Item
1.01. Entry Into or Amendment of a Material Definitive Agreement.
On
November 18, 2021, Marathon Digital Holdings, Inc. (the “Company”) issued $650,000,000 principal amount of its 1.00%
Convertible Senior Notes due 2026 (the “Notes”). The Notes were issued pursuant to, and are governed by, an indenture
(the “Indenture”), dated as of November 18, 2021, between the Company and U.S. Bank National Association, as trustee
(the “Trustee”). Pursuant to the purchase agreement between the Company and the initial purchasers of the Notes, the
Company also granted the initial purchasers an option, for settlement within a period of 13 days from, and including, November 18, 2021
to purchase up to an additional $97,500,000 principal amount of Notes.
The
Notes will be the Company’s senior, unsecured obligations and will be (i) equal in right of payment with the Company’s existing
and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that
is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness,
to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future
indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity,
if any, of the Company’s subsidiaries.
The
Notes will accrue interest at a rate of 1.00% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning
on June 1, 2022. The Notes will mature on December 1, 2026, unless earlier repurchased, redeemed or converted. Before the close of business
on the business day immediately before June 1, 2026, noteholders will have the right to convert their Notes only upon the occurrence
of certain events. From and after June 1, 2026, noteholders may convert their Notes at any time at their election until the close of
business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering,
as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.
The initial conversion rate is 13.1277 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion
price of approximately $76.17 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments
upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change”
(as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of
time.
The
Notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any
time, and from time to time, on or after December 6, 2024 and on or before the 21st scheduled trading day immediately before the maturity
date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any,
to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds
130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days
ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading
day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding Notes
unless at least $100.0 million aggregate principal amount of Notes are outstanding and not called for redemption as of the time the Company
sends the related redemption notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with
respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances
if it is converted during the related redemption conversion period.
If
certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited
exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to
the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change
repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain
de-listing events with respect to the Company’s common stock.
The
Notes will have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which
include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes,
will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified
periods of time; (iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s
ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions,
all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (iv) a default by the
Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days
after notice is given in accordance with the Indenture; (v) certain defaults by the Company or any of its subsidiaries with respect to
indebtedness for borrowed money of at least $50,000,000; and (vi) certain events of bankruptcy, insolvency and reorganization involving
the Company or any of its significant subsidiaries.
If
an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect
to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the
Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event
of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal
amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and
unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing,
the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply
with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on
the Notes for up to 270 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes.
The
above description of the Indenture and the Notes is a summary and is not complete. A copy of the Indenture and the form of the certificate
representing the Notes are filed as exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K, and the above summary is
qualified by reference to the terms of the Indenture and the Notes set forth in such exhibits.