal 2020 starting on August 5, 2019. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the Fiscal 2022 LTIP. We expect to settle the Fiscal 2022 LTIP awards in stock.

Restricted Share Units (RSUs)

During the three and six months ended December 31, 2019, we did not grant any RSUs to employees in accordance with employment and other non-LTIP related agreements (three and six months ended December 31, 2018—nil). RSUs vest over a specified contract date, typically three years from the respective date of grants. We expect to settle RSU awards in stock.

During the three and six months ended December 31, 2019, we did not issue any Common Shares from treasury stock in connection with the settlement of vested RSUs (three and six months ended December 31, 2018—5,826 and 8,794 Common Shares, respectively, with a cost of $0.2 million and $0.3 million, respectively).

Deferred Stock Units (DSUs)

During the three and six months ended December 31, 2019, we granted 70,609 and 74,408 DSUs, respectively, to certain non-employee directors (three and six months ended December 31, 2018—90,184 and 93,342 DSUs, respectively). The DSUs were issued under our Deferred Share Unit Plan. DSUs granted as compensation for director fees vest immediately, whereas all other DSUs granted vest at our next annual general meeting following the granting of the DSUs. No DSUs are payable by us until the director ceases to be a member of the Board.

Employee Share Purchase Plan (ESPP)

Our ESPP offers employees a purchase price discount of 15%.

During the three and six months ended December 31, 2019, 139,462 and 327,543 Common Shares, respectively, were eligible for issuance to employees enrolled in the ESPP (three and six months ended December 31, 2018—160,088 and 336,162 Common Shares, respectively).

During the three and six months ended December 31, 2019, cash in the amount of approximately $5.2 million and $11.7 million, respectively, was received from employees relating to the ESPP (three and six months ended December 31, 2018—$4.4 million and $10.1 million, respectively).

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
ASSETS
Cash and cash equivalents	$ 675,403	$ 941,009
Accounts receivable trade, net of allowance for doubtful accounts of $17,937 as of December 31, 2019 and $17,011 as of June 30, 2019 (note 4)	526,020	463,785
Contract assets (note 3)	22,794	20,956
Income taxes recoverable (note 15)	24,615	38,340
Prepaid expenses and other current assets	104,962	97,238
Total current assets	1,353,794	1,561,328
Property and equipment (note 5)	273,448	249,453
Operating lease right of use assets (note 6)	253,387
Long-term contract assets (note 3)	17,975	15,386
Goodwill (note 7)	4,656,492	3,769,908
Acquired intangible assets (note 8)	1,808,072	1,146,504
Deferred tax assets (note 15)	930,856	1,004,450
Other assets (note 9)	158,058	148,977
Long-term income taxes recoverable (note 15)	46,151	37,969
Total assets	9,498,233	7,933,975
Current liabilities:
Accounts payable and accrued liabilities (note 10)	417,611	329,903
Current portion of long-term debt (note 11)	913,631	10,000
Operating lease liabilities (note 6)	66,579
Deferred revenues (note 3)	718,861	641,656
Income taxes payable (note 15)	51,298	33,158
Total current liabilities	2,167,980	1,014,717
Long-term liabilities:
Accrued liabilities (note 10)	14,977	49,441
Pension liability (note 12)	73,678	75,239
Long-term debt (note 11)	2,600,386	2,604,878
Long-term operating lease liabilities (note 6)	218,681
Deferred revenues (note 3)	77,335	46,974
Long-term income taxes payable (note 15)	180,507	202,184
Deferred tax liabilities (note 15)	165,457	55,872
Total long-term liabilities	3,331,021	3,034,588
Shareholders’ equity:
Share capital and additional paid-in capital (note 13): 270,608,627 and 269,834,442 Common Shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively; authorized Common Shares: unlimited	1,803,663	1,774,214
Accumulated other comprehensive income	24,690	24,124
Retained earnings	2,201,653	2,113,883
Treasury stock, at cost (847,369 shares at December 31, 2019 and 802,871 shares at June 30, 2019, respectively)	(32,066)	(28,766)
Total OpenText shareholders' equity	3,997,940	3,883,455
Non-controlling interests	1,292	1,215
Total shareholders’ equity	3,999,232	3,884,670
Total liabilities and shareholders’ equity	$ 9,498,233	$ 7,933,975

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Statement of Comprehensive Income [Abstract]
Unrealized gain (loss) on cash flow hedges, tax expense (recovery)	$ 301		$ 95
Unrealized gain (loss) on cash flow hedges, tax expense (recovery)		$ (677)		$ (496)
(Gain) loss reclassified into net income, tax (expense) recovery	(26)		(23)
(Gain) loss reclassified into net income, tax (expense) recovery		169		301
Actuarial gain (loss), tax (recovery) expense	1,308	(519)	59	(213)
Amortization of actuarial (gain) loss into net income, tax recovery (expense)	$ 97	$ 72	$ 243	$ 145

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Long-Term Debt (Tables)

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

Long-term debt is comprised of the following:

	As of December 31, 2019			As of June 30, 2019
Total debt
Senior Notes 2026	$	850,000		$	850,000
Senior Notes 2023	800,000			800,000
Notes due 2022	143,750			—
Term Loan B	982,500			987,500
Revolver	750,000			—
Total principal payments due	3,526,250			2,637,500
Premium on Senior Notes 2026	5,085			5,405
Make-whole premium on Notes due 2022(1)	9,881			—
Debt issuance costs	(27,199		)	(28,027		)
Total amount outstanding	3,514,017			2,614,878
Less:
Current portion of long-term debt
Notes due 2022 including make-whole premium	153,631			—
Term Loan B	10,000			10,000
Revolver	750,000			—
Total current portion of long-term debt	913,631			10,000
Non-current portion of long-term debt	$	2,600,386		$	2,604,878

⁽¹⁾ Represents the total value of the make-whole premium, assuming all holders convert at the temporarily increased conversion rate.

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Income Taxes (Tables)

6 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Interest and Penalties Related to Liabilities for Income Tax Expense

For the three and six months ended December 31, 2019 and 2018, we recognized the following amounts as income tax-related interest expense and penalties:

	Three Months Ended December 31,					Six Months Ended December 31,
	2019			2018		2019		2018
Interest expense (recoveries)	$	2,652		$	1,570	$	1,234	$	4,607
Penalties expense (recoveries)	(156		)	67		75		559
Total	$	2,496		$	1,637	$	1,309	$	5,166

Interest Accrued and Penalties Accrued Related to Income Tax Expense

The following amounts have been accrued on account of income tax-related interest expense and penalties:

	As of December 31, 2019		As of June 30, 2019
Interest expense accrued *	$	65,870	$	64,530
Penalties accrued *	$	2,526	$	2,525

* These balances are primarily included within "Long-term income taxes payable" within the Condensed Consolidated Balance Sheets.

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Leases - Lease Costs and Other Information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Leases [Abstract]
Operating lease cost	$ 15,955	$ 32,102
Short-term lease cost	190	288
Variable lease cost	764	1,507
Sublease income	(1,583)	(3,137)
Total lease cost	$ 15,326	$ 30,760
Weighted-average remaining lease term	6 years 18 days	6 years 18 days
Weighted-average discount rate	3.28%	3.28%
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities:	$ 18,461	$ 36,070
Right of use assets obtained in exchange for new operating lease liabilities	$ 10,557	$ 15,417

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Income Taxes - Interest Accrued and Penalties Accrued Related to Income Tax Expense (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Interest expense accrued	$ 65,870	$ 64,530
Penalties accrued	$ 2,526	$ 2,525

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Guarantees and Contingencies - Schedule of Contractual Obligations with Minimum Payments (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Long term debt obligations
Total	$ 3,449,651
January 1, 2020— June 30, 2020	223,222
July 1, 2020— June 30, 2022	277,680
July 1, 2022— June 30, 2024	1,031,371
July 1, 2024 and beyond	1,917,378
Purchase obligations for contracts not accounted for as lease obligations
Total	60,978
January 1, 2020— June 30, 2020	23,135
July 1, 2020— June 30, 2022	32,843
July 1, 2022— June 30, 2024	5,000
July 1, 2024 and beyond	0
Total payments due between
Total	3,510,629
January 1, 2020— June 30, 2020	246,357
July 1, 2020— June 30, 2022	310,523
July 1, 2022— June 30, 2024	1,036,371
July 1, 2024 and beyond	$ 1,917,378

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Revenues - Transaction Price Allocated to the Remaining Performance Obligations, Additional Information (Details)	6 Months Ended
	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Description of timing	As a practical expedient, we do not account for significant financing components if the period between when we transfer the promised good or service to the customer and when the customer pays for the product or service will be one year or less.We apply the practical expedient and do not disclose performance obligations that have original expected durations of one year or less.

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Derivative Instruments and Hedging Activities - Effects on Income and Other Comprehensive Income (OCI) (Details) - Cash Flow Hedging - Foreign currency forward contracts - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Derivatives, Fair Value [Line Items]
Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)	$ 1,134		$ 356
Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)		$ (2,554)		$ (1,871)
Operating Expenses
Derivatives, Fair Value [Line Items]
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	$ 98		$ 87
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		$ (636)		$ (1,134)

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Acquired Intangible Assets - Calculation Of Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
2020 (six months ended June 30)	$ 239,877
2021	424,138
2022	384,751
2023	299,585
2024	220,855
2025 and beyond	238,866
Total	$ 1,808,072	$ 1,146,504

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Acquisitions - Acquisition of Liaison Technologies, Inc., Purchase Price Allocation (Details) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019	Dec. 17, 2018
Business Acquisition [Line Items]
Goodwill	$ 4,656,492	$ 3,769,908
Liaison Technologies Inc.
Business Acquisition [Line Items]
Current assets			$ 23,006
Non-current tangible assets			5,168
Liabilities assumed			(57,265)
Total identifiable net assets			146,209
Goodwill			164,434
Net assets acquired			310,643
Liaison Technologies Inc. | Customer assets
Business Acquisition [Line Items]
Intangible assets			68,300
Liaison Technologies Inc. | Technology assets
Business Acquisition [Line Items]
Intangible assets			$ 107,000

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Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended		6 Months Ended
	Jan. 29, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Subsequent Event [Line Items]
Dividends declared per common share (in dollars per share)		$ 0.1746	$ 0.1518	$ 0.3492	$ 0.3036
Subsequent Event
Subsequent Event [Line Items]
Dividends declared per common share (in dollars per share)	$ 0.1746
Subsequent Event | Minimum | Fiscal 2020 Restructuring Plan
Subsequent Event [Line Items]
Restructuring plan, expected cost	$ 26
Subsequent Event | Maximum | Fiscal 2020 Restructuring Plan
Subsequent Event [Line Items]
Restructuring plan, expected cost	34
Workforce restructurings | Subsequent Event | Minimum | Fiscal 2020 Restructuring Plan
Subsequent Event [Line Items]
Restructuring plan, expected cost	13
Workforce restructurings | Subsequent Event | Maximum | Fiscal 2020 Restructuring Plan
Subsequent Event [Line Items]
Restructuring plan, expected cost	17
Facility consolidations | Subsequent Event | Minimum | Fiscal 2020 Restructuring Plan
Subsequent Event [Line Items]
Restructuring plan, expected cost	13
Facility consolidations | Subsequent Event | Maximum | Fiscal 2020 Restructuring Plan
Subsequent Event [Line Items]
Restructuring plan, expected cost	$ 17

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Statement of Financial Position [Abstract]
Accounts receivable trade, allowance for doubtful accounts	$ 17,937	$ 17,011
Common shares issued	270,608,627	269,834,442
Common shares outstanding	270,608,627	269,834,442
Treasury stock (in shares)	847,369	802,871

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Shares and Additional Paid in Capital	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Income	Non-Controlling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of new accounting principle | Accounting Standards Update 2016-16	$ (26,780)			$ (26,780)
Cumulative effect of new accounting principle | Accounting Standards Update 2014-09	29,786			29,786
Balance (in shares) at Jun. 30, 2018		267,651,000	(691,000)
Balance at Jun. 30, 2018	3,717,258	$ 1,707,073	$ (18,732)	1,994,235	$ 33,645	$ 1,037
Issuance of Common Shares
Under employee stock option plans (in shares)		556,000
Under employee stock option plans	14,171	$ 14,171
Under employee stock purchase plans (in shares)		362,000
Under employee stock purchase plans	11,265	$ 11,265
Share-based compensation	$ 13,440	13,440
Purchase of treasury stock (in shares)	(674,265)		(674,000)
Purchase of treasury stock	$ (24,534)		$ (24,534)
Issuance of treasury stock	$ 0	(14,025)	$ 14,025
Issuance of treasury stock (in shares)	547,897		548,000
Dividends declared	$ (81,166)			(81,166)
Other comprehensive income (loss) - net	(7,674)				(7,674)
Non-controlling interest	(583)	$ (625)				42
Net income for the quarter	140,829			140,756		73
Balance (in shares) at Dec. 31, 2018		268,569,000	(817,000)
Balance at Dec. 31, 2018	3,786,012	$ 1,731,299	$ (29,241)	2,056,831	25,971	1,152
Balance (in shares) at Sep. 30, 2018		268,332,000	(992,000)
Balance at Sep. 30, 2018	3,727,030	$ 1,730,933	$ (30,381)	1,993,099	32,256	1,123
Issuance of Common Shares
Under employee stock option plans (in shares)		62,000
Under employee stock option plans	1,740	$ 1,740
Under employee stock purchase plans (in shares)		175,000
Under employee stock purchase plans	5,696	$ 5,696
Share-based compensation	$ 6,885	6,885
Purchase of treasury stock (in shares)	(370,265)		(370,000)
Purchase of treasury stock	$ (12,815)		$ (12,815)
Issuance of treasury stock	$ 0	$ (13,955)	$ 13,955
Issuance of treasury stock (in shares)	544,929		545,000
Dividends declared	$ (40,700)			(40,700)
Other comprehensive income (loss) - net	(6,285)				(6,285)
Net income for the quarter	104,461			104,432		29
Balance (in shares) at Dec. 31, 2018		268,569,000	(817,000)
Balance at Dec. 31, 2018	3,786,012	$ 1,731,299	$ (29,241)	2,056,831	25,971	1,152
Balance (in shares) at Jun. 30, 2019		269,834,000	(803,000)
Balance at Jun. 30, 2019	$ 3,884,670	$ 1,774,214	$ (28,766)	2,113,883	24,124	1,215
Issuance of Common Shares
Under employee stock option plans (in shares)	414,682	415,000
Under employee stock option plans	$ 11,359	$ 11,359
Under employee stock purchase plans (in shares)		360,000
Under employee stock purchase plans	12,540	$ 12,540
Share-based compensation	$ 14,674	14,674
Purchase of treasury stock (in shares)	(300,000)		(300,000)
Purchase of treasury stock	$ (12,424)		$ (12,424)
Issuance of treasury stock	$ 0	$ (9,124)	$ 9,124
Issuance of treasury stock (in shares)	255,502		256,000
Dividends declared	$ (94,098)			(94,098)
Other comprehensive income (loss) - net	566				566
Net income for the quarter	181,945			181,868		77
Balance (in shares) at Dec. 31, 2019		270,609,000	(847,000)
Balance at Dec. 31, 2019	3,999,232	$ 1,803,663	$ (32,066)	2,201,653	24,690	1,292
Balance (in shares) at Sep. 30, 2019		270,190,000	(1,103,000)
Balance at Sep. 30, 2019	3,908,114	$ 1,791,689	$ (41,190)	2,141,278	15,096	1,241
Issuance of Common Shares
Under employee stock option plans (in shares)		231,000
Under employee stock option plans	6,783	$ 6,783
Under employee stock purchase plans (in shares)		188,000
Under employee stock purchase plans	6,532	$ 6,532
Share-based compensation	$ 7,783	7,783
Purchase of treasury stock (in shares)	0
Issuance of treasury stock	$ 0	$ (9,124)	$ 9,124
Issuance of treasury stock (in shares)	255,502		256,000
Dividends declared	$ (47,092)			(47,092)
Other comprehensive income (loss) - net	9,594				9,594
Net income for the quarter	107,518			107,467		51
Balance (in shares) at Dec. 31, 2019		270,609,000	(847,000)
Balance at Dec. 31, 2019	$ 3,999,232	$ 1,803,663	$ (32,066)	$ 2,201,653	$ 24,690	$ 1,292

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Special Charges (Recoveries)

6 Months Ended

Dec. 31, 2019

Restructuring, Settlement and Impairment Provisions [Abstract]

SPECIAL CHARGES (RECOVERIES)

SPECIAL CHARGES (RECOVERIES)

Special charges (recoveries) include costs and recoveries that relate to certain restructuring initiatives that we have undertaken from time to time under our various restructuring plans, as well as acquisition-related costs and other charges. 

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Fiscal 2019 Restructuring Plan	$	23		$	5,993		$	1,679		$	26,239
Fiscal 2018 Restructuring Plan	65			(25		)	86			510
Restructuring Plans prior to Fiscal 2018 Restructuring Plan	(481		)	(79		)	(282		)	475
Acquisition-related costs	7,779			3,197			10,445			3,704
Other charges (recoveries)	2,686			294			3,245			1,763
Total	$	10,072		$	9,380		$	15,173		$	32,691

Fiscal 2019 Restructuring Plan

During Fiscal 2019, we began to implement restructuring activities to streamline our operations (Fiscal 2019 Restructuring Plan), including in connection with our acquisitions of Catalyst Repository Systems Inc. (Catalyst) and Liaison Technologies, Inc. (Liaison), to take further steps to improve our operational efficiency. The Fiscal 2019 Restructuring Plan charges relate to workforce reductions and facility consolidations. These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate.

Since the inception of the plan, approximately $30.0 million has been recorded within "Special charges (recoveries)" to date. We do not expect to incur any further significant charges relating to this plan.

A reconciliation of the beginning and ending liability for the six months ended December 31, 2019 is shown below.

Fiscal 2019 Restructuring Plan	Workforce reduction			Facility costs			Total
Balance payable as at June 30, 2019	$	1,819		$	5,288		$	7,107
Adjustment for Topic 842 (note 1 and note 6)	—			(5,288		)	(5,288		)
Accruals and adjustments	589			1,090			1,679
Cash payments	(1,555		)	(1,090		)	(2,645		)
Foreign exchange and other non-cash adjustments	(211		)	—			(211		)
Balance payable as at December 31, 2019	$	642		$	—		$	642

Fiscal 2018 Restructuring Plan

During Fiscal 2018 and in the context of our acquisitions of Covisint Corporation, Guidance Software Inc. and Hightail, Inc., we implemented restructuring activities to streamline our operations (collectively referred to as the Fiscal 2018 Restructuring Plan). The Fiscal 2018 Restructuring Plan charges relate to workforce reductions and facility consolidations. These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate.

Since the inception of the plan, approximately $10.7 million has been recorded within "Special charges (recoveries)" to date. We do not expect to incur any further significant charges relating to this plan.

A reconciliation of the beginning and ending liability for the six months ended December 31, 2019 is shown below.

Fiscal 2018 Restructuring Plan	Workforce reduction			Facility costs			Total
Balance payable as at June 30, 2019	$	150		$	486		$	636
Adjustment for Topic 842 (note 1 and note 6)	—			(486		)	(486		)
Accruals and adjustments	(62		)	148			86
Cash payments	(39		)	(148		)	(187		)
Foreign exchange and other non-cash adjustments	(9		)	—			(9		)
Balance payable as at December 31, 2019	$	40		$	—		$	40

Other charges (recoveries)

For the three months ended December 31, 2019, "Other charges" includes $0.1 million relating to the write-off of ROU assets and $2.6 million relating to other miscellaneous charges.

For the six months ended December 31, 2019, "Other charges" includes $0.7 million relating to the write-off of ROU assets and approximately $2.6 million relating to other miscellaneous charges.

For the three months ended December 31, 2018, "Other charges" include $0.3 million relating to other miscellaneous charges.

For the six months ended December 31, 2018, "Other charges" include (i) $1.1 million relating to one-time system implementation costs and (ii) $0.7 million relating to other miscellaneous charges.

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Guarantees and Contingencies

6 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

GUARANTEES AND CONTINGENCIES

GUARANTEES AND CONTINGENCIES

We have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

	Payments due between
	Total		January 1, 2020— June 30, 2020		July 1, 2020— June 30, 2022		July 1, 2022— June 30, 2024		July 1, 2024 and beyond
Long-term debt obligations (1)	$	3,449,651	$	223,222	$	277,680	$	1,031,371	$	1,917,378
Purchase obligations for contracts not accounted for as lease obligations (2)	60,978		23,135		32,843		5,000		—
	$	3,510,629	$	246,357	$	310,523	$	1,036,371	$	1,917,378

⁽¹⁾ Includes interest up to maturity and principal payments. Please see note 11 "Long-Term Debt" for more details.

⁽²⁾ For contractual obligations relating to leases and purchase obligations accounted for under Topic 842, please see note 6 "Leases".

Guarantees and Indemnifications

We have entered into customer agreements which may include provisions to indemnify our customers against third party claims that our software products or services infringe certain third party intellectual property rights and for liabilities related to a breach of our confidentiality obligations. We have not made any material payments in relation to such indemnification provisions and have not accrued any liabilities related to these indemnification provisions in our Condensed Consolidated Financial Statements.

Occasionally, we enter into financial guarantees with third parties in the ordinary course of our business, including, among others, guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business. Such agreements have not had a material effect on our results of operations, financial position or cash flows.

Litigation

We are currently involved in various claims and legal proceedings.

Quarterly, we review the status of each significant legal matter and evaluate such matters to determine how they should be treated for accounting and disclosure purposes in accordance with the requirements of ASC Topic 450-20 "Loss Contingencies" (Topic 450-20). Specifically, this evaluation process includes the centralized tracking and itemization of the status of all our disputes and litigation items, discussing the nature of any litigation and claim, including any dispute or claim that is reasonably likely to result in litigation, with relevant internal and external counsel, and assessing the progress of each matter in light of its merits and our experience with similar proceedings under similar circumstances.

If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20. As of the date of this Quarterly Report on Form 10-Q, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts already recognized will be incurred that would be material to our consolidated financial position or results of operations. As described more fully below, we are unable at this time to estimate a possible loss or range of losses in respect of certain disclosed matters.

Contingencies

IRS Matter

As we have previously disclosed, the United States Internal Revenue Service (IRS) is examining certain of our tax returns for our fiscal year ended June 30, 2010 (Fiscal 2010) through our fiscal year ended June 30, 2012 (Fiscal 2012), and in connection with those examinations is reviewing our internal reorganization in Fiscal 2010 to consolidate certain intellectual property ownership in Luxembourg and Canada and our integration of certain acquisitions into the resulting structure. We also previously disclosed that the examinations may lead to proposed adjustments to our taxes that may be material, individually or in the aggregate, and that we have not recorded any material accruals for any such potential adjustments in our Condensed Consolidated Financial Statements.

We previously disclosed that, as part of these examinations, on July 17, 2015 we received from the IRS an initial Notice of Proposed Adjustment (NOPA) in draft form, that, as revised by the IRS on July 11, 2018 proposes a one-time approximately $335 million increase to our U.S. federal taxes arising from the reorganization in Fiscal 2010 (the 2010 NOPA), plus penalties equal to 20% of the additional proposed taxes for Fiscal 2010, and interest at the applicable statutory rate published by the IRS.

On July 11, 2018, we also received, consistent with previously disclosed expectations, a draft NOPA proposing a one time approximately $80 million increase to our U.S. federal taxes for Fiscal 2012 (the 2012 NOPA) arising from the integration of Global 360 Holding Corp. into the structure that resulted from the internal reorganization in Fiscal 2010, plus penalties equal to 40% of the additional proposed taxes for Fiscal 2012, and interest.

On January 7, 2019, we received from the IRS official notification of proposed adjustments to our taxable income for Fiscal 2010 and Fiscal 2012, together with the 2010 NOPA and 2012 NOPA in final form. In each case, such documentation was as expected and on substantially the same terms as provided for in the previously disclosed respective draft NOPAs, with the exception of an additional proposed penalty as part of the 2012 NOPA.

A NOPA is an IRS position and does not impose an obligation to pay tax. We continue to strongly disagree with the IRS’ positions within the NOPAs and we are vigorously contesting the proposed adjustments to our taxable income, along with any proposed penalties and interest.

As of our receipt of the final 2010 NOPA and 2012 NOPA, our estimated potential aggregate liability, as proposed by the IRS, including additional state income taxes plus penalties and interest that may be due, was approximately $770 million, comprised of approximately $455 million in U.S. federal and state taxes, approximately $130 million of penalties, and approximately $185 million of interest. Interest will continue to accrue at the applicable statutory rates until the matter is resolved and may be substantial.

As previously disclosed and noted above, we strongly disagree with the IRS’ positions and we are vigorously contesting the proposed adjustments to our taxable income, along with the proposed penalties and interest. We are examining various alternatives available to taxpayers to contest the proposed adjustments, including through IRS Appeals and U.S. Federal court. Any such alternatives could involve a lengthy process and result in the incurrence of significant expenses. As of the date of this Quarterly Report on Form 10-Q, we have not recorded any material accruals in respect of these examinations in our Condensed Consolidated Financial Statements. An adverse outcome of these tax examinations could have a material adverse effect on our financial position and results of operations.

For additional information regarding the history of this IRS matter, please see Note 13 "Guarantees and Contingencies" in our Annual Report on Form 10-K for Fiscal 2018.

CRA Matter

As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013 and Fiscal 2014. Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of December 31, 2019, in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013 and Fiscal 2014 to be limited to penalties and interest that may be due of approximately $25 million.

The notices of reassessment for Fiscal 2012, Fiscal 2013 and Fiscal 2014 would, as drafted, increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10% penalty on the proposed adjustment to income.

We strongly disagree with the CRA's positions and believe the reassessments of Fiscal 2012, Fiscal 2013 and Fiscal 2014 (including any penalties) are without merit. We have filed notices of objection for Fiscal 2012, Fiscal 2013 and Fiscal 2014, and we are currently seeking competent authority consideration under applicable international treaties in respect of these reassessments.

Even if we are unsuccessful in challenging the CRA's reassessments to increase our taxable income for Fiscal 2012, Fiscal 2013 and Fiscal 2014, or potential reassessments that may be proposed for subsequent years currently under audit, we have elective deductions available for those years (including carry-backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of any assessed penalties and interest, as described above.

We will continue to vigorously contest the proposed adjustments to our taxable income and any penalty and interest assessments. As of the date of this Quarterly Report on Form 10-Q, we have not recorded any accruals in respect of these reassessments in our Condensed Consolidated Financial Statements. Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have been completed with no reassessment of our income tax liability in respect of our international transactions, including the transfer pricing methodology applied to them. The CRA is currently auditing Fiscal 2015, Fiscal 2016 and Fiscal 2017 and have proposed to reassess Fiscal 2015 in a manner consistent with Fiscal 2012, Fiscal 2013 and Fiscal 2014. We are engaged in ongoing discussions with the CRA and continue to vigorously contest the CRA's audit positions.

GXS India Matter

Our Indian subsidiary, GXS India Technology Centre Private Limited (GXS India), is subject to potential assessments by Indian tax authorities in the city of Bangalore. GXS India has received assessment orders from the Indian tax authorities alleging that the transfer price applied to intercompany transactions was not appropriate. Based on advice from our tax advisors, we believe that the facts that the Indian tax authorities are using to support their assessment are incorrect. We have filed appeals and anticipate an eventual settlement with the Indian tax authorities. We have accrued $1.3 million to cover our anticipated financial exposure in this matter.

Carbonite Class Action Complaint

On August 1, 2019, prior to our acquisition of Carbonite, a purported stockholder of Carbonite filed a putative class action complaint against Carbonite, its former Chief Executive Officer, Mohamad S. Ali, and its former Chief Financial Officer, Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A. Luna, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19-cv-11662-LTS). The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint generally alleges that the defendants made materially false and misleading statements in connection with Carbonite’s Server Backup VM Edition, and seeks, among other things, the designation of the action as a class action, an award of unspecified compensatory damages, costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate. On August 23, 2019, a nearly identical complaint was filed in the same court captioned William Feng, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19- cv-11808-LTS) (together with the Luna Complaint, the “Securities Actions”). On November 21, 2019, the court consolidated the Securities Actions, appointed a lead plaintiff, and designated a lead counsel. On January 15, 2020, the lead plaintiff filed a consolidated amended complaint generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019. The defendants' answer or responsive pleading is due by March 10, 2020. In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of this action and are unable to reasonably estimate the amount or range of loss, if any, that could result from this proceeding.

Carbonite vs Realtime Data

On February 27, 2017, prior to our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (“Realtime Data”) filed a lawsuit against Carbonite in the U.S. District Court for the Eastern District of Texas "Realtime Data LLC v. Carbonite, Inc. et al (No 6:17-cv-00121-RWS-JDL)", alleging that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data. Realtime Data’s complaint against Carbonite sought damages in an unspecified amount and injunctive relief. On December 19, 2017, the U.S. District Court for the Eastern District of Texas transferred the case to the U.S District Court for the District of Massachusetts (No. 1:17-cv-12499). Realtime Data has also filed numerous other patent suits on the asserted patents against other companies around the country. In one of those suits, filed in the U.S. District Court for the District of Delaware, the Delaware Court on July 29, 2019 dismissed the lawsuit after declaring invalid three of the four patents asserted by Realtime Data against Carbonite. By way of Order dated August 19, 2019, the U.S. District Court for the District of Massachusetts stayed the action against Carbonite pending appeal of the dismissal in the Delaware lawsuit. As to the fourth patent, the U.S. Patent & Trademark Office Patent Trial and Appeal Board on September 24, 2019 invalidated certain claims of that patent. No trial date has been set in the action against Carbonite. The Company is defending Carbonite vigorously. We have not accrued a loss contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable. Although a loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain unable to reasonably estimate a possible loss or range of loss associated with this litigation.

Please also see "Risk Factors" included in our Annual Report on Form 10-K for Fiscal 2019.

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Acquisitions - Acquisition of Liaison Technologies, Inc. (Details) - USD ($) $ in Thousands	Dec. 17, 2018	Dec. 31, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Goodwill		$ 4,656,492	$ 3,769,908
Liaison Technologies Inc.
Business Acquisition [Line Items]
Purchase consideration	$ 310,600
Goodwill	164,434
Goodwill expected to be tax deductible	2,200
Deferred revenue	7,600
Acquired receivables, fair value	20,500
Acquired receivables, gross contractual amount	22,200
Acquired receivables, estimated uncollectible	$ 1,700

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Leases

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

LEASES

LEASES

We enter into operating leases, both domestically and internationally, for certain facilities, automobiles, data centers and equipment for use in the ordinary course of business. The duration of the majority of these leases generally range from 1 to 10 years, some of which include options to extend for an additional 3 to 5 years after the initial term. Additionally, the land upon which our headquarters in Waterloo, Ontario Canada is located, is leased from the University of Waterloo for a period of 49 years beginning in December 2005, with an option to renew for an additional term of 49 years. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets and we do not have any material finance leases.

We account for a contract as a lease when we have the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine the initial classification and measurement of our right of use (ROU) assets and lease liabilities at the lease commencement date and thereafter if modified.

ROU assets represent our right to control the underlying assets under lease, and the lease liability is our obligation to make the lease payments related to the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are recognized on the Consolidated Balance Sheets based on the present value of future minimum lease payments to be made over the lease term. When available, we will use the rate implicit in the lease to discount lease payments to present value. However, real estate leases generally do not provide a readily determinable implicit rate, therefore, we must estimate our incremental borrowing rate to discount the lease payments. We estimate our incremental borrowing rate based on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located.

The ROU asset equals the lease liability, adjusted for any initial direct costs, prepaid rent and lease incentives. Fixed lease costs are included in the recognition of ROU assets and lease liabilities. Variable lease costs are not included in the measurement of the lease liability. These variable lease payments are recognized in the Consolidated Statements of Income in the period in which the obligation for those payments is incurred. Consistent with previous lease accounting rules under ASC Topic 840, lease expense for minimum lease payments continue to be recognized in the Consolidated Statements of Income on a straight-line basis over the lease term.

We have not elected the practical expedient to combine lease and non-lease components in the determination of lease costs for our facility leases. For all other asset classes, we have elected the practical expedient to combine the lease and the non-lease components. The lease liability includes lease payments related to options to extend or renew the lease term only if we are reasonably certain we will exercise those options. Our leases typically do not contain any material residual value guarantees or restrictive covenants.

In certain circumstances, we sublease all or a portion of a leased facility, to various other companies through a sublease agreement.

Lease Costs and Other Information

The following illustrates the various components of operating lease costs, lease term and discount rate for the period indicated:

	Three Months Ended December 31, 2019			Six Months Ended December 31, 2019
Operating lease cost	$	15,955		$	32,102
Short-term lease cost	190			288
Variable lease cost	764			1,507
Sublease income	(1,583		)	(3,137		)
Total lease cost	$	15,326		$	30,760
Weighted-average remaining lease term	6.05 years			6.05 years
Weighted-average discount rate	3.28		%	3.28		%

Supplemental Cash Flow Information

The following table presents supplemental information relating to cash flows arising from lease transactions. Cash payment made for variable lease cost and short-term lease are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below:

	Three Months Ended December 31, 2019		Six Months Ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities:	$	18,461	$	36,070
Right of use assets obtained in exchange for new operating lease liabilities	$	10,557	$	15,417

Maturity of Lease Liabilities

The following table presents the future minimum lease payments under our operating leases liabilities as of December 31, 2019:

Fiscal years ending June 30,
2020 (six months ended June 30)	$	39,817
2021	66,295
2022	54,406
2023	41,187
2024	30,844
Thereafter	81,161
Total Lease payments	$	313,710
Less: Imputed interest	(28,450		)
Total	$	285,260
Reported as
Current operating lease liabilities	66,579
Non-current operating lease liabilities	218,681
Total	$	285,260

Operating lease maturity amounts included in the table above do not include sublease income expected to be received under our various sublease agreements with third parties. Under these agreements, we expect to receive sublease income of approximately $3.7 million over the remainder of Fiscal 2020, and approximately $27.2 million thereafter.

The following table presents the future minimum lease payments under our operating leases, based on the expected due dates of the various agreements as of June 30, 2019, as previously reported in our Annual Report on Form 10-K for the year ended June 30, 2019, prior to the adoption of Topic 842:

Fiscal years ending June 30,
2020	$	72,853
2021	59,451
2022	46,943
2023	33,871
2024	25,570
Thereafter	80,163
Total minimum lease payments (1)	$	318,851

⁽¹⁾ Net of $30.7 million of sublease income to be received from properties which we have subleased to third parties.

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Recent Accounting Pronouncements

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted in Fiscal 2020

During Fiscal 2020, we have adopted the following ASUs, in addition to those discussed in note 1 "Basis of Presentation". The ASUs listed below did not have a material impact to our reported financial position, results of operations or cash flows:

• ASU No. 2017-12 “Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities” (ASU 2017-12)

• ASU No. 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”

Accounting Pronouncements Not Yet Adopted

Retirement Benefits

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-14 “Compensation-Retirement Benefits-Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (ASU 2018-14), which modifies the disclosure requirements for defined benefit pension plans and other post retirement plans. ASU 2018-14 is effective for us in the first quarter of our fiscal year ending June 30, 2021. We are currently evaluating the impact of our pending adoption of ASU 2018-14 on our consolidated financial statements.

Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward looking information to calculate credit loss estimates. Topic 326 is effective for us in our first quarter of our fiscal year ending June 30, 2021. Topic 326 must be adopted by applying a cumulative effect adjustment to retained earnings. We are currently evaluating Topic 326, including its potential impact to our process and controls. We believe the effect on our consolidated financial statements will largely depend on the composition and credit quality of our financial assets and the economic conditions at the time of adoption.

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Acquisitions - Acquisition of Carbonite, Inc., Unaudited Pro Forma Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Amortization of intangible assets	$ 42,299	$ 48,366	$ 82,597	$ 95,843
Carbonite
Business Acquisition [Line Items]
Revenues	9,511
Net Loss	(3,654)
Total Revenues	887,563	812,197	1,710,047	1,557,036
Net Income (loss)	78,571	$ 76,024	$ 117,789	(9,748)
Acquisition-related costs | Carbonite
Business Acquisition [Line Items]
Special charges	2,600
Amortization of intangible assets	$ 4,200
Expenses incurred				127,000
Expenses incurred, tax				33,000
Expenses incurred, accelerated vesting of equity awards				74,000
Expenses incurred, transaction fees				29,000
Expenses incurred, extinguishment of debt and interest rate swaps				21,000
Expenses incurred, employee severance costs				$ 3,000

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Accounts Payable and Accrued Liabilities

6 Months Ended

Dec. 31, 2019

Accounts Payable and Accrued Liabilities [Abstract]

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Current liabilities

Accounts payable and accrued liabilities are comprised of the following:

 

	As of December 31, 2019		As of June 30, 2019
Accounts payable—trade	$	45,285	$	46,323
Accrued salaries and commissions	113,901		131,430
Accrued liabilities(1)(2)	229,414		117,551
Accrued interest on Senior Notes	24,786		24,786
Amounts payable in respect of restructuring and other Special charges(1)	1,111		8,153
Asset retirement obligations	3,114		1,660
Total	$	417,611	$	329,903

Long-term accrued liabilities 

	As of December 31, 2019		As of June 30, 2019
Amounts payable in respect of restructuring and other Special charges(1)	$	—	$	4,804
Other accrued liabilities(1)	2,186		30,338
Asset retirement obligations	12,791		14,299
Total	$	14,977	$	49,441

⁽¹⁾ Previously, in Fiscal 2019, tenant allowances, deferred rent, lease fair value adjustments and amounts payable relating to restructured facilities were included in total accrued liabilities. Effective July 1, 2019, these balances were reclassified to operating lease right of use assets in accordance with the adoption of Topic 842. See note 1 "Basis of Presentation" and note 6 "Leases" for more information.

⁽²⁾ Includes approximately $89 million of Carbonite purchase consideration that was accrued and unpaid as of December 31, 2019, in accordance with the purchase agreement (see note 19 "Acquisitions").

Asset retirement obligations

We are required to return certain of our leased facilities to their original state at the conclusion of our lease. As of December 31, 2019, the present value of this obligation was $15.9 million (June 30, 2019—$16.0 million), with an undiscounted value of $17.3 million (June 30, 2019—$17.6 million).

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Special Charges (Recoveries) - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Restructuring Cost and Reserve [Line Items]
Other charges	$ 2,686	$ 294	$ 3,245	$ 1,763
ROU Assets Write-off
Restructuring Cost and Reserve [Line Items]
Other charges	100		700
Miscellaneous Other Charges
Restructuring Cost and Reserve [Line Items]
Other charges	2,600	$ 300	2,600	700
System Implementation Costs
Restructuring Cost and Reserve [Line Items]
Other charges				$ 1,100
Fiscal 2019 Restructuring Plan
Restructuring Cost and Reserve [Line Items]
Special charges recorded to date	30,000		30,000
Fiscal 2018 Restructuring Plan
Restructuring Cost and Reserve [Line Items]
Special charges recorded to date	$ 10,700		$ 10,700

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Subsequent Events

6 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Cash Dividends

As part of our quarterly, non-cumulative cash dividend program, we declared, on January 29, 2020, a dividend of $0.1746 per Common Share. The record date for this dividend is February 28, 2020 and the payment date is March 20, 2020. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board.

Fiscal 2020 Restructuring Plan

On January 29, 2020, our Board approved a restructuring plan that will impact our global workforce and consolidate certain real estate facilities in an effort to further streamline our operations, inclusive of Carbonite (Fiscal 2020 Restructuring Plan). The total size of the plan is expected to be approximately $26 million to $34 million and is proposed to be undertaken in phases throughout calendar year 2020 and the first half of calendar year 2021. We currently expect to incur charges related to this plan in the following amounts:

• Workforce restructurings of approximately $13 million to $17 million; and

•

Facility consolidations of approximately $13 million to $17 million.

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Property and Equipment (Tables)

6 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Components of Property and Equipment by Type

	As of December 31, 2019
	Cost		Accumulated Depreciation			Net
Furniture and fixtures	$	45,392	$	(29,191	)	$	16,201
Office equipment	2,152		(1,244		)	908
Computer hardware	286,043		(186,562		)	99,481
Computer software	125,736		(95,262		)	30,474
Capitalized software development costs	102,560		(62,420		)	40,140
Leasehold improvements	125,155		(73,802		)	51,353
Land and buildings	49,547		(14,656		)	34,891
Total	$	736,585	$	(463,137	)	$	273,448

 

	As of June 30, 2019
	Cost		Accumulated Depreciation			Net
Furniture and fixtures	$	40,260	$	(26,492	)	$	13,768
Office equipment	1,993		(1,576		)	417
Computer hardware	258,802		(177,402		)	81,400
Computer software	119,018		(87,240		)	31,778
Capitalized software development costs	95,729		(56,205		)	39,524
Leasehold improvements	113,510		(66,520		)	46,990
Land and buildings	49,557		(13,981		)	35,576
Total	$	678,869	$	(429,416	)	$	249,453

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Revenues - Contract Balances (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Jun. 30, 2019
Revenue from Contract with Customer [Abstract]
Short-term contract assets	$ 22,794	$ 22,794	$ 20,956
Long-term contract assets	17,975	17,975	15,386
Short-term deferred revenue	718,861	718,861	641,656
Long-term deferred revenue	77,335	77,335	$ 46,974
Contract assets reclassified to receivables		13,300
Asset impairment	$ 0	0
Revenue recognized		$ 491,000

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Basis of Presentation - Additional Information (Details)	Dec. 31, 2019
OT South Africa
Noncontrolling Interest [Line Items]
Ownership percentage by Open Text	70.00%
GXS Singapore
Noncontrolling Interest [Line Items]
Ownership percentage by Open Text	81.00%

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Pension Plans and Other Post Retirement Benefits - Schedule of Defined Benefit Plans and Long-Term Employee Benefit Obligations (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Assumptions:
Total benefit obligation	$ 75,948	$ 77,531
Current portion of benefit obligation	2,270	2,292
Non-current portion of benefit obligation	73,678	75,239
Pension Plan | CDT defined benefit plan
Assumptions:
Total benefit obligation	35,221	35,836
Current portion of benefit obligation	700	675
Non-current portion of benefit obligation	34,521	35,161
Pension Plan | GXS GER defined benefit plan
Assumptions:
Total benefit obligation	25,650	26,739
Current portion of benefit obligation	986	1,012
Non-current portion of benefit obligation	24,664	25,727
Pension Plan | GXS PHP defined benefit plan
Assumptions:
Total benefit obligation	7,113	6,904
Current portion of benefit obligation	93	124
Non-current portion of benefit obligation	7,020	6,780
Other plans
Assumptions:
Total benefit obligation	7,964	8,052
Current portion of benefit obligation	491	481
Non-current portion of benefit obligation	$ 7,473	$ 7,571

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Share Capital, Option Plans and Share-Based Payments - Schedule of Weighted-Average Fair Value Of Options And Weighted-Average Assumptions Used (Details) - $ / shares	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Share-based Payment Arrangement [Abstract]
Weighted-average fair value of options granted (in dollars per share)	$ 6.74	$ 7.37	$ 6.49	$ 8.55
Weighted-average assumptions used:
Expected volatility	22.03%	25.95%	22.09%	26.05%
Risk–free interest rate	1.55%	2.97%	1.65%	2.82%
Expected dividend yield	1.64%	1.73%	1.67%	1.49%
Expected life (in years)	4 years 1 month 9 days	4 years 3 months 25 days	4 years 1 month 9 days	4 years 3 months 25 days
Forfeiture rate (based on historical rates)	7.00%	6.00%	7.00%	6.00%
Average exercised share price (in dollars per share)	$ 41.13	$ 33.97	$ 39.33	$ 38.56

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Other Assets - Schedule (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Other Assets, Noncurrent Disclosure [Abstract]
Deposits and restricted cash	$ 13,527	$ 13,671
Capitalized costs to obtain a contract	37,692	35,593
Investments	69,712	67,002
Long-term prepaid expenses and other long-term assets	37,127	32,711
Total other assets	$ 158,058	$ 148,977

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Pension Plans and Other Post Retirement Benefits - Schedule of the Change in Benefit Obligation (Details) - Pension Plan - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation—beginning of period			$ 69,479	$ 61,886	$ 61,886
Service cost	$ 534	$ 435	1,054	897	1,887
Interest cost	287	352	570	711	1,431
Benefits paid			(900)		(1,762)
Actuarial (gain) loss			(738)		7,194
Foreign exchange (gain) loss			(1,481)		(1,157)
Benefit obligation—end of period	67,984		67,984		69,479
Less: Current portion	(1,779)		(1,779)		(1,811)
Non-current portion of benefit obligation	66,205		66,205		67,668
CDT defined benefit plan
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation—beginning of period			35,836	32,651	32,651
Service cost	144	136	286	277	550
Interest cost	115	159	229	324	642
Benefits paid			(313)		(626)
Actuarial (gain) loss			90		3,365
Foreign exchange (gain) loss			(907)		(746)
Benefit obligation—end of period	35,221		35,221		35,836
Less: Current portion	(700)		(700)		(675)
Non-current portion of benefit obligation	34,521		34,521		35,161
GXS GER defined benefit plan
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation—beginning of period			26,739	25,382	25,382
Service cost	80	140	159	285	566
Interest cost	84	121	168	247	489
Benefits paid			(472)		(996)
Actuarial (gain) loss			(269)		1,872
Foreign exchange (gain) loss			(675)		(574)
Benefit obligation—end of period	25,650		25,650		26,739
Less: Current portion	(986)		(986)		(1,012)
Non-current portion of benefit obligation	24,664		24,664		25,727
GXS PHP defined benefit plan
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation—beginning of period			6,904	3,853	3,853
Service cost	310	159	609	335	771
Interest cost	88	$ 72	173	$ 140	300
Benefits paid			(115)		(140)
Actuarial (gain) loss			(559)		1,957
Foreign exchange (gain) loss			101		163
Benefit obligation—end of period	7,113		7,113		6,904
Less: Current portion	(93)		(93)		(124)
Non-current portion of benefit obligation	$ 7,020		$ 7,020		$ 6,780

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Share Capital, Option Plans and Share-Based Payments - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Cash Dividends
Dividends declared per common share (in dollars per share)	$ 0.1746	$ 0.1518	$ 0.3492	$ 0.3036
Payments of dividends	$ 47,100,000	$ 40,700,000	$ 94,098,000	$ 81,166,000
Share Capital
Preference shares issued (in shares)	0		0
Treasury Stock
Purchase of treasury stock (in shares)	0	370,265	300,000	674,265
Payments for Repurchase of Common Stock	$ 0	$ 12,800,000	$ 12,424,000	$ 24,534,000
Issuance of treasury stock (in shares)	255,502	544,929	255,502	547,897

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Accounts Payable and Accrued Liabilities - Narrative (Details) - USD ($) $ in Millions	Dec. 31, 2019	Jun. 30, 2019
Accounts Payable and Accrued Liabilities [Abstract]
Present value of asset retirement obligation	$ 15.9	$ 16.0
Undiscounted value of asset retirement obligation	$ 17.3	$ 17.6

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Goodwill (Details) $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 3,769,908
Adjustments relating to acquisitions prior to Fiscal 2020 that had open measurement periods (note 19)	842
Adjustments on account of foreign exchange	(1,985)
Ending balance	4,656,492
Carbonite
Goodwill [Roll Forward]
Acquisitions	885,547
The Fax Guys
Goodwill [Roll Forward]
Acquisitions	$ 2,180

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Fair Value Measurement - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis (Details) - USD ($)	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Assets, Level 1 to Level 2 transfers	$ 0	$ 0
Liabilities, Level 1 to Level 2 transfers	0	0
Assets, Level 2 to Level 1 transfers	0	0
Liabilities, Level 2 to Level 1 transfers	0	0
Asset transfers into Level 3	0	0
Liability transfers into Level 3	0	0
Asset transfers out of Level 3	0	0
Liability transfers out of Level 3	$ 0	$ 0

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Income Taxes - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Effective income tax rate	30.30%	25.80%	27.80%	31.90%
Increase in income tax expense	$ 10.6		$ 3.8
Increase in repatriations from subsidiaries	16.8		14.9
Increase in tax filings in excess of estimates	6.0		7.3
Increase in net income taxed at foreign rates	3.3		11.8
Decrease in reserves for unrecognized tax benefits	11.6		22.4
Decrease in tax impact of internal reorganizations of subsidiaries	4.5		7.9
Possible decrease in tax expense in next 12 months	7.1		7.1
Provision for deferred income tax liabilities	$ 19.3		$ 19.3		$ 17.4

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Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Property, Plant and Equipment [Line Items]
Cost	$ 736,585	$ 678,869
Accumulated Depreciation	(463,137)	(429,416)
Net	273,448	249,453
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Cost	45,392	40,260
Accumulated Depreciation	(29,191)	(26,492)
Net	16,201	13,768
Office equipment
Property, Plant and Equipment [Line Items]
Cost	2,152	1,993
Accumulated Depreciation	(1,244)	(1,576)
Net	908	417
Computer hardware
Property, Plant and Equipment [Line Items]
Cost	286,043	258,802
Accumulated Depreciation	(186,562)	(177,402)
Net	99,481	81,400
Computer software
Property, Plant and Equipment [Line Items]
Cost	125,736	119,018
Accumulated Depreciation	(95,262)	(87,240)
Net	30,474	31,778
Capitalized software development costs
Property, Plant and Equipment [Line Items]
Cost	102,560	95,729
Accumulated Depreciation	(62,420)	(56,205)
Net	40,140	39,524
Leasehold improvements
Property, Plant and Equipment [Line Items]
Cost	125,155	113,510
Accumulated Depreciation	(73,802)	(66,520)
Net	51,353	46,990
Land and buildings
Property, Plant and Equipment [Line Items]
Cost	49,547	49,557
Accumulated Depreciation	(14,656)	(13,981)
Net	$ 34,891	$ 35,576

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Other Assets (Tables)

6 Months Ended

Dec. 31, 2019

Other Assets, Noncurrent Disclosure [Abstract]

Components of Other Assets

	As of December 31, 2019		As of June 30, 2019
Deposits and restricted cash	$	13,527	$	13,671
Capitalized costs to obtain a contract	37,692		35,593
Investments	69,712		67,002
Long-term prepaid expenses and other long-term assets	37,127		32,711
Total	$	158,058	$	148,977

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Share Capital, Option Plans and Share-Based Payments (Tables)

6 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Summary of Share-based Compensation Costs

Total share-based compensation expense for the periods indicated below is detailed as follows: 

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Stock options	$	2,667	$	2,319	$	4,677	$	4,921
Performance Share Units (issued under LTIP)	1,521		851		2,921		1,694
Restricted Share Units (issued under LTIP)	1,309		1,626		2,969		3,011
Restricted Share Units (other)	10		52		20		133
Deferred Share Units (directors)	1,124		1,032		1,875		1,693
Employee Share Purchase Plan	1,152		1,005		2,212		1,988
Total share-based compensation expense	$	7,783	$	6,885	$	14,674	$	13,440

Summary of Option Activity

A summary of activity under our stock option plans for the six months ended December 31, 2019 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic  Value ($’000s)
Outstanding at June 30, 2019	7,102,753		$	31.82
Granted	982,440		39.33
Exercised	(414,682	)	27.39
Forfeited or expired	(158,906	)	34.48
Outstanding at December 31, 2019	7,511,605		$	32.99	4.02	$	83,257
Exercisable at December 31, 2019	2,855,956		$	28.42	2.55	$	44,688

Schedule of Weighted-Average Fair Value of Options and Weighted-Average Assumptions Used

For the periods indicated, the weighted-average fair value of options and weighted-average assumptions were as follows:

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Weighted–average fair value of options granted	$	6.74		$	7.37		$	6.49		$	8.55
Weighted-average assumptions used:
Expected volatility	22.03		%	25.95		%	22.09		%	26.05		%
Risk–free interest rate	1.55		%	2.97		%	1.65		%	2.82		%
Expected dividend yield	1.64		%	1.73		%	1.67		%	1.49		%
Expected life (in years)	4.11			4.32			4.11			4.32
Forfeiture rate (based on historical rates)	7		%	6		%	7		%	6		%
Average exercise share price	$	41.13		$	33.97		$	39.33		$	38.56

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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets

The effect of these derivative instruments on our Condensed Consolidated Financial Statements for the periods indicated below were as follows (amounts presented do not include any income tax effects).

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets (see note 16 "Fair Value Measurement")

		As of December 31, 2019		As of June 30, 2019
Derivatives	Balance Sheet Location	Fair Value Asset (Liability)		Fair Value Asset (Liability)
Foreign currency forward contracts designated as cash flow hedges	Prepaid expenses and other current assets (Accounts payable and accrued liabilities)	$	1,005	$	736

Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI)

Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI)

Three and Six Months Ended December 31, 2019
Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI on Derivatives  (Effective Portion)						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended December 31, 2019			Six Months Ended December 31, 2019				Three Months Ended December 31, 2019			Six Months Ended December 31, 2019
Foreign currency forward contracts	$	1,134		$	356		Operating expenses	$	98		$	87
Three and Six Months Ended December 31, 2018
Derivatives in Cash Flow Hedging Relationship	Amount of Gain or (Loss) Recognized in OCI on Derivatives  (Effective Portion)						Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Three Months Ended December 31, 2018			Six Months Ended December 31, 2018				Three Months Ended December 31, 2018			Six Months Ended December 31, 2018
Foreign currency forward contracts	$	(2,554	)	$	(1,871	)	Operating expenses	$	(636	)	$	(1,134	)

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Supplemental Cash Flow Disclosures

6 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Information [Abstract]

SUPPLEMENTAL CASH FLOW DISCLOSURES

SUPPLEMENTAL CASH FLOW DISCLOSURES

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Cash paid during the period for interest	$	34,685	$	36,136	$	68,129	$	68,763
Cash received during the period for interest	$	3,474	$	2,624	$	7,423	$	3,359
Cash paid during the period for income taxes	$	23,037	$	31,445	$	33,372	$	39,812

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Cover Page - shares	6 Months Ended
	Dec. 31, 2019	Jan. 27, 2020
Cover page.
Document Type	10-Q
Entity Registrant Name	OPEN TEXT CORP
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2019
Entity File Number	0-27544
Entity Central Index Key	0001002638
Current Fiscal Year End Date	--06-30
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Incorporation, State or Country Code	Z4
Entity Tax Identification Number	98-0154400
Title of 12(b) Security	Common stock without par value
Trading Symbol	OTEX
Security Exchange Name	NASDAQ
Amendment Flag	false
Entity Common Stock, Shares Outstanding		270,771,591
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Address, Address Line One	275 Frank Tompa Drive,
Entity Address, City or Town	Waterloo,
Entity Address, State or Province	ON
Entity Address, Postal Zip Code	N2L 0A1
Entity Address, Country	CA
City Area Code	519
Local Phone Number	888-7111

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income for the period	$ 107,518	$ 104,461	$ 181,945	$ 140,829
Other comprehensive income (loss)—net of tax:
Net foreign currency translation adjustments	4,875	(3,418)	(736)	(6,938)
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) - net of tax expense (recovery) effect of $301 and ($677) for the three months ended December 31, 2019 and 2018, respectively; $95 and ($496) for the six months ended December 31, 2019 and 2018, respectively	833		261
Unrealized gain (loss) - net of tax expense (recovery) effect of $301 and ($677) for the three months ended December 31, 2019 and 2018, respectively; $95 and ($496) for the six months ended December 31, 2019 and 2018, respectively		(1,877)		(1,375)
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of ($26) and $169 for the three months ended December 31, 2019 and 2018, respectively; ($23) and $301 for the six months ended December 31, 2019 and 2018, respectively	(72)		(64)
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of ($26) and $169 for the three months ended December 31, 2019 and 2018, respectively; ($23) and $301 for the six months ended December 31, 2019 and 2018, respectively		467		833
Actuarial gain (loss) relating to defined benefit pension plans:
Actuarial gain (loss) - net of tax expense (recovery) effect of $1,308 and ($519) for the three months ended December 31, 2019 and 2018, respectively; $59 and ($213) for the six months ended December 31, 2019 and 2018, respectively	3,698	(1,521)	614	(324)
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $97 and $72 for the three months ended December 31, 2019 and 2018, respectively; $243 and $145 for the six months ended December 31, 2019 and 2018, respectively	260	64	491	130
Total other comprehensive income (loss) net, for the period	9,594	(6,285)	566	(7,674)
Total comprehensive income	117,112	98,176	182,511	133,155
Comprehensive (income) loss attributable to non-controlling interests	(51)	(29)	(77)	(73)
Total comprehensive income attributable to OpenText	$ 117,061	$ 98,147	$ 182,434	$ 133,082

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Fair Value Measurement

6 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

ASC Topic 820 “Fair Value Measurement” (Topic 820) defines fair value, establishes a framework for measuring fair value, and addresses disclosure requirements for fair value measurements. Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value, in this context, should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including our own credit risk.

In addition to defining fair value and addressing disclosure requirements, Topic 820 establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: 

• Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis:

Our financial assets and liabilities measured at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2019 and June 30, 2019:

December 31, 2019

June 30, 2019

Fair Market Measurements using:

Fair Market Measurements using:

December 31, 2019

Quoted prices in active markets for identical assets/ (liabilities)

Significant other observable inputs

Significant unobservable inputs

June 30, 2019

Quoted prices in active markets for identical assets/ (liabilities)

Significant other observable inputs

Significant unobservable inputs

(Level 1)

(Level 2)

(Level 3)

(Level 1)

(Level 2)

(Level 3)

Financial Assets:

Foreign currency forward contracts designated as cash flow hedges (note 17)

$

1,005

N/A

$

1,005

N/A

$

736

N/A

$

736

N/A

Our valuation techniques used to measure the fair values of the derivative instruments, the counterparty to which has high credit ratings, were derived from pricing models including discounted cash flow techniques, with all significant inputs derived

from or corroborated by observable market data, as no quoted market prices exist for these instruments. Our discounted cash flow techniques use observable market inputs, such as, where applicable, foreign currency spot and forward rates.

Our cash and cash equivalents, along with our accounts receivable and accounts payable and accrued liabilities balances, are measured and recognized in our Condensed Consolidated Financial Statements at an amount that approximates their fair value (a Level 2 measurement) due to their short maturities.

If applicable, we will recognize transfers between levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. During the three and six months ended December 31, 2019 and 2018, we did not have any transfers between Level 1, Level 2 or Level 3.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets and liabilities at fair value on a nonrecurring basis. These assets and liabilities are recognized at fair value when they are deemed to be other-than-temporarily impaired. During the three and six months ended December 31, 2019 and 2018, no indications of impairment were identified and therefore no fair value measurements were required.

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Pension Plans and Other Post Retirement Benefits

6 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

PENSION PLANS AND OTHER POST RETIREMENT BENEFITS

PENSION PLANS AND OTHER POST RETIREMENT BENEFITS

The following table provides details of our defined benefit pension plans and long-term employee benefit obligations for Open Text Document Technologies GmbH (CDT), GXS GmbH (GXS GER), GXS Philippines, Inc. (GXS PHP) and other plans as of December 31, 2019 and June 30, 2019:

	As of December 31, 2019
	Total benefit obligation		Current portion of benefit obligation*		Non-current portion of benefit obligation
CDT defined benefit plan	$	35,221	$	700	$	34,521
GXS GER defined benefit plan	25,650		986		24,664
GXS PHP defined benefit plan	7,113		93		7,020
Other plans	7,964		491		7,473
Total	$	75,948	$	2,270	$	73,678

	As of June 30, 2019
	Total benefit obligation		Current portion of benefit obligation*		Non-current portion of benefit obligation
CDT defined benefit plan	$	35,836	$	675	$	35,161
GXS GER defined benefit plan	26,739		1,012		25,727
GXS PHP defined benefit plan	6,904		124		6,780
Other plans	8,052		481		7,571
Total	$	77,531	$	2,292	$	75,239

* The current portion of the benefit obligation has been included within "Accrued salaries and commissions", all within "Accounts payable and accrued liabilities" in the Condensed Consolidated Balance Sheets (see note 10 "Accounts Payable and Accrued Liabilities").

Defined Benefit Plans

CDT Plan

CDT sponsors an unfunded defined benefit pension plan covering substantially all CDT employees (CDT plan) which provides for old age, disability and survivors’ benefits. Benefits under the CDT plan are generally based on age at retirement, years of service and the employee’s annual earnings. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. No contributions have been made since the inception of the plan. Actuarial gains or losses in excess of 10% of the projected benefit obligation are being amortized and recognized as a component of net periodic benefit costs over the average remaining service period of the plan's active employees. As of December 31, 2019, there is approximately $0.5 million in accumulated other comprehensive income related to the CDT plan that is expected to be recognized as a component of net periodic benefit costs over the remainder of Fiscal 2020.

GXS GER Plan

As part of our acquisition of GXS Group, Inc. (GXS) in Fiscal 2014, we assumed an unfunded defined benefit pension plan covering certain German employees which provides for old age, disability and survivors' benefits. The GXS GER plan has been closed to new participants since 2006. Benefits under the GXS GER plan are generally based on a participant’s remuneration, date of hire, years of eligible service and age at retirement. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the

discount rate and estimated service costs. No contributions have been made since the inception of the plan. Actuarial gains or losses in excess of 10% of the projected benefit obligation are being amortized and recognized as a component of net periodic benefit costs over the average remaining service period of the plan’s active employees. As of December 31, 2019, there is approximately $0.1 million in accumulated other comprehensive income related to the GXS GER plan that is expected to be recognized as a component of net periodic benefit costs over the remainder of Fiscal 2020.

GXS PHP Plan

As part of our acquisition of GXS in Fiscal 2014, we assumed a primarily unfunded defined benefit pension plan covering substantially all of the GXS Philippines employees which provides for retirement, disability and survivors' benefits. Benefits under the GXS PHP plan are generally based on a participant’s remuneration, years of eligible service and age at retirement. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. Aside from an initial contribution which has a fair value of approximately $0.03 million as of December 31, 2019, no additional contributions have been made since the inception of the plan. Actuarial gains or losses in excess of 10% of the projected benefit obligation are being amortized and recognized as a component of net periodic benefit costs over the average remaining service period of the plan’s active employees. As of December 31, 2019, there is approximately $0.1 million in accumulated other comprehensive income related to the GXS PHP plan that is expected to be recognized as a component of net periodic benefit costs over the remainder of Fiscal 2020.

The following are the details of the change in the benefit obligation for each of the above mentioned pension plans for the periods indicated: 

	As of December 31, 2019												As of June 30, 2019
	CDT			GXS GER			GXS PHP			Total			CDT			GXS GER			GXS PHP			Total
Benefit obligation—beginning of period	$	35,836		$	26,739		$	6,904		$	69,479		$	32,651		$	25,382		$	3,853		$	61,886
Service cost	286			159			609			1,054			550			566			771			1,887
Interest cost	229			168			173			570			642			489			300			1,431
Benefits paid	(313		)	(472		)	(115		)	(900		)	(626		)	(996		)	(140		)	(1,762		)
Actuarial (gain) loss	90			(269		)	(559		)	(738		)	3,365			1,872			1,957			7,194
Foreign exchange (gain) loss	(907		)	(675		)	101			(1,481		)	(746		)	(574		)	163			(1,157		)
Benefit obligation—end of period	35,221			25,650			7,113			67,984			35,836			26,739			6,904			69,479
Less: Current portion	(700		)	(986		)	(93		)	(1,779		)	(675		)	(1,012		)	(124		)	(1,811		)
Non-current portion of benefit obligation	$	34,521		$	24,664		$	7,020		$	66,205		$	35,161		$	25,727		$	6,780		$	67,668

The following are details of net pension expense relating to the following pension plans:

	Three Months Ended December 31,
	2019									2018
Pension expense:	CDT		GXS GER		GXS PHP			Total		CDT		GXS GER		GXS PHP			Total
Service cost	$	144	$	80	$	310		$	534	$	136	$	140	$	159		$	435
Interest cost	115		84		88			287		159		121		72			352
Amortization of actuarial (gains) and losses	235		61		(72		)	224		175		33		(139		)	69
Net pension expense	$	494	$	225	$	326		$	1,045	$	470	$	294	$	92		$	856

	Six Months Ended December 31,
	2019									2018
Pension expense:	CDT		GXS GER		GXS PHP			Total		CDT		GXS GER		GXS PHP			Total
Service cost	$	286	$	159	$	609		$	1,054	$	277	$	285	$	335		$	897
Interest cost	229		168		173			570		324		247		140			711
Amortization of actuarial (gains) and losses	469		122		(143		)	448		351		66		(279		)	138
Net pension expense	$	984	$	449	$	639		$	2,072	$	952	$	598	$	196		$	1,746

In determining the fair value of the pension plan benefit obligations as of December 31, 2019 and June 30, 2019, respectively, we used the following weighted-average key assumptions:

	As of December 31, 2019			As of June 30, 2019
	CDT	GXS GER	GXS PHP	CDT	GXS GER	GXS PHP
Assumptions:
Salary increases	2.50%	2.50%	6.50%	2.50%	2.50%	6.50%
Pension increases	2.00%	2.00%	N/A	2.00%	2.00%	N/A
Discount rate	1.30%	1.30%	5.25%	1.32%	1.32%	5.00%
Normal retirement age	65-67	65-67	60	65-67	65-67	60
Employee fluctuation rate:
to age 20	—%	—%	12.19%	—%	—%	12.19%
to age 25	—%	—%	16.58%	—%	—%	16.58%
to age 30	1.00%	—%	13.97%	1.00%	—%	13.97%
to age 35	0.50%	—%	10.77%	0.50%	—%	10.77%
to age 40	—%	—%	7.39%	—%	—%	7.39%
to age 45	0.50%	—%	3.28%	0.50%	—%	3.28%
to age 50	0.50%	—%	—%	0.50%	—%	—%
from age 51	1.00%	—%	—%	1.00%	—%	—%

Anticipated pension payments under the pension plans for the fiscal years indicated below are as follows:

	Fiscal years ending June 30,
	CDT		GXS GER		GXS PHP
2020 (six months ended June 30)	$	331	$	493	$	31
2021	739		985		268
2022	810		1,017		266
2023	909		1,017		222
2024	1,014		1,023		278
2025 to 2029	5,851		5,171		2,890
Total	$	9,654	$	9,706	$	3,955

Other Plans

Other plans include defined benefit pension plans that are offered by certain of our foreign subsidiaries. Many of these plans were assumed through our acquisitions or are required by local regulatory requirements. These other plans are primarily unfunded, with the aggregate projected benefit obligation included in our pension liability. The net periodic costs of these plans are determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net income for the period	$ 181,945,000	$ 140,829,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets	224,204,000	235,326,000
Share-based compensation expense	14,674,000	13,440,000
Pension expense	2,895,000	2,254,000
Amortization of debt issuance costs	2,276,000	2,157,000
Loss on sale and write down of property and equipment	0	9,428,000
Deferred taxes	34,168,000	8,909,000
Share in net (income) loss of equity investees	(1,948,000)	(7,863,000)
Changes in operating assets and liabilities:
Accounts receivable	2,598,000	33,548,000
Contract assets	(17,659,000)	(13,400,000)
Prepaid expenses and other current assets	(501,000)	12,532,000
Income taxes	(891,000)	17,324,000
Accounts payable and accrued liabilities	(33,235,000)	(29,748,000)
Deferred revenue	(64,093,000)	(69,151,000)
Other assets	2,357,000	4,919,000
Operating lease assets and liabilities, net	(2,105,000)
Net cash provided by operating activities	344,685,000	360,504,000
Cash flows from investing activities:
Additions of property and equipment	(38,212,000)	(33,464,000)
Other investing activities	(5,541,000)	(6,373,000)
Net cash used in investing activities	(1,264,541,000)	(353,401,000)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP	23,117,000	24,286,000
Proceeds from long-term debt and Revolver	750,000,000	0
Repayment of long-term debt and Revolver	(5,000,000)	(5,000,000)
Debt issuance costs	(979,000)	(322,000)
Purchase of Treasury Stock	(12,424,000)	(24,534,000)
Purchase of non-controlling interests	0	(583,000)
Payments of dividends to shareholders	(94,098,000)	(81,166,000)
Net cash provided by (used in) financing activities	660,616,000	(87,319,000)
Foreign exchange gain (loss) on cash held in foreign currencies	(4,071,000)	(5,901,000)
Increase (decrease) in cash, cash equivalents and restricted cash during the period	(263,311,000)	(86,117,000)
Cash, cash equivalents and restricted cash at beginning of the period	943,543,000	683,991,000
Cash, cash equivalents and restricted cash at end of the period	680,232,000	597,874,000
Reconciliation of cash, cash equivalents and restricted cash:
Total cash, cash equivalents and restricted cash	680,232,000	597,874,000
Carbonite
Cash flows from investing activities:
Purchase of business, net of cash acquired	(1,216,639,000)	0
The Fax Guys
Cash flows from investing activities:
Purchase of business, net of cash acquired	(4,149,000)	0
Liaison Technologies Inc.
Cash flows from investing activities:
Purchase of business, net of cash acquired	0	(311,285,000)
Guidance Software Inc.
Cash flows from investing activities:
Purchase of business, net of cash acquired	$ 0	$ (2,279,000)

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Basic earnings per share
Net income attributable to OpenText	$ 107,467	$ 104,432	$ 181,868	$ 140,756
Basic earnings per share attributable to OpenText (in dollars per share)	$ 0.40	$ 0.39	$ 0.67	$ 0.52
Diluted earnings per share
Net income attributable to OpenText	$ 107,467	$ 104,432	$ 181,868	$ 140,756
Diluted earnings per share attributable to OpenText (in dollars per share)	$ 0.40	$ 0.39	$ 0.67	$ 0.52
Weighted-average number of shares outstanding
Basic (in shares)	270,450	268,524	270,232	268,276
Effect of dilutive securities (in shares)	1,140	876	1,096	1,120
Diluted (in shares)	271,590	269,400	271,328	269,396
Excluded as anti-dilutive (in shares)	2,541	3,171	2,360	2,597

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Earnings Per Share

6 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Basic earnings per share are computed by dividing net income, attributable to OpenText, by the weighted average number of Common Shares outstanding during the period. Diluted earnings per share are computed by dividing net income, attributable to OpenText, by the shares used in the calculation of basic earnings per share plus the dilutive effect of Common Share equivalents, such as stock options, using the treasury stock method. Common Share equivalents are excluded from the computation of diluted earnings per share if their effect is anti-dilutive.

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Basic earnings per share
Net income attributable to OpenText	$	107,467	$	104,432	$	181,868	$	140,756
Basic earnings per share attributable to OpenText	$	0.40	$	0.39	$	0.67	$	0.52
Diluted earnings per share
Net income attributable to OpenText	$	107,467	$	104,432	$	181,868	$	140,756
Diluted earnings per share attributable to OpenText	$	0.40	$	0.39	$	0.67	$	0.52
Weighted-average number of shares outstanding (in 000's)
Basic	270,450		268,524		270,232		268,276
Effect of dilutive securities	1,140		876		1,096		1,120
Diluted	271,590		269,400		271,328		269,396
Excluded as anti-dilutive(1)	2,541		3,171		2,360		2,597

⁽¹⁾ Represents options to purchase Common Shares excluded from the calculation of diluted earnings per share because the exercise price of the stock options was greater than or equal to the average price of the Common Shares during the period.

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Revenues (Tables)

6 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction

A summary of our typical performance obligations and when the obligations are satisfied are as follows:

Performance Obligation	When Performance Obligation is Typically Satisfied
License revenue:
Software licenses (Perpetual,Term, Subscription)	When software activation keys have been made available for download (point in time)
Cloud services and subscriptions revenue:
Outsourced Professional Services	As the services are provided (over time)
Managed Services / Ongoing Hosting / SaaS	Over the contract term, beginning on the date that service is made available (i.e. "Go live") to the customer (over time)
Customer support revenue:
When and if available updates and upgrades and technical support	Ratable over the course of the service term (over time)
Professional service and other revenue:
Professional services	As the services are provided (over time)

Disaggregation of Revenue

The following table disaggregates our revenue by significant geographic area, based on the location of our end customer, and by type of performance obligation and timing of revenue recognition for the periods indicated:

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Total Revenues by Geography:
Americas (1)	$	450,691	$	420,696	$	870,401	$	810,036
EMEA (2)	252,268		243,937		462,435		458,412
Asia Pacific (3)	68,598		70,598		135,609		133,940
Total Revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Total Revenues by Type of Performance Obligation:
Recurring revenue (4)
Cloud services and subscriptions revenue	$	248,340	$	219,233	$	485,605	$	427,316
Customer support revenue	315,508		310,354		627,806		621,905
Total recurring revenues	$	563,848	$	529,587	$	1,113,411	$	1,049,221
License revenue (perpetual, term and subscriptions)	138,095		132,756		215,993		209,643
Professional service and other revenue	69,614		72,888		139,041		143,524
Total revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388
Total Revenues by Timing of Revenue Recognition
Point in time	138,095		132,756		215,993		209,643
Over time (including professional service and other revenue)	633,462		602,475		1,252,452		1,192,745
Total revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388

⁽¹⁾ Americas consists of countries in North, Central and South America.

⁽²⁾ EMEA primarily consists of countries in Europe, the Middle East and Africa.

⁽³⁾ Asia Pacific primarily consists of the countries Japan, Australia, China, Korea, Philippines, Singapore and New Zealand.

⁽⁴⁾ Recurring revenue is defined as the sum of cloud services and subscriptions revenue and customer support revenue.

Contract Balances

The balance for our contract assets and contract liabilities (i.e. deferred revenues) for the periods indicated below were as follows:

	As of December 31, 2019		As of June 30, 2019
Short-term contract assets	$	22,794	$	20,956
Long-term contract assets	$	17,975	$	15,386
Short-term deferred revenue	$	718,861	$	641,656
Long-term deferred revenue	$	77,335	$	46,974

Incremental Costs of Obtaining a Contract with a Customer

The following table summarizes the changes in total capitalized costs since June 30, 2019:

Capitalized costs to obtain a contract as of June 30, 2019	$	48,284
New capitalized costs incurred	10,590
Amortization of capitalized costs	(7,715		)
Adjustments on account of foreign exchange	(228		)
Capitalized costs to obtain a contract as of December 31, 2019	$	50,931

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Goodwill (Tables)

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Changes In Carrying Amount of Goodwill

The following table summarizes the changes in goodwill since June 30, 2019:

Balance as of June 30, 2019	$	3,769,908
Acquisition of Carbonite (note 19)	885,547
Acquisition of The Fax Guys (note 19)	2,180
Adjustments relating to acquisitions prior to Fiscal 2020 that had open measurement periods (note 19)	842
Adjustments on account of foreign exchange	(1,985		)
Balance as of December 31, 2019	$	4,656,492

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Acquired Intangible Assets

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

ACQUIRED INTANGIBLE ASSETS

ACQUIRED INTANGIBLE ASSETS

	As of December 31, 2019
	Cost		Accumulated Amortization			Net
Technology assets	$	1,126,601	$	(431,856	)	$	694,745
Customer assets	1,951,617		(838,290		)	1,113,327
Total	$	3,078,218	$	(1,270,146	)	$	1,808,072
	As of June 30, 2019
	Cost		Accumulated Amortization			Net
Technology assets	$	835,498	$	(349,259	)	$	486,239
Customer assets	1,397,937		(737,672		)	660,265
Total	$	2,233,435	$	(1,086,931	)	$	1,146,504

The weighted average amortization periods for acquired technology and customer intangible assets are approximately five years and seven years, respectively.

The following table shows the estimated future amortization expense for the fiscal years indicated. This calculation assumes no future adjustments to acquired intangible assets:

Fiscal years ending June 30,
2020 (six months ended June 30)	$	239,877
2021	424,138
2022	384,751
2023	299,585
2024	220,855
2025 and beyond	238,866
Total	$	1,808,072

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Allowance for Doubtful Accounts

6 Months Ended

Dec. 31, 2019

Receivables [Abstract]

ALLOWANCE FOR DOUBTFUL ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance as of June 30, 2019	$	17,011
Bad debt expense	3,450
Write-off /adjustments	(2,524		)
Balance as of December 31, 2019	$	17,937

Included in accounts receivable are unbilled receivables in the amount of $80.5 million as of December 31, 2019 (June 30, 2019—$56.1 million).

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Acquisitions - Acquisition of Catalyst Repository Systems Inc. (Details) - USD ($) $ in Thousands	Jan. 31, 2019	Dec. 31, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Goodwill		$ 4,656,492	$ 3,769,908
Catalyst Repository Systems Inc
Business Acquisition [Line Items]
Cash consideration	$ 70,800
Goodwill	30,973
Goodwill expected to be tax deductible	3,100
Deferred revenue	800
Acquired receivables, fair value	10,800
Acquired receivables, gross contractual amount	11,800
Acquired receivables, estimated uncollectible	$ 1,000

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Acquisitions - Acquisition of Carbonite, Inc. (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Dec. 24, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Business Acquisition [Line Items]
Goodwill		$ 4,656,492		$ 4,656,492		$ 3,769,908
Acquisition-related costs		7,779	$ 3,197	10,445	$ 3,704
Carbonite
Business Acquisition [Line Items]
Purchase consideration	$ 1,400,000
Cash consideration	1,300,000
Purchase consideration unpaid	100,000			89,000
Goodwill	885,547
Goodwill expected to be tax deductible	6,900
Deferred revenue	171,500
Deferred revenue adjustment	74,900
Acquired receivables, fair value	49,800
Acquired receivables, gross contractual amount	51,200
Acquired receivables, estimated uncollectible	$ 1,400
Acquisition-related costs		$ 7,400		$ 7,400

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Accounts Payable and Accrued Liabilities - Schedule of Current Liabilities (Details) - USD ($) $ in Thousands		6 Months Ended
	Dec. 24, 2019	Dec. 31, 2019	Jun. 30, 2019
Accounts Payable and Accrued Liabilities [Abstract]
Accounts payable—trade		$ 45,285	$ 46,323
Accrued salaries and commissions		113,901	131,430
Accrued liabilities		229,414	117,551
Accrued interest on Senior Notes		24,786	24,786
Amounts payable in respect of restructuring and other Special charges(1)		1,111	8,153
Asset retirement obligations		3,114	1,660
Total		417,611	$ 329,903
Carbonite
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Purchase consideration unpaid	$ 100,000	$ 89,000

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Pension Plans and Other Post Retirement Benefits - Schedule of Weighted-Average Key Assumptions Used for Pension Plans (Details) - Pension Plan	6 Months Ended	12 Months Ended
	Dec. 31, 2019	Jun. 30, 2019
CDT
Assumptions:
Salary increases	2.50%	2.50%
Pension increases	2.00%	2.00%
Discount rate	1.30%	1.32%
CDT | to age 20
Assumptions:
Employee fluctuation rate	0.00%	0.00%
CDT | to age 25
Assumptions:
Employee fluctuation rate	0.00%	0.00%
CDT | to age 30
Assumptions:
Employee fluctuation rate	1.00%	1.00%
CDT | to age 35
Assumptions:
Employee fluctuation rate	0.50%	0.50%
CDT | to age 40
Assumptions:
Employee fluctuation rate	0.00%	0.00%
CDT | to age 45
Assumptions:
Employee fluctuation rate	0.50%	0.50%
CDT | to age 50
Assumptions:
Employee fluctuation rate	0.50%	0.50%
CDT | from age 51
Assumptions:
Employee fluctuation rate	1.00%	1.00%
CDT | Minimum
Assumptions:
Normal retirement age	65 years	65 years
CDT | Maximum
Assumptions:
Normal retirement age	67 years	67 years
GXS GER
Assumptions:
Salary increases	2.50%	2.50%
Pension increases	2.00%	2.00%
Discount rate	1.30%	1.32%
GXS GER | to age 20
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | to age 25
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | to age 30
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | to age 35
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | to age 40
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | to age 45
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | to age 50
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | from age 51
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS GER | Minimum
Assumptions:
Normal retirement age	65 years	65 years
GXS GER | Maximum
Assumptions:
Normal retirement age	67 years	67 years
GXS PHP
Assumptions:
Salary increases	6.50%	6.50%
Discount rate	5.25%	5.00%
Normal retirement age	60 years	60 years
GXS PHP | to age 20
Assumptions:
Employee fluctuation rate	12.19%	12.19%
GXS PHP | to age 25
Assumptions:
Employee fluctuation rate	16.58%	16.58%
GXS PHP | to age 30
Assumptions:
Employee fluctuation rate	13.97%	13.97%
GXS PHP | to age 35
Assumptions:
Employee fluctuation rate	10.77%	10.77%
GXS PHP | to age 40
Assumptions:
Employee fluctuation rate	7.39%	7.39%
GXS PHP | to age 45
Assumptions:
Employee fluctuation rate	3.28%	3.28%
GXS PHP | to age 50
Assumptions:
Employee fluctuation rate	0.00%	0.00%
GXS PHP | from age 51
Assumptions:
Employee fluctuation rate	0.00%	0.00%

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Share Capital, Option Plans and Share-Based Payments - Summary of Outstanding Stock Options, Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding (in shares)	7,511,605		7,511,605		7,102,753
Cash used to settle awards	$ 0	$ 0	$ 0	$ 0
Capitalized amount of share-based compensation costs	0	0	0	0
Cash proceeds from exercise of options granted	6,800,000	1,800,000	11,400,000	14,200,000
Tax benefit realized from exercise of options	$ 600,000	$ 15,000.0	$ 900,000	$ 900,000
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding (in shares)	7,511,605		7,511,605
Common shares available for issuance (in shares)	8,573,945		8,573,945
Expiration period of options, minimum term			7 years
Expiration period of options, maximum term			10 years
Unrecognized compensation cost relating to unvested stock awards	$ 24,500,000		$ 24,500,000
Unvested stock awards compensation cost, weighted average recognition period			2 years 10 months 24 days
Stock Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			4 years
Stock Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			5 years

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Long-Term Debt - Senior Unsecured Fixed Rate Notes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2019	Dec. 20, 2016	May 31, 2016	Jan. 15, 2015
Debt Instrument [Line Items]
Long-term debt	$ 3,526,250,000		$ 3,526,250,000		$ 2,637,500,000
Senior Notes | Senior Notes 2026
Debt Instrument [Line Items]
Debt instrument face amount						$ 250,000,000	$ 600,000,000
Debt instrument stated interest rate							5.875%
Debt premium issue price percentage						102.75%
Long-term debt	850,000,000		850,000,000		850,000,000
Interest expense	12,500,000	$ 12,500,000	25,000,000.0	$ 25,000,000.0
Senior Notes | Senior Notes 2023
Debt Instrument [Line Items]
Debt instrument face amount								$ 800,000,000
Debt instrument stated interest rate								5.625%
Long-term debt	800,000,000		800,000,000		$ 800,000,000
Interest expense	$ 11,200,000	$ 11,200,000	$ 22,500,000	$ 22,500,000

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Revenues - Remaining Performance Obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 $ in Billions	Dec. 31, 2019 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 1.3
Expected timing of satisfaction, period	12 months

XML

Revenues - Additional Information (Details)	6 Months Ended
	Dec. 31, 2019 revenue_stream
Revenue from Contract with Customer [Abstract]
Number of revenue streams	4
Disaggregation of Revenue [Line Items]
Right of return period	70 days
Description of timing	As a practical expedient, we do not account for significant financing components if the period between when we transfer the promised good or service to the customer and when the customer pays for the product or service will be one year or less.We apply the practical expedient and do not disclose performance obligations that have original expected durations of one year or less.
Minimum
Disaggregation of Revenue [Line Items]
Payment period	30 days
Maximum
Disaggregation of Revenue [Line Items]
Payment period	60 days

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Supplemental Cash Flow Disclosures (Tables)

6 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Information [Abstract]

Supplemental Disclosure of Cash Flow Information

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Cash paid during the period for interest	$	34,685	$	36,136	$	68,129	$	68,763
Cash received during the period for interest	$	3,474	$	2,624	$	7,423	$	3,359
Cash paid during the period for income taxes	$	23,037	$	31,445	$	33,372	$	39,812

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Acquired Intangible Assets (Tables)

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Calculation of Acquired Intangibles by Asset Class

	As of December 31, 2019
	Cost		Accumulated Amortization			Net
Technology assets	$	1,126,601	$	(431,856	)	$	694,745
Customer assets	1,951,617		(838,290		)	1,113,327
Total	$	3,078,218	$	(1,270,146	)	$	1,808,072
	As of June 30, 2019
	Cost		Accumulated Amortization			Net
Technology assets	$	835,498	$	(349,259	)	$	486,239
Customer assets	1,397,937		(737,672		)	660,265
Total	$	2,233,435	$	(1,086,931	)	$	1,146,504

Calculation of Estimated Future Amortization Expense

The following table shows the estimated future amortization expense for the fiscal years indicated. This calculation assumes no future adjustments to acquired intangible assets:

Fiscal years ending June 30,
2020 (six months ended June 30)	$	239,877
2021	424,138
2022	384,751
2023	299,585
2024	220,855
2025 and beyond	238,866
Total	$	1,808,072

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Related Party Transactions

6 Months Ended

Dec. 31, 2019

Related Party Transaction, Due from (to) Related Party [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Our procedure regarding the approval of any related party transaction requires that the material facts of such transaction be reviewed by the independent members of the Audit Committee and the transaction be approved by a majority of the independent members of the Audit Committee. The Audit Committee reviews all transactions in which we are, or will be, a participant and any related party has or will have a direct or indirect interest in the transaction. In determining whether to approve a related party transaction, the Audit Committee generally takes into account, among other facts it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; the extent and nature of the related person’s interest in the transaction; the benefits to the Company of the proposed transaction; if applicable, the effects on a director’s independence; and if applicable, the availability of other sources of comparable services or products.

During the six months ended December 31, 2019, Mr. Stephen Sadler, a director, earned approximately $0.4 million (six months ended December 31, 2018—$0.4 million) in consulting fees from OpenText for assistance with acquisition-related business activities. Mr. Sadler abstained from voting on all transactions from which he would potentially derive consulting fees.

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Allowance for Doubtful Accounts (Tables)

6 Months Ended

Dec. 31, 2019

Receivables [Abstract]

Changes in Carrying Amount of Allowance For Doubtful Accounts

Balance as of June 30, 2019	$	17,011
Bad debt expense	3,450
Write-off /adjustments	(2,524		)
Balance as of December 31, 2019	$	17,937

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Acquisitions - Acquisition of Dynamic Solutions Group, Inc (The Fax Guys) (Details) - The Fax Guys $ in Millions	Dec. 02, 2019 USD ($)
Business Acquisition [Line Items]
Purchase consideration	$ 5.3
Purchase consideration unpaid	$ 1.2

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Special Charges (Recoveries) - Schedule of Restructuring Reserve (Details) $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($)
Fiscal 2019 Restructuring Plan
Restructuring Reserve [Roll Forward]
Balance, beginning	$ 7,107
Adjustment for Topic 842 (note 1 and note 6)	(5,288)
Accruals and adjustments	1,679
Cash payments	(2,645)
Foreign exchange and other non-cash adjustments	(211)
Balance, end	642
Fiscal 2019 Restructuring Plan | Workforce Reduction
Restructuring Reserve [Roll Forward]
Balance, beginning	1,819
Adjustment for Topic 842 (note 1 and note 6)	0
Accruals and adjustments	589
Cash payments	(1,555)
Foreign exchange and other non-cash adjustments	(211)
Balance, end	642
Fiscal 2019 Restructuring Plan | Facility Costs
Restructuring Reserve [Roll Forward]
Balance, beginning	5,288
Adjustment for Topic 842 (note 1 and note 6)	(5,288)
Accruals and adjustments	1,090
Cash payments	(1,090)
Foreign exchange and other non-cash adjustments	0
Balance, end	0
Fiscal 2018 Restructuring Plan
Restructuring Reserve [Roll Forward]
Balance, beginning	636
Adjustment for Topic 842 (note 1 and note 6)	(486)
Accruals and adjustments	86
Cash payments	(187)
Foreign exchange and other non-cash adjustments	(9)
Balance, end	40
Fiscal 2018 Restructuring Plan | Workforce Reduction
Restructuring Reserve [Roll Forward]
Balance, beginning	150
Adjustment for Topic 842 (note 1 and note 6)	0
Accruals and adjustments	(62)
Cash payments	(39)
Foreign exchange and other non-cash adjustments	(9)
Balance, end	40
Fiscal 2018 Restructuring Plan | Facility Costs
Restructuring Reserve [Roll Forward]
Balance, beginning	486
Adjustment for Topic 842 (note 1 and note 6)	(486)
Accruals and adjustments	148
Cash payments	(148)
Foreign exchange and other non-cash adjustments	0
Balance, end	$ 0

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Goodwill

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

GOODWILL

Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net tangible and intangible assets. The following table summarizes the changes in goodwill since June 30, 2019:

Balance as of June 30, 2019	$	3,769,908
Acquisition of Carbonite (note 19)	885,547
Acquisition of The Fax Guys (note 19)	2,180
Adjustments relating to acquisitions prior to Fiscal 2020 that had open measurement periods (note 19)	842
Adjustments on account of foreign exchange	(1,985		)
Balance as of December 31, 2019	$	4,656,492

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Revenues

6 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

REVENUES

REVENUES

In accordance with Accounting Standards Codification (ASC) Topic 606 "Revenue from Contracts with Customers" (Topic 606), we account for a customer contract when we obtain written approval, the contract is committed, the rights of the parties, including the payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Revenue is recognized when, or as, control of a promised product or service is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for our products and services (at its transaction price). Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based on readily available information, which may include historical, current and forecasted information, taking into consideration the type of customer, the type of transaction and specific facts and circumstances of each arrangement. We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue producing transactions.

We have four revenue streams: license, cloud services and subscriptions, customer support, and professional service and other.

License revenue

Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premises (on-premise).

Perpetual licenses: We sell perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which is generally paid at contract inception. Our perpetual licenses provide a right to use intellectual property (IP) that is functional in nature and have significant stand-alone functionality. Accordingly, for perpetual licenses of functional IP, revenue is recognized at the point-in-time when control has been transferred to the customer, which normally occurs once software activation keys have been made available for download.

Term licenses and Subscription licenses: We sell both term and subscription licenses which provide customers the right to use software for a specified period in exchange for a fee, which may be paid at contract inception or paid in installments over the period of the contract. Like perpetual licenses, both our term licenses and subscription licenses are functional IP that have significant stand-alone functionality. Accordingly, for both term and subscription licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.

Cloud services and subscriptions revenue

Cloud services and subscriptions revenue are from hosting arrangements where in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements). The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis. Our cloud arrangements can be broadly categorized as "platform as a service" (PaaS), "software as a service" (SaaS), cloud subscriptions and managed services.

PaaS/ SaaS/ Cloud Subscriptions (collectively referred to here as cloud-based solutions): We offer cloud-based solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. These services are made available to the customer continuously throughout the contractual period, however, the extent to which the customer uses the services may vary at the customer’s discretion. The payment for cloud-based solutions may be received either at inception of the arrangement, or over the term of the arrangement.

These cloud-based solutions are considered to have a single performance obligation where the customer simultaneously receives and consumes the benefit, and as such we recognize revenue for these cloud-based solutions ratably over the term of the contractual agreement. For example, revenue related to cloud-based solutions that are provided on a usage basis, such as the number of users, is recognized based on a customer’s utilization of the services in a given period.

Additionally, a software license is present in a cloud-based solutions arrangement if all of the following criteria are met:

(i) The customer has the contractual right to take possession of the software at any time without significant penalty; and

(ii) It is feasible for the customer to host the software independent of us.

In these cases where a software license is present in a cloud-based solutions arrangement it is assessed to determine if it is distinct from the cloud-based solutions arrangement. The revenue allocated to the distinct software license would be recognized at the point in time the software license is transferred to the customer, whereas the revenue allocated to the hosting performance obligation would be recognized ratably on a monthly basis over the contractual term unless evidence suggests that revenue is earned, or obligations are fulfilled in a different pattern over the contractual term of the arrangement.

Managed services: We provide comprehensive B2B process outsourcing services for all day-to-day operations of a customers’ B2B integration program. Customers using these managed services are not permitted to take possession of our software and the contract is for a defined period, where customers pay a monthly or quarterly fee. Our performance obligation is satisfied as we provide services of operating and managing a customer's electronic data interchange (EDI) environment. Revenue relating to these services is recognized using an output method based on the expected level of service we will provide over the term of the contract.

In connection with cloud subscription and managed service contracts, we often agree to perform a variety of services before the customer goes live, such as for example, converting and migrating customer data, building interfaces and providing training. These services are considered an outsourced suite of professional services which can involve certain project-based activities. These services can be provided at the initiation of a contract, during the implementation or on an ongoing basis as part of the customer life cycle. These services can be charged separately on a fixed fee or time and materials basis, or the costs associated may be recovered as part of the ongoing cloud subscription or managed services fee. These outsourced professional services are considered to be distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements. The obligation to provide outsourced professional services is satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance

obligations. For outsourced professional services, we recognize revenue by measuring progress toward the satisfaction of our performance obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we recognize revenue at that amount.

Customer support revenue

Customer support revenue is associated with perpetual, term license and on-premise subscription arrangements. As customer support is not critical to the customer's ability to derive benefit from its right to use our software, customer support is considered as a distinct performance obligation when sold together in a bundled arrangement along with the software.

Customer support consists primarily of technical support and the provision of unspecified updates and upgrades on a when-and-if-available basis. Customer support for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Customer support for term and subscription licenses is renewable concurrently with such licenses for the same duration of time. Payments for customer support are generally made at the inception of the contract term or in installments over the term of the maintenance period. Our customer support team is ready to provide these maintenance services, as needed, to the customer during the contract term. As the elements of customer support are delivered concurrently and have the same pattern of transfer, customer support is accounted for as a single performance obligation. The customer benefits evenly throughout the contract period from the guarantee that the customer support resources and personnel will be available to them, and that any unspecified upgrades or unspecified future products developed by us will be made available. Revenue for customer support is recognized ratably over the contract period based on the start and end dates of the maintenance term, in line with how we believe services are provided.

Professional service and other revenue

Our professional services, when offered along with software licenses, consists primarily of technical services and training services. Technical services may include installation, customization, implementation or consulting services. Training services may include access to online modules or delivering a training package customized to the customer’s needs. At the customer’s discretion, we may offer one, all, or a mix of these services. Payment for professional services is generally a fixed fee or is a fee based on time and materials.

Professional services can be arranged in the same contract as the software license or in a separate contract.

As our professional services do not significantly change the functionality of the license and our customers can benefit from our professional services on their own or together with other readily available resources, we consider professional services as distinct within the context of the contract.

Professional service revenue is recognized over time so long as: (i) the customer simultaneously receives and consumes the benefits as we perform them, (ii) our performance creates or enhances an asset the customer controls as we perform, and (iii) our performance does not create an asset with alternative use and we have enforceable right to payment.

If all of the above criteria are met, we use an input-based measure of progress for recognizing professional service revenue. For example we may consider total labor hours incurred compared to total expected labor hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we will recognize revenue at that amount.

Material rights

To the extent that we grant our customer an option to acquire additional products or services in one of our arrangements, we will account for the option as a distinct performance obligation in the contract only if the option provides a material right to the customer that the customer would not receive without entering into the contract. For example if we give the customer an option to acquire additional goods or services in the future at a price that is significantly lower than the current price, this would be a material right as it allows the customer to, in effect, pay in advance for the option to purchase future products or services. If a material right exists in one of our contracts then revenue allocated to the option is deferred and we would recognize revenue only when those future products or services are transferred or when the option expires.

Based on history, our contracts do not typically contain material rights and when they do, the material right is not significant to our consolidated financial statements.

Arrangements with multiple performance obligations

Our contracts generally contain more than one of the products and services listed above. Determining whether goods and services are considered distinct performance obligations that should be accounted for separately or as a single performance obligation may require judgment, specifically when assessing whether both of the following two criteria are met:

• the customer can benefit from the product or service either on its own or together with other resources that are readily available to the customer; and

• our promise to transfer the product or service to the customer is separately identifiable from other promises in the contract.

If these criteria are not met, we determine an appropriate measure of progress based on the nature of our overall promise for the single performance obligation.

If these criteria are met, each product or service is separately accounted for as a distinct performance obligation and the total transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis.

Standalone selling price

The SSP reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers. In most cases we are able to establish the SSP based on observable data. We typically establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in facts and circumstances warrant a review.

If the SSP is not directly observable, then we estimate the amount using either the expected cost plus a margin or residual approach. Estimating SSP requires judgment that could impact the amount and timing of revenue recognized. SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or regional specific factors, competitive positioning, internal costs, profit objectives, and pricing practices.

Transaction Price Allocation

In bundled arrangements, where we have more than one distinct performance obligation, we must allocate the transaction price to each performance obligation based on its relative SSP. However, in certain bundled arrangements, the SSP may not always be directly observable. For instance, in bundled arrangements with license and customer support, we allocate the transaction price between the license and customer support performance obligations using the residual approach because we have determined that the SSP for licenses in these arrangements are highly variable. We use the residual approach only for our license arrangements. When the SSP is observable but contractual pricing does not fall within our established SSP range, then an adjustment is required and we will allocate the transaction price between license and customer support at a constant ratio reflecting the mid-point of the established SSP range.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly.

Sales to resellers

We execute certain sales contracts through resellers, distributors and channel partners (collectively referred to as resellers). For these type of agreements, we assess whether we are considered the principal or the agent in the arrangement. We consider factors such as, but not limited to, whether or not the reseller has the ability to set the price for which they sell our software products to end users and whether or not resellers distribution rights are limited such that any potential sales are subject to OpenText’s review and approval before delivery of the software product can be made. If we determine that we are the principal in the arrangement, then revenue is recognized based on the transaction price for the sale of the software product to the end user at the gross amount. If that is not known, then the net amount received from the reseller is the transaction price. If we determine that we are the agent in the agreement, then revenue is recognized based on the transaction price for the sale of the software product to the reseller, less any applicable commissions paid or discounts or rebates, if offered. Costs or commissions paid to the reseller would be recognized as a reduction of revenue unless we received a distinct good or service in return. Similarly, any discounts or rebates offered by the reseller would be recognized as a reduction of revenue.

Typically, we conclude that we are the principal in our reseller agreements, as we have control over the service and products prior to being transferred to the end customer.

We also assess the creditworthiness of each reseller and if they are newly formed, undercapitalized or in financial difficulty, we defer any revenues expected to emanate from such reseller and recognize revenue only when cash is received, and all other revenue recognition criteria under Topic 606 are met.

Rights of return and other incentives

We do not generally offer rights of return or any other incentives such as concessions, product rotation, or price protection and, therefore, do not provide for or make estimates of rights of return and similar incentives. However, we do offer consumers who purchase certain of our products on-line directly from us an unconditional full 70-days money-back guarantee. Distributors and resellers are also permitted to return the consumer products, subject to certain limitations. Revenue is reduced for such rights based on the estimate of future returns originating from contractual agreements with these customers.

Additionally, in some contracts, however, discounts may be offered to the customer for future software purchases and other additional products or services. Such arrangements grant the customer an option to acquire additional goods or services in the future at a discount and therefore are evaluated under guidance related to “material rights” as discussed above.

Other policies

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice date. In certain arrangements, we will receive payment from a customer either before or after the performance obligation to which the invoice relates has been satisfied. As a practical expedient, we do not account for significant financing components if the period between when we transfer the promised good or service to the customer and when the customer pays for the product or service will be one year or less. On that basis, our contracts for license and maintenance typically do not contain a significant financing component, however, in determining the transaction price we consider whether we need to adjust the promised consideration for the effects of the time value of money if the timing of payments provides either the customer or OpenText with a significant benefit of financing. Our managed services contracts may not include an upfront charge for outsourced professional services performed as part of an implementation and are recovered through an ongoing fee. Therefore, these contracts may be expected to have a financing component associated with revenue being recognized in advance of billings.

We may modify contracts to offer customers additional products or services. The additional products and services will be considered distinct from those products or services transferred to the customer before the modification and will be accounted for as a separate contract. We evaluate whether the price for the additional products and services reflects the SSP adjusted as appropriate for facts and circumstances applicable to that contract. In determining whether an adjustment is appropriate, we evaluate whether the incremental consideration is consistent with the prices previously paid by the customer or similar customers.

Certain of our subscription services and product support arrangements generally contain performance response time guarantees. For subscription services arrangements, we estimate variable consideration using a portfolio approach because performance penalties are tied to standard response time requirements. For product support arrangements, we estimate variable consideration on a contract basis because such arrangements are customer-specific. For both subscription services and product support arrangements, we use an expected value approach to estimate variable consideration based on historical business practices and current and future performance expectations to determine the likelihood of incurring penalties.

Performance Obligations

A summary of our typical performance obligations and when the obligations are satisfied are as follows:

Performance Obligation	When Performance Obligation is Typically Satisfied
License revenue:
Software licenses (Perpetual,Term, Subscription)	When software activation keys have been made available for download (point in time)
Cloud services and subscriptions revenue:
Outsourced Professional Services	As the services are provided (over time)
Managed Services / Ongoing Hosting / SaaS	Over the contract term, beginning on the date that service is made available (i.e. "Go live") to the customer (over time)
Customer support revenue:
When and if available updates and upgrades and technical support	Ratable over the course of the service term (over time)
Professional service and other revenue:
Professional services	As the services are provided (over time)

Disaggregation of Revenue

The following table disaggregates our revenue by significant geographic area, based on the location of our end customer, and by type of performance obligation and timing of revenue recognition for the periods indicated:

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Total Revenues by Geography:
Americas (1)	$	450,691	$	420,696	$	870,401	$	810,036
EMEA (2)	252,268		243,937		462,435		458,412
Asia Pacific (3)	68,598		70,598		135,609		133,940
Total Revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Total Revenues by Type of Performance Obligation:
Recurring revenue (4)
Cloud services and subscriptions revenue	$	248,340	$	219,233	$	485,605	$	427,316
Customer support revenue	315,508		310,354		627,806		621,905
Total recurring revenues	$	563,848	$	529,587	$	1,113,411	$	1,049,221
License revenue (perpetual, term and subscriptions)	138,095		132,756		215,993		209,643
Professional service and other revenue	69,614		72,888		139,041		143,524
Total revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388
Total Revenues by Timing of Revenue Recognition
Point in time	138,095		132,756		215,993		209,643
Over time (including professional service and other revenue)	633,462		602,475		1,252,452		1,192,745
Total revenues	$	771,557	$	735,231	$	1,468,445	$	1,402,388

⁽¹⁾ Americas consists of countries in North, Central and South America.

⁽²⁾ EMEA primarily consists of countries in Europe, the Middle East and Africa.

⁽³⁾ Asia Pacific primarily consists of the countries Japan, Australia, China, Korea, Philippines, Singapore and New Zealand.

⁽⁴⁾ Recurring revenue is defined as the sum of cloud services and subscriptions revenue and customer support revenue.

Contract Balances

A contract asset will be recorded if we have recognized revenue but do not have an unconditional right to the related consideration from the customer. For example, this will be the case if implementation services offered in a cloud arrangement are identified as a separate performance obligation and are provided to a customer prior to us being able to bill the customer. In addition, a contract asset may arise in relation to subscription licenses if the license revenue that is recognized upfront exceeds the amount that we are able to invoice the customer at that time. Contract assets are reclassified to accounts receivable when the rights become unconditional.

The balance for our contract assets and contract liabilities (i.e. deferred revenues) for the periods indicated below were as follows:

	As of December 31, 2019		As of June 30, 2019
Short-term contract assets	$	22,794	$	20,956
Long-term contract assets	$	17,975	$	15,386
Short-term deferred revenue	$	718,861	$	641,656
Long-term deferred revenue	$	77,335	$	46,974

The difference in the opening and closing balances of our contract assets and deferred revenues primarily results from the timing difference between our performance and the customer’s payments. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. During the six months ended December 31, 2019, we reclassified $13.3 million of contract assets to receivables as a result of the right to the transaction consideration becoming unconditional. During the three and six months ended December 31, 2019, respectively, there was no significant impairment loss recognized related to contract assets.

We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer for future obligations to transfer products or services. Our deferred revenues primarily relate to customer support agreements which have been paid for by customers prior to the performance of those services. The amount of revenue that was recognized during the six months ended December 31, 2019 that was included in the deferred revenue balances at June 30, 2019 was approximately $491 million.

Incremental Costs of Obtaining a Contract with a Customer

Incremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not have incurred if the contract had not been obtained, such as sales commissions. We have determined that certain of our commission programs meet the requirements to be capitalized. Some commission programs are not subject to capitalization as the commission expense is paid and recognized as the related revenue is recognized. In assessing costs to obtain a contract, we apply a practical expedient that allows us to assess our incremental costs on a portfolio of contracts with similar characteristics instead of assessing the incremental costs on each individual contract. We do not expect the financial statement effects of applying this practical expedient to the portfolio of contracts to be materially different than if we were to apply the new standard to each individual contract.

We pay commissions on the sale of new customer contracts as well as for renewals of existing contracts to the extent the renewals generate incremental revenue. Commissions paid on renewal contracts are limited to the incremental new revenue and therefore these payments are not commensurate with the commission paid on the original sale. We allocate commission costs to the performance obligations in an arrangement consistent with the allocation of the transaction price. Commissions allocated to the license performance obligation are expensed at the time the license revenue is recognized. Commissions allocated to professional service performance obligations are expensed as incurred, as these contracts are generally for one year or less and we apply a practical expedient to expense costs as incurred if the amortization period would have been one year or less. Commissions allocated to maintenance, managed services, on-going hosting arrangements or other recurring services, are capitalized and amortized consistent with the pattern of transfer to the customer of the services over the period expected to benefit from the commission payment. As commissions paid on renewals are not commensurate with the original sale, the period of benefit considers anticipated renewals. The benefit period is estimated to be approximately six years which is based on our customer contracts and the estimated life of our technology.

Expenses for incremental costs associated with obtaining a contract are recorded within sales and marketing expense in the Condensed Consolidated Statements of Income.

Our short term capitalized costs to obtain a contract are included in "Prepaid expenses and other assets", while our long-term capitalized costs to obtain a contract are included in "Other assets" on our Condensed Consolidated Balance Sheets.

The following table summarizes the changes in total capitalized costs since June 30, 2019:

Capitalized costs to obtain a contract as of June 30, 2019	$	48,284
New capitalized costs incurred	10,590
Amortization of capitalized costs	(7,715		)
Adjustments on account of foreign exchange	(228		)
Capitalized costs to obtain a contract as of December 31, 2019	$	50,931

During the three and six months ended December 31, 2019, respectively, there was no significant impairment loss recognized in relation to costs capitalized.

Transaction Price Allocated to the Remaining Performance Obligations

As of December 31, 2019, approximately $1.3 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts. We expect to recognize approximately 50% of this amount over the next 12 months and the remaining balance thereafter. We apply the practical expedient and do not disclose performance obligations that have original expected durations of one year or less.

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Accounts Payable and Accrued Liabilities - Schedule of Long-Term Accrued Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Accounts Payable and Accrued Liabilities [Abstract]
Amounts payable in respect of restructuring and other Special charges	$ 0	$ 4,804
Other accrued liabilities	2,186	30,338
Asset retirement obligations	12,791	14,299
Total	$ 14,977	$ 49,441

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Pension Plans and Other Post Retirement Benefits - Anticipated Pension Payments Under Pension Plans (Details) - Pension Plan $ in Thousands	Dec. 31, 2019 USD ($)
CDT defined benefit plan
Assumptions:
2020 (six months ended June 30)	$ 331
2021	739
2022	810
2023	909
2024	1,014
2025 to 2029	5,851
Total	9,654
GXS GER defined benefit plan
Assumptions:
2020 (six months ended June 30)	493
2021	985
2022	1,017
2023	1,017
2024	1,023
2025 to 2029	5,171
Total	9,706
GXS PHP defined benefit plan
Assumptions:
2020 (six months ended June 30)	31
2021	268
2022	266
2023	222
2024	278
2025 to 2029	2,890
Total	$ 3,955

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Share Capital, Option Plans and Share-Based Payments - Schedule of Outstanding Stock Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Dec. 31, 2019
Options
Outstanding at beginning of period (in shares)	7,102,753
Granted (in shares)	982,440
Exercised (in shares)	(414,682)
Forfeited or expired (in shares)	(158,906)
Outstanding at end of period (in shares)	7,511,605
Exercisable ending balance (in shares)	2,855,956
Weighted- Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 31.82
Granted (in dollars per share)	39.33
Exercised (in dollars per share)	27.39
Forfeited or expired (in dollars per share)	34.48
Outstanding at end of period (in dollars per share)	32.99
Exercisable at end of period (in dollars per share)	$ 28.42
Weighted- Average Remaining Contractual Term (years)
Outstanding (in years)	4 years 7 days
Exercisable (in years)	2 years 6 months 18 days
Aggregate Intrinsic Value ($’000s)
Outstanding	$ 83,257
Exercisable	$ 44,688

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Long-Term Debt - Additional Information (Details)			3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 24, 2019 USD ($) $ / shares	May 30, 2018 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jun. 30, 2019 USD ($)	Oct. 31, 2019 USD ($)	Apr. 04, 2017 USD ($)	Jan. 16, 2014 USD ($)
Debt Instrument [Line Items]
Long-term debt			$ 3,526,250,000		$ 3,526,250,000		$ 2,637,500,000
Revolver | Line of Credit
Debt Instrument [Line Items]
Effective interest rate percentage			3.29%		3.29%
Interest expense			$ 600,000		$ 600,000	$ 0
Credit agreement, maximum capacity			750,000,000		750,000,000			$ 450,000,000
Proceeds from lines of credit			750,000,000				0
Long-term debt			750,000,000	$ 0	$ 750,000,000	0	0
Revolver | Line of Credit | LIBOR | Minimum
Debt Instrument [Line Items]
Interest addition to floating rate					1.25%
Revolver | Line of Credit | LIBOR | Maximum
Debt Instrument [Line Items]
Interest addition to floating rate					1.75%
Notes due 2022 | Convertible Debt
Debt Instrument [Line Items]
Debt instrument face amount									$ 143,800,000
Debt instrument stated interest rate									2.50%
Incremental principal amount convertible	$ 1,000
Conversion price (in dollars per share) | $ / shares	$ 23.00
Conversion rate increase	7.7633
Conversion rate	46.4667
Total converted per $1,000 Principal	$ 1,068.7341
Long-term debt			$ 143,750,000		$ 143,750,000		0
Term Loan B
Debt Instrument [Line Items]
Debt instrument face amount		$ 1,000,000,000								$ 800,000,000
Proceeds from issuance of debt		$ 1,000,000,000
Term loan period					7 years
Term loan quarterly repayment as percentage of principal					0.25%
Effective interest rate percentage			3.45%		3.45%
Interest expense			$ 9,000,000.0	$ 10,300,000	$ 19,100,000	$ 20,100,000
Long-term debt			$ 982,500,000		$ 982,500,000		$ 987,500,000
Term Loan B | LIBOR
Debt Instrument [Line Items]
Interest addition to floating rate					1.75%

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Basis of Presentation - Lease (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jul. 01, 2019	Jun. 30, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase in operating lease right of use assets	$ 253,387
Increase in operating lease liabilities	285,260
Decrease in prepaid expenses and other current assets	(104,962)		$ (97,238)
Decrease in other assets	$ (158,058)		$ (148,977)
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase in operating lease right of use assets		$ 217,500
Increase in operating lease liabilities		253,500
Decrease in prepaid expenses and other current assets		6,600
Decrease in other assets		200
Decrease in total accrued liabilities		$ 42,800

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Acquisitions (Tables)

6 Months Ended

Dec. 31, 2019

Carbonite

Business Acquisition [Line Items]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of December 24, 2019, are set forth below:

Current assets (inclusive of cash acquired of $62.9 million)	$	131,119
Non-current tangible assets (inclusive of restricted cash acquired of $2.4 million)	93,111
Intangible customer assets	549,000
Intangible technology assets	291,000
Liabilities assumed	(578,747		)
Total identifiable net assets	485,483
Goodwill	885,547
Net assets acquired	$	1,371,030

Schedule of Unaudited Pro Forma Information

The amount of Carbonite's revenues and net income included in our Condensed Consolidated Statements of Income for the three months ended December 31, 2019 is set forth below:

	December 24, 2019 - December 31, 2019
Revenues	$	9,511
Net Loss *	(3,654		)

* Net loss includes one-time fees of approximately $2.6 million on account of special charges and $4.2 million of amortization charges relating to intangible assets, all net of tax.

The unaudited pro forma revenues and net income (loss) of the combined entity for the three and six months ended December 31, 2019 and 2018, respectively, had the acquisition been consummated on July 1, 2018, are set forth below:

	Three Months Ended December 31,		Six Months Ended December 31,
	2019	2018	2019	2018
Supplemental Unaudited Pro Forma Information(1)
Total Revenues	887,563	812,197	1,710,047	1,557,036
Net Income (loss) (2) (3)	78,571	76,024	117,789	(9,748	)

⁽¹⁾Carbonite had recently purchased Webroot Inc. in March 2019. The supplemental pro forma revenues and net income (loss) shown above do not include the results of operations of Webroot Inc. for periods prior to the Webroot acquisition date.

⁽²⁾ Included in pro forma net income (loss) for the six months ended December 31, 2018 are approximately $127 million of one-time expenses incurred by Carbonite on account of the acquisition and the related tax effect of approximately $33 million. These one-time expenses included i) approximately $74 million related to the accelerated vesting of historical Carbonite equity

awards, ii) approximately $29 million of one time fees, primarily related to transaction costs triggered by the closing of the acquisition, iii) $21 million related to the extinguishment of certain of Carbonite's historical debt and interest rate swaps and iv) approximately $3 million in employee severance costs.

⁽³⁾ Included in pro forma net income for the three and six months ended December 31, 2019 and 2018 are estimated amortization charges relating to the allocated value of intangible assets.

Catalyst Repository Systems Inc

Business Acquisition [Line Items]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of January 31, 2019, are set forth below:

Current assets	$	9,699
Non-current tangible assets	5,754
Intangible customer assets	30,607
Intangible technology assets	11,658
Liabilities assumed	(17,891		)
Total identifiable net assets	39,827
Goodwill	30,973
Net assets acquired	$	70,800

Liaison Technologies Inc.

Business Acquisition [Line Items]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of December 17, 2018, are set forth below:

Current assets	$	23,006
Non-current tangible assets	5,168
Intangible customer assets	68,300
Intangible technology assets	107,000
Liabilities assumed	(57,265		)
Total identifiable net assets	146,209
Goodwill	164,434
Net assets acquired	$	310,643

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Revenues - Incremental Costs of Obtaining a Contract with a Customer (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Capitalized contract cost, amortization period	6 years	6 years
Capitalized Contract Cost [Roll Forward]
Capitalized costs to obtain a contract as of June 30, 2019		$ 48,284
New capitalized costs incurred		10,590
Amortization of capitalized costs		(7,715)
Adjustments on account of foreign exchange		(228)
Capitalized costs to obtain a contract as of December 31, 2019	$ 50,931	50,931
Impairment loss	$ 0	$ 0

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Leases - Maturity of Lease Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Leases [Abstract]
2020 (six months ended June 30)	$ 39,817
2021	66,295
2022	54,406
2023	41,187
2024	30,844
Thereafter	81,161
Total Lease payments	313,710
Less: Imputed interest	(28,450)
Total	285,260
Sublease income to be received remainder of fiscal year	3,700
Sublease income to be received after fiscal year	27,200
Reported as
Operating lease liabilities (note 6)	66,579
Long-term operating lease liabilities (note 6)	$ 218,681
Previously reported as
2020		$ 72,853
2021		59,451
2022		46,943
2023		33,871
2024		25,570
Thereafter		80,163
Total		318,851
Sublease income to be received from properties		$ 30,700

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Fair Value Measurement - Schedule of Financial Assets and Liabilities (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Financial Assets:
Foreign currency forward contracts designated as cash flow hedges (note 17)	$ 1,005	$ 736
Significant other observable inputs (Level 2)
Financial Assets:
Foreign currency forward contracts designated as cash flow hedges (note 17)	$ 1,005	$ 736

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Guarantees and Contingencies - Additional Information (Details) - USD ($) $ in Millions		6 Months Ended
	Jul. 11, 2018	Dec. 31, 2019
GXS India
Loss Contingencies [Line Items]
Loss contingency accrual		$ 1.3
Internal Revenue Service (IRS)
Loss Contingencies [Line Items]
Estimated amount of loss resulting from an adverse tax position		770.0
Income tax examination, tax		455.0
Income tax examination, penalties		130.0
Income tax examination, interest		185.0
Internal Revenue Service (IRS) | Tax Year 2010
Loss Contingencies [Line Items]
Estimated amount of loss resulting from an adverse tax position	$ 335.0
Additional tax expense, as a percent	20.00%
Internal Revenue Service (IRS) | Tax Year 2012
Loss Contingencies [Line Items]
Additional tax expense, as a percent	40.00%
Income tax examination, change in liability	$ 80.0
Canada Revenue Agency (CRA)
Loss Contingencies [Line Items]
Estimated amount of loss resulting from an adverse tax position		$ 25.0
Canada Revenue Agency (CRA) | Tax Year 2012
Loss Contingencies [Line Items]
Additional tax expense, as a percent		10.00%
Canada Revenue Agency (CRA) | Tax Year 2013
Loss Contingencies [Line Items]
Additional tax expense, as a percent		10.00%
Canada Revenue Agency (CRA) | Tax Year 2014
Loss Contingencies [Line Items]
Additional tax expense, as a percent		10.00%
Minimum | Canada Revenue Agency (CRA) | Tax Year 2012
Loss Contingencies [Line Items]
Income tax examination, estimate of increase to taxable income		$ 90.0
Minimum | Canada Revenue Agency (CRA) | Tax Year 2013
Loss Contingencies [Line Items]
Income tax examination, estimate of increase to taxable income		90.0
Minimum | Canada Revenue Agency (CRA) | Tax Year 2014
Loss Contingencies [Line Items]
Income tax examination, estimate of increase to taxable income		90.0
Maximum | Canada Revenue Agency (CRA) | Tax Year 2012
Loss Contingencies [Line Items]
Income tax examination, estimate of increase to taxable income		100.0
Maximum | Canada Revenue Agency (CRA) | Tax Year 2013
Loss Contingencies [Line Items]
Income tax examination, estimate of increase to taxable income		100.0
Maximum | Canada Revenue Agency (CRA) | Tax Year 2014
Loss Contingencies [Line Items]
Income tax examination, estimate of increase to taxable income		$ 100.0

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Allowance for Doubtful Accounts - Changes In Carrying Amount (Details) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2019	Jun. 30, 2019
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance as of beginning of the period	$ 17,011
Bad debt expense	3,450
Write-off /adjustments	(2,524)
Balance as of end of the period	17,937
Unbilled receivables	$ 80,500	$ 56,100

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Special Charges (Recoveries) (Tables)

6 Months Ended

Dec. 31, 2019

Restructuring Cost and Reserve [Line Items]

Schedule of Restructuring Reserve

Special charges (recoveries) include costs and recoveries that relate to certain restructuring initiatives that we have undertaken from time to time under our various restructuring plans, as well as acquisition-related costs and other charges. 

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Fiscal 2019 Restructuring Plan	$	23		$	5,993		$	1,679		$	26,239
Fiscal 2018 Restructuring Plan	65			(25		)	86			510
Restructuring Plans prior to Fiscal 2018 Restructuring Plan	(481		)	(79		)	(282		)	475
Acquisition-related costs	7,779			3,197			10,445			3,704
Other charges (recoveries)	2,686			294			3,245			1,763
Total	$	10,072		$	9,380		$	15,173		$	32,691

Fiscal 2019 Restructuring Plan

Restructuring Cost and Reserve [Line Items]

Schedule of Restructuring Reserve

A reconciliation of the beginning and ending liability for the six months ended December 31, 2019 is shown below.

Fiscal 2019 Restructuring Plan	Workforce reduction			Facility costs			Total
Balance payable as at June 30, 2019	$	1,819		$	5,288		$	7,107
Adjustment for Topic 842 (note 1 and note 6)	—			(5,288		)	(5,288		)
Accruals and adjustments	589			1,090			1,679
Cash payments	(1,555		)	(1,090		)	(2,645		)
Foreign exchange and other non-cash adjustments	(211		)	—			(211		)
Balance payable as at December 31, 2019	$	642		$	—		$	642

Fiscal 2018 Restructuring Plan

Restructuring Cost and Reserve [Line Items]

Schedule of Restructuring Reserve

A reconciliation of the beginning and ending liability for the six months ended December 31, 2019 is shown below.

Fiscal 2018 Restructuring Plan	Workforce reduction			Facility costs			Total
Balance payable as at June 30, 2019	$	150		$	486		$	636
Adjustment for Topic 842 (note 1 and note 6)	—			(486		)	(486		)
Accruals and adjustments	(62		)	148			86
Cash payments	(39		)	(148		)	(187		)
Foreign exchange and other non-cash adjustments	(9		)	—			(9		)
Balance payable as at December 31, 2019	$	40		$	—		$	40

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Accounts Payable and Accrued Liabilities (Tables)

6 Months Ended

Dec. 31, 2019

Accounts Payable and Accrued Liabilities [Abstract]

Schedule of Current Liabilities

Accounts payable and accrued liabilities are comprised of the following:

 

	As of December 31, 2019		As of June 30, 2019
Accounts payable—trade	$	45,285	$	46,323
Accrued salaries and commissions	113,901		131,430
Accrued liabilities(1)(2)	229,414		117,551
Accrued interest on Senior Notes	24,786		24,786
Amounts payable in respect of restructuring and other Special charges(1)	1,111		8,153
Asset retirement obligations	3,114		1,660
Total	$	417,611	$	329,903

Schedule of Long-Term Accrued Liabilities

	As of December 31, 2019		As of June 30, 2019
Amounts payable in respect of restructuring and other Special charges(1)	$	—	$	4,804
Other accrued liabilities(1)	2,186		30,338
Asset retirement obligations	12,791		14,299
Total	$	14,977	$	49,441

⁽¹⁾ Previously, in Fiscal 2019, tenant allowances, deferred rent, lease fair value adjustments and amounts payable relating to restructured facilities were included in total accrued liabilities. Effective July 1, 2019, these balances were reclassified to operating lease right of use assets in accordance with the adoption of Topic 842. See note 1 "Basis of Presentation" and note 6 "Leases" for more information.

⁽²⁾ Includes approximately $89 million of Carbonite purchase consideration that was accrued and unpaid as of December 31, 2019, in accordance with the purchase agreement (see note 19 "Acquisitions")

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Guarantees and Contingencies (Tables)

6 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Contractual Obligations

We have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

	Payments due between
	Total		January 1, 2020— June 30, 2020		July 1, 2020— June 30, 2022		July 1, 2022— June 30, 2024		July 1, 2024 and beyond
Long-term debt obligations (1)	$	3,449,651	$	223,222	$	277,680	$	1,031,371	$	1,917,378
Purchase obligations for contracts not accounted for as lease obligations (2)	60,978		23,135		32,843		5,000		—
	$	3,510,629	$	246,357	$	310,523	$	1,036,371	$	1,917,378

⁽¹⁾ Includes interest up to maturity and principal payments. Please see note 11 "Long-Term Debt" for more details.

⁽²⁾ For contractual obligations relating to leases and purchase obligations accounted for under Topic 842, please see note 6 "Leases".

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Income Taxes

6 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a wide range of income tax rates.

The effective tax rate increased to a provision of 30.3% for the three months ended December 31, 2019, compared to 25.8% for the three months ended December 31, 2018. The increase in tax expense of $10.6 million was primarily due to (i) an increase of $16.8 million relating mainly to a one-time reversal of accruals for repatriations from subsidiaries in the United States in Fiscal 2019 that did not recur in Fiscal 2020, (ii) an increase in tax filings in excess of estimates of $6.0 million and (iii) an increase in net income taxed at foreign rates of $3.3 million. These were partially offset by (i) a decrease of $11.6 million in reserves for unrecognized tax benefits resulting from clarifications provided by tax regulations and taxation years becoming statute barred and (ii) a decrease of $4.5 million related to tax costs of internal reorganizations that did not recur in Fiscal 2020. The remainder of the difference was due to normal course movements and non-material items.

The effective tax rate decreased to a provision of 27.8% for the six months ended December 31, 2019, compared to 31.9% for the six months ended December 31, 2018. Tax expense increased by $3.8 million primarily due to (i) the increase in net income taxed at foreign rates of $11.8 million, (ii) an increase of $14.9 million relating to a one-time reversal of accruals for repatriations from subsidiaries in the United States in Fiscal 2019 that did not recur in Fiscal 2020 and (iii) an increase in tax filing in excess of estimates of $7.3 million. These were partially offset by (i) a decrease of $22.4 million in reserves for unrecognized tax benefit resulting from clarifications provided by tax regulations and taxation years becoming statute barred and (ii) a decrease of $7.9 million relating to the tax impact of internal reorganizations of subsidiaries that did not reoccur Fiscal 2020. The remainder of the difference was due to normal course movements and non-material items.

We recognize interest expense and penalties related to income tax matters in income tax expense. For the three and six months ended December 31, 2019 and 2018, we recognized the following amounts as income tax-related interest expense and penalties:

	Three Months Ended December 31,					Six Months Ended December 31,
	2019			2018		2019		2018
Interest expense (recoveries)	$	2,652		$	1,570	$	1,234	$	4,607
Penalties expense (recoveries)	(156		)	67		75		559
Total	$	2,496		$	1,637	$	1,309	$	5,166

The following amounts have been accrued on account of income tax-related interest expense and penalties:

	As of December 31, 2019		As of June 30, 2019
Interest expense accrued *	$	65,870	$	64,530
Penalties accrued *	$	2,526	$	2,525

* These balances are primarily included within "Long-term income taxes payable" within the Condensed Consolidated Balance Sheets.

We believe that it is reasonably possible that the gross unrecognized tax benefits, as of December 31, 2019, could decrease tax expense in the next 12 months by $7.1 million, relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions.

Our four most significant tax jurisdictions are Canada, the United States, Luxembourg and Germany. Our tax filings remain subject to audits by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The earliest fiscal years open for examination are 2012 for Germany, 2010 for the United States, 2012 for Luxembourg, and 2012 for Canada.

We are subject to tax audits in all major taxing jurisdictions in which we operate and currently have tax audits open in Canada, the United States, Germany, India, and the United Kingdom. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. Statements regarding the United States and Canada audits are included in note 14 "Guarantees and Contingencies".

The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that

within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For more information relating to certain tax audits, please refer to note 14 "Guarantees and Contingencies".

As at December 31, 2019, we have recognized a provision of $19.3 million (June 30, 2019—$17.4 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution. We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future.

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividends declared per common share (in dollars per share)	$ 0.1746	$ 0.1518	$ 0.3492	$ 0.3036

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Long-Term Debt

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

Long-term debt

Long-term debt is comprised of the following:

	As of December 31, 2019			As of June 30, 2019
Total debt
Senior Notes 2026	$	850,000		$	850,000
Senior Notes 2023	800,000			800,000
Notes due 2022	143,750			—
Term Loan B	982,500			987,500
Revolver	750,000			—
Total principal payments due	3,526,250			2,637,500
Premium on Senior Notes 2026	5,085			5,405
Make-whole premium on Notes due 2022(1)	9,881			—
Debt issuance costs	(27,199		)	(28,027		)
Total amount outstanding	3,514,017			2,614,878
Less:
Current portion of long-term debt
Notes due 2022 including make-whole premium	153,631			—
Term Loan B	10,000			10,000
Revolver	750,000			—
Total current portion of long-term debt	913,631			10,000
Non-current portion of long-term debt	$	2,600,386		$	2,604,878

⁽¹⁾ Represents the total value of the make-whole premium, assuming all holders convert at the temporarily increased conversion rate.

Senior Unsecured Fixed Rate Notes

Senior Notes 2026

On May 31, 2016, we issued $600 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (Securities Act), and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2026 bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016. Senior Notes 2026 will mature on June 1, 2026, unless earlier redeemed, in accordance with their terms, or repurchased.

On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%. The additional notes have identical terms, are fungible with and are a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026. The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, is $850 million.

For the three and six months ended December 31, 2019, we recorded interest expense of $12.5 million and $25.0 million, respectively, relating to Senior Notes 2026 (three and six months ended December 31, 2018— $12.5 million and $25.0 million, respectively).

Senior Notes 2023

On January 15, 2015, we issued $800 million in aggregate principal amount of 5.625% Senior Notes due 2023 (Senior Notes 2023) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2023 bear interest at a

rate of 5.625% per annum, payable semi-annually in arrears on January 15 and July 15, commencing on July 15, 2015. Senior Notes 2023 will mature on January 15, 2023, unless earlier redeemed, in accordance with their terms, or repurchased.

For the three and six months ended December 31, 2019, we recorded interest expense of $11.2 million and $22.5 million, respectively, relating to Senior Notes 2023 (three and six months ended December 31, 2018— $11.2 million and $22.5 million, respectively).

Notes due 2022

As part of our acquisition of Carbonite, our consolidated debt reflects $143.8 million of principal debt convertible notes (Notes due 2022). Notes due 2022 were originally issued by Carbonite, on April 4, 2017, in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Notes due 2022 were issued under an Indenture (the 2022 Notes Indenture) between Carbonite and U.S. Bank National Association, as trustee (the 2022 Notes Trustee). The Notes due 2022 accrue interest at 2.5% per year, payable semiannually in arrears on April 1 and October 1 of each year. The Notes due 2022 will mature on April 1, 2022, unless earlier repurchased, redeemed or converted. Carbonite, now a subsidiary of OpenText, remains the sole obligor on the Notes due 2022.

In connection with our acquisition of Carbonite, and as required by the 2022 Notes Indenture, Carbonite and the 2022 Notes Trustee entered into a first supplemental indenture, dated as of December 24, 2019 (the 2022 Notes Supplemental Indenture). The 2022 Notes Supplemental Indenture provides that, at and after the effective time of our acquisition of Carbonite, the right to convert each $1,000 principal amount of the Notes due 2022 was changed into the right to convert such principal amount of the Notes due 2022 solely into cash in an amount equal to the Conversion Rate (as defined in the 2022 Notes Indenture) in effect on the Conversion Date (as defined in the 2022 Notes Indenture) multiplied by $23.00, which was the price per share we paid in connection with our acquisition of Carbonite.

As a result of our acquisition of Carbonite, the Conversion Rate for the Notes due 2022 was temporarily increased by 7.7633 per $1,000 principal amount of Notes due 2022 to yield a Conversion Rate of 46.4667 per $1,000 principal amount of Notes due 2022.  The increased Conversion Rate will remain in effect until the close of business (5:00 P.M. New York City time) on February 27, 2020.  During the period between our acquisition of Carbonite and that date, each $1,000 principal amount of Notes due 2022 surrendered for conversion will be converted into $1,068.7341 in cash. 

Term Loan B

On May 30, 2018, we refinanced our existing term loan facility, by entering into a new $1 billion term loan facility (Term Loan B), whereby we borrowed $1 billion on that day and repaid in full the loans under our prior $800 million term loan facility originally entered into on January 16, 2014. Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver (defined below).

Term Loan B has a seven year term, maturing in May 2025, and repayments made under Term Loan B are equal to 0.25% of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity. Borrowings under Term Loan B currently bear a floating rate of interest equal to 1.75% plus LIBOR. As of December 31, 2019, the outstanding balance on the Term Loan B bears an interest rate of approximately 3.45%.

For the three and six months ended December 31, 2019, we recorded interest expense of $9.0 million and $19.1 million, respectively, relating to Term Loan B (three and six months ended December 31, 2018—$10.3 million and $20.1 million).

Revolver

On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total commitments under the Revolver from $450 million to $750 million as well as to extend the maturity from May 5, 2022 to October 31, 2024. Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B. The Revolver has no fixed repayment date prior to the end of the term. Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%. As of December 31, 2019, the outstanding balance on the Revolver bears an interest rate of approximately 3.29%.

During the three months ended December 31, 2019 we drew down $750 million from the Revolver to partially fund the acquisition of Carbonite. As of December 31, 2019, the full amount drawn remained outstanding (June 30, 2019—nil). During the three and six months ended December 31, 2019, we recorded interest expense relating to amounts drawn of approximately $0.6 million, respectively.

As of December 31, 2018, we had no outstanding balance on the Revolver. There was no activity during the three and six months ended December 31, 2018 and we recorded no interest expense.

Debt Issuance Costs and Premium on Senior Notes

Debt issuance costs relate primarily to costs incurred for the purpose of obtaining our credit facilities and issuing our Senior Notes 2023 and Senior Notes 2026 (collectively referred to as the Senior Notes) and are being amortized over the respective terms of the Senior Notes and Term Loan B and the Revolver using the effective interest method.

The premium on Senior Notes 2026 represents the excess of the proceeds received over the face value of Senior Notes 2026. This premium is amortized as a reduction to interest expense over the term of Senior Notes 2026 using the effective interest method.

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Acquisitions

6 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

Fiscal 2020 Acquisitions

Acquisition of Carbonite, Inc.

On December 24, 2019, we acquired all of the equity interest in Carbonite, a leading provider of cloud-based subscription backup, disaster recovery and endpoint security to small and medium-sized businesses (SMB), consumers, and a wide variety of partners. Total consideration for Carbonite was approximately $1.4 billion, comprised of $1.3 billion paid in cash (inclusive of cash acquired) and approximately $0.1 billion currently held back and unpaid in accordance with the purchase agreement. In accordance with Accounting Standards Codification (ASC) Topic 805 "Business Combinations" (Topic 805), this acquisition was accounted for as a business combination. We believe the acquisition will increase our position in the data protection and

endpoint security space, further strengthen our cloud capabilities and open a new route to connect with customers through Carbonite's marquee SMB and consumer channels and products.

The results of operations of Carbonite have been consolidated with those of OpenText beginning December 24, 2019.

Preliminary Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of December 24, 2019, are set forth below:

Current assets (inclusive of cash acquired of $62.9 million)	$	131,119
Non-current tangible assets (inclusive of restricted cash acquired of $2.4 million)	93,111
Intangible customer assets	549,000
Intangible technology assets	291,000
Liabilities assumed	(578,747		)
Total identifiable net assets	485,483
Goodwill	885,547
Net assets acquired	$	1,371,030

The goodwill of approximately $885.5 million is primarily attributable to the synergies expected to arise after the acquisition. Of this goodwill, approximately $6.9 million is expected to be deductible for tax purposes.

Included in total identifiable net assets is acquired deferred revenue with a fair value of approximately $171.5 million, which represents our estimate of the fair value of the contractual obligations assumed. In arriving at this fair value, we reduced the acquired company’s original carrying value by approximately $74.9 million.

The fair value of current assets acquired includes accounts receivable with a fair value of $49.8 million. The gross amount receivable was $51.2 million of which $1.4 million of this receivable was expected to be uncollectible.

Acquisition-related costs for Carbonite included in "Special charges (recoveries)" in the Condensed Consolidated Financial Statements for the three and six months ended December 31, 2019 were $7.4 million, respectively.

The finalization of the above purchase price allocation is pending the finalization of the valuation of fair value for the assets acquired and liabilities assumed, including intangible assets and taxation-related balances as well as for potential unrecorded liabilities. We expect to finalize this determination on or before our quarter ending December 31, 2020.

The amount of Carbonite's revenues and net income included in our Condensed Consolidated Statements of Income for the three months ended December 31, 2019 is set forth below:

	December 24, 2019 - December 31, 2019
Revenues	$	9,511
Net Loss *	(3,654		)

* Net loss includes one-time fees of approximately $2.6 million on account of special charges and $4.2 million of amortization charges relating to intangible assets, all net of tax.

The unaudited pro forma revenues and net income (loss) of the combined entity for the three and six months ended December 31, 2019 and 2018, respectively, had the acquisition been consummated on July 1, 2018, are set forth below:

	Three Months Ended December 31,		Six Months Ended December 31,
	2019	2018	2019	2018
Supplemental Unaudited Pro Forma Information(1)
Total Revenues	887,563	812,197	1,710,047	1,557,036
Net Income (loss) (2) (3)	78,571	76,024	117,789	(9,748	)

⁽¹⁾Carbonite had recently purchased Webroot Inc. in March 2019. The supplemental pro forma revenues and net income (loss) shown above do not include the results of operations of Webroot Inc. for periods prior to the Webroot acquisition date.

⁽²⁾ Included in pro forma net income (loss) for the six months ended December 31, 2018 are approximately $127 million of one-time expenses incurred by Carbonite on account of the acquisition and the related tax effect of approximately $33 million. These one-time expenses included i) approximately $74 million related to the accelerated vesting of historical Carbonite equity

awards, ii) approximately $29 million of one time fees, primarily related to transaction costs triggered by the closing of the acquisition, iii) $21 million related to the extinguishment of certain of Carbonite's historical debt and interest rate swaps and iv) approximately $3 million in employee severance costs.

⁽³⁾ Included in pro forma net income for the three and six months ended December 31, 2019 and 2018 are estimated amortization charges relating to the allocated value of intangible assets.

The unaudited pro forma financial information in the table above is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented or the results that may be realized in the future.

Acquisition of Dynamic Solutions Group Inc. (The Fax Guys)

On December 2, 2019, we acquired certain assets and assumed certain liabilities of The Fax Guys, for approximately $5.3 million, of which $1.2 million is currently held back and unpaid in accordance with the terms of the purchase agreement. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe this acquisition complements our Enterprise Information Management (EIM) portfolio.

The results of operations of The Fax Guys have been consolidated with those of OpenText beginning December 2, 2019.

Since the date of acquisition, the acquisition had no significant impact on revenues and net earnings for the three and six months ended December 31, 2019. Pro forma results of operations for this acquisition have not been presented because they are not material to our consolidated results of operations.

Fiscal 2019 Acquisitions

Acquisition of Catalyst Repository Systems Inc.

On January 31, 2019, we acquired all of the equity interest in Catalyst for approximately $70.8 million in an all cash transaction. Catalyst is a leading provider of eDiscovery that designs, develops and supports market-leading cloud eDiscovery software. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe this acquisition complements and extends our EIM portfolio.

The results of operations of this acquisition have been consolidated with those of OpenText beginning January 31, 2019.

Preliminary Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their preliminary fair values as of January 31, 2019, are set forth below:

Current assets	$	9,699
Non-current tangible assets	5,754
Intangible customer assets	30,607
Intangible technology assets	11,658
Liabilities assumed	(17,891		)
Total identifiable net assets	39,827
Goodwill	30,973
Net assets acquired	$	70,800

The goodwill of approximately $31.0 million is primarily attributable to the synergies expected to arise after the acquisition. Of this goodwill, approximately $3.1 million is expected to be deductible for tax purposes.

Included in total identifiable net assets is acquired deferred revenue with a fair value of $0.8 million, which represents our estimate of the fair value of the contractual obligations assumed based on a preliminary valuation. In arriving at this fair value, we reduced the acquired company’s original carrying value by an insignificant amount.

The fair value of current assets acquired includes accounts receivable with a fair value of $10.8 million. The gross amount receivable was $11.8 million, of which $1.0 million is expected to be uncollectible.

The finalization of the purchase price allocation is pending the finalization of the valuation of fair value assets acquired and liabilities assumed, including tax balances. We expect to finalize this determination during the three months ended March 31, 2020.

Acquisition of Liaison Technologies, Inc.

On December 17, 2018, we acquired all of the equity interest in Liaison, a leading provider of cloud-based business to business integration, for approximately $310.6 million in an all cash transaction. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe this acquisition complements and extends our EIM portfolio.

The results of operations of this acquisition have been consolidated with those of OpenText beginning December 17, 2018.

Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of December 17, 2018, are set forth below:

Current assets	$	23,006
Non-current tangible assets	5,168
Intangible customer assets	68,300
Intangible technology assets	107,000
Liabilities assumed	(57,265		)
Total identifiable net assets	146,209
Goodwill	164,434
Net assets acquired	$	310,643

The goodwill of approximately $164.4 million is primarily attributable to the synergies expected to arise after the acquisition. Of this goodwill, approximately $2.2 million is expected to be deductible for tax purposes.

Included in total identifiable net assets is acquired deferred revenue with a fair value of $7.6 million, which represents our estimate of the fair value of the contractual obligations assumed. In arriving at this fair value, we reduced the acquired company’s original carrying value by an insignificant amount.

The fair value of current assets acquired includes accounts receivable with a fair value of $20.5 million. The gross amount receivable was $22.2 million, of which $1.7 million is expected to be uncollectible.

The finalization of the purchase price allocation during the three months ended December 31, 2019 did not result in any significant changes to the preliminary amounts previously disclosed.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenues (note 3):
Total revenues	$ 771,557	$ 735,231	$ 1,468,445	$ 1,402,388
Cost of revenues:
Amortization of acquired technology-based intangible assets (note 8)	42,299	48,366	82,597	95,843
Total cost of revenues	232,385	228,022	460,893	454,335
Gross profit	539,172	507,209	1,007,552	948,053
Operating expenses:
Research and development	80,283	75,753	161,461	153,223
Sales and marketing	137,310	126,193	265,928	246,375
General and administrative	54,595	52,198	106,130	103,122
Depreciation	20,712	23,834	40,989	47,688
Amortization of acquired customer-based intangible assets (note 8)	51,460	45,919	100,618	91,795
Special charges (recoveries) (note 18)	10,072	9,380	15,173	32,691
Total operating expenses	354,432	333,277	690,299	674,894
Income from operations	184,740	173,932	317,253	273,159
Other income (expense), net	1,972	378	(813)	1,900
Interest and other related expense, net	(32,376)	(33,613)	(64,586)	(68,144)
Income before income taxes	154,336	140,697	251,854	206,915
Provision for (recovery of) income taxes (note 15)	46,818	36,236	69,909	66,086
Net income for the period	107,518	104,461	181,945	140,829
Net (income) loss attributable to non-controlling interests	(51)	(29)	(77)	(73)
Net income attributable to OpenText	$ 107,467	$ 104,432	$ 181,868	$ 140,756
Earnings per share—basic attributable to OpenText (note 21) (in dollars per share)	$ 0.40	$ 0.39	$ 0.67	$ 0.52
Earnings per share—diluted attributable to OpenText (note 21) (in dollars per share)	$ 0.40	$ 0.39	$ 0.67	$ 0.52
Weighted average number of Common Shares outstanding—basic (in '000's)	270,450	268,524	270,232	268,276
Weighted average number of Common Shares outstanding—diluted (in '000's)	271,590	269,400	271,328	269,396
License
Revenues (note 3):
Total revenues	$ 138,095	$ 132,756	$ 215,993	$ 209,643
Cost of revenues:
Costs of revenues	3,050	3,655	5,373	7,527
Cloud services and subscriptions
Revenues (note 3):
Total revenues	248,340	219,233	485,605	427,316
Cost of revenues:
Costs of revenues	103,644	88,698	205,806	176,401
Customer support
Revenues (note 3):
Total revenues	315,508	310,354	627,806	621,905
Cost of revenues:
Costs of revenues	29,788	31,273	59,175	61,738
Professional service and other
Revenues (note 3):
Total revenues	69,614	72,888	139,041	143,524
Cost of revenues:
Costs of revenues	$ 53,604	$ 56,030	$ 107,942	$ 112,826

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Related Party Transactions (Details) - USD ($) $ in Millions	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Director, Stephen Sadler
Related Party Transaction [Line Items]
Consultancy fees for business acquisition-related activities	$ 0.4	$ 0.4