12. INDEBTEDNESS

2024 Convertible Notes

On November 14, 2017, the Company issued $570.0 million senior notes due on November 15, 2024 (the “2024 Notes”). The 2024 Notes were issued at face value and bear interest at the rate of 1.50% per annum, payable semi-annually in cash on each May 15 and November 15, commencing on May 15, 2018.

Upon conversion, the Company may pay cash, shares of its common stock or a combination of cash and stock, as determined by the Company in its discretion. The 2024 Notes may be convertible into 7,763,552 shares of the Company’s common stock under certain circumstances prior to maturity at a conversion rate of 13.621 shares per $1,000 principal amount of the 2024 Notes, which represents a conversion price of $73.42 per share, subject to adjustment under certain conditions which include:

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as the result of a spin-off or other distribution of property;

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if the Company exclusively issues shares of common stock as a dividend or distribution on common stock, or if the Company effects a share split or share combination;

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cash dividend or distribution is made to all or substantially all holders of the common stock;

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tender offer or exchange offer

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if the Company issues to all or substantially all holders of common stock any rights, options or warrants entitling them 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 sales prices of the common stock for the 10 consecutive trading day period ending on, and include, the trading day immediately preceding the date of announcement of such issuance; and

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at the discretion of the Company’s board of directors if deemed in the best interest of the Company.

In connection with the issuance of the 2024 Notes, the Company incurred $14.8 million of debt issuance costs. These costs are being amortized under an effective interest method and are recorded as additional interest expense over the life of the 2024 Notes. The Company has separately accounted for the liability and equity components of the 2024 Notes by allocating the proceeds from issuance of the Notes between the liability component and the embedded conversion option, or equity component. This allocation was done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. In order to estimate the interest rate, the Company first selected an appropriate implied credit rating for the Company based on its financial metrics and then selected the market yield of the debt issuances within that rating category. The Company allocated $161.1 million to the equity component, net of offering costs of $4.2 million, which was recorded as additional paid-in capital. Additionally, the Company recorded a debt discount which equals the portion allocated to the equity component and debt issuance costs of $10.6 million on the notes, both of which will be amortized under an effective interest method and recorded as additional interest expense over the life of the 2024 Notes. The effective interest rate on the liability component of the Notes for the year ended December 31, 2017 was 6.9%. The Company may incur between 0.25% and 0.5% per annum additional interest expenses should it fail to register the 2024 Notes after 180 days and 380 days after the issuance date of the 2024 Notes, respectively.

Upon the occurrence of a “fundamental change”, which includes (1) change in beneficial ownership of the Company where any person/group possesses more than 50% of the voting power of the Company, (2) consolidation or merger of the Company, (3) shareholder approval of a liquidation plan or (4) the Company is delisted from NYSE or NASDAQ, the holders may require the Company to repurchase all or a portion of the 2024 Notes for cash at 100% of the principal amount of the 2024 Notes being purchased, plus any accrued and unpaid interest. Additionally, upon the occurrence of a “make-whole fundamental change” prior to the maturity date, the Company shall adjust the conversion rate on a sliding scale basis detailed in the agreement

To minimize the impact of potential dilution upon conversion of the 2024 Notes, the Company separately entered into capped call transactions with certain counterparties. The capped calls have a strike price of $73.42 and a cap price of $104.88 and are exercisable when and if the 2024 Notes are converted. If, upon conversion of the 2024 Notes, the price of the Company’s common stock is between the strike price and the cap price of the capped calls, the counterparties will deliver shares of the Company’s common stock and/or cash with an aggregate value equal to the difference between the price of the Company’s common stock at the conversion date and the strike price, multiplied by the number of shares of the Company’s common stock related to the capped calls being exercised. The Company paid $50.9 million for these capped calls transactions, which was recorded as additional paid-in capital.

The following table summarizes the 2024 Notes for the period indicated:

	As of December 31, 2017
	(in thousand)
Par value of the 2024 Notes	$	570,000
Unamortized discounts	$	(158,890	)
Debt issuance expenses		(10,449	)
Net carrying value of convertible debt	$	400,661

Fair value of convertible debt	$	619,641

The fair value of the Company’s 2024 Notes is based on open market trades and is classified as level 1 in the fair value hierarchy.

Term Loans

In July 2017, the Company entered into an amended and restated credit agreement (the “Amended and Restated Credit and Security Agreement”) which provides a term loan (“July 2017 Term Loan”) of $60.0 million with MidCap Financial Trust (“MidCap”). Borrowings under the Amended and Restated Credit and Security Agreement bear interest at a rate per annum equal to 6.25%, plus the one-month London Interbank Offered Rate (“LIBOR”). In addition to paying interest on the outstanding principal under the Amended and Restated Credit and Security Agreement, the Company paid an origination fee equal to 0.50% of the amount of the term loan when advanced under the Amended and Restated Credit and Security Agreement and will be liable for a final payment fee equal to 2.00% of the amount borrowed under the Amended and Restated Credit and Security Agreement when the July 2017 Term Loan is fully repaid. Commencing on July 1, 2018, and continuing for the remaining thirty six months of the facility, the Company will be required to make monthly principal payments of approximately $0.8 million, set forth in the Amended and Restated Credit and Security Agreement, subject to certain adjustments as described therein. The facility matures in July 2021.

The Company may voluntarily prepay outstanding loans under the Amended and Restated Credit and Security Agreement at any time, provided that the Company may not prepay an amount that is less than the total of all of the credit extensions and other related obligations under the Amended and Restated Credit and Security Agreement then outstanding. In the event of a permitted prepayment, the Company is obligated to pay a prepayment fee equal to the following:

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3.00% of the outstanding principal of such advance, if the prepayment is made within twelve months of the closing date;

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2.00% of the outstanding principal of such advance, if the prepayment is made on or after the date which is twelve months after the closing date of such advance through the date which is twenty-four months after the closing date of such advance; and

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1.00% of the outstanding principal of such advance, if the prepayment is made on or after the date which is twenty-four months after the closing date of such advance through the date immediately preceding the maturity date.

The Amended and Restated Credit and Security Agreement contains both affirmative and negative covenants. Affirmative covenants include government compliance, reporting requirements, maintaining property, making tax payments, maintaining insurance, cooperating during litigation, etc. Additionally, the Company is required to maintain an amount of cash and/or cash equivalents equal to not less than 75% of the sum of the outstanding principal amounts under both the Amended and Restated Credit and Security Agreement and the Revolving Credit Agreement (defined below). Negative covenants include restrictions on asset dispositions, mergers or acquisitions, indebtedness, liens, distributions, transactions with affiliates and other restrictions. The Amended and Restated Credit and Security Agreement includes customary events of default, including cross defaults and material adverse changes. Additionally, the Company's failure to be compliant with the affirmative or negative covenants or make payments when they become due will result in an event of default.

After paying off certain debt issuance costs, the Company received net proceeds of $29.1 million related to the July 2017 Term Loan, $9.2 million of which was used to pay off the outstanding balance of the term loan that was taken out in June 2015 (“June 2015 Term Loan”). In connection with the July 2017 Term Loan, the Company recorded $30.0 million as long-term debt in the consolidated balance sheet as of December 31, 2017. In addition, debt issuance costs of $1.1 million related to the July 2017 Term Loan were recorded as a direct deduction to the carrying value of the July 2017 Term Loan in the consolidated balance sheet as of December 31, 2017. These costs are being amortized to interest expense using the effective interest method over the term of the loan. The following table summarizes term loans for each of the periods indicated:

	As of December 31
	2017			2016
	(in thousands)
Principal amount of the 2017 Term Loan	$	30,000		$	—
Principal amount of the 2015 Term Loan		—			15,000
Unamortized debt issuance expense		(918	)		(223	)
Net carrying value of term loan	$	29,082		$	14,777

Revolving Line of Credit

In July 2017, the Company entered into a revolving credit and security agreement (the “Revolving Credit Agreement”) which provides an aggregate revolving loan commitment of $40.0 million (which may be increased by an additional tranche of $20.0 million) with MidCap (“Revolver”). Borrowings under the Revolving Credit Agreement bear interest at a rate of 3.95%, plus the one-month LIBOR. In addition to paying interest on the outstanding principal under the Revolving Credit Agreement, the Company paid $0.2 million of origination fee, which was 0.50% of the amount of the revolving loan. The Company recognized this origination fee as other asset and it is being amortized to interest expense over the term of the line-of-credit. Additionally, the Company is liable for unused line fees, minimum balance fees, collateral fees, deferred revolving loan original fees, etc. This facility matures in July 2021. The Company may voluntarily prepay the outstanding revolving loans under the Revolving Credit Agreement in whole or in part provided that the prepayment shall be in certain amounts as specified therein. As of December 31, 2017, the outstanding balance of the revolving line of credit is less than $0.1 million.

Mortgage Loans

The Company has two mortgage loans outstanding which bear interest at 4.75% with the original maturity date of February 2027 and are collateralized by the Airport Facility in Corvallis, Oregon. At December 31, 2017, these loans had unpaid principal balances of $0.8 million and $0.5 million, for a total indebtedness of $1.3 million, and were presented as current portion of long-term debt on the consolidated balance sheet. In connection with the sale of the Airport Facility in January 2018, the two long-term mortgage loans were paid off.

As of December 31, 2017, the Company recorded approximately $6.2 million as current portion of long-term debt and approximately $424.9 million as long-term debt on the consolidated balance sheets related to the convertible debt, the term loan, the revolver and the mortgage loans. Related to these debt facilities, for the years ended December 31, 2017, 2016 and 2015, the Company recorded $5.8 million, $1.9 million and $1.3 million of interest expenses.

The following table summarizes the total gross payments due under the Company’s debt arrangements:

	As of December 31, 2017
	(in thousands)
2018	$	6,328
2019		10,000
2020		10,000
2021		5,000
2022		—
Thereafter		570,000
Total Payments	$	601,328