Item 1.01.
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Entry into a Material Definitive Agreement.
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On October 28, 2016, Extreme Networks,
Inc., a Delaware corporation (the
Company
) entered into an Amended and Restated Credit Agreement (the
Credit Agreement
), by and among the Company, as borrower, Silicon Valley Bank, as administrative agent (the
Agent
), and the financial institutions that are a party thereto as lenders (
Lenders
).
The Credit
Agreement provides for a $50 million five-year revolving credit facility (the
Revolving Facility
) and a $90.5 million five-year term loan (the
Term Loan
and together with the Revolving Facility, the
Senior Secured Credit Facilities
). On October 28, 2016, the Company borrowed approximately $100.5 million under the Senior Secured Credit Facilities in order to pay off existing debt and to finance the acquisition described
in Item 2.01 of this Current Report on Form 8-K.
Borrowings under the Senior Secured Credit Facilities will bear interest, at the
Companys election, as of October 28, 2016, at a rate per annum equal to LIBOR plus 2.50% to 3.50%, or the adjusted base rate plus 0.75% to 1.50%, based on the Companys Consolidated Leverage Ratio. In addition, the Company is required to
pay a commitment fee of between 0.375% and 0.50% quarterly (currently 0.50%) on the unused portion of the Revolving Facility, also based on the Companys Consolidated Leverage Ratio. Principal installments are payable on the Term Loan in
varying percentages quarterly starting December 31, 2016 and to the extent not previously paid, all outstanding balances are to be paid at maturity. The Senior Secured Credit Facilities are secured by substantially all of the Companys
assets and are jointly and severally guaranteed by the Company and certain of its subsidiaries.
Financial covenants under the Credit
Agreement require the Company to maintain a minimum consolidated fixed charge coverage ratio of at least 1.25:1.00 at the end of each fiscal quarter. In addition, the Companys Consolidated Quick Ratio at the end of any fiscal quarter shall not
be less than 1.15:1.00. Also the Companys Consolidated Leverage Ratio shall not be greater than (i) 3.00:1.00 at the end of the fiscal quarters ending September 30, 2016 and December 31, 2016, (ii) 2.75:1.00 at the end of
the fiscal quarter ending March 31, 2017, (iii) 2.50:1.00 at the end of the fiscal quarter ending June 30, 2017, (iv) 2.25:1.00 at the end of the fiscal quarter ending September 30, 2017, and (v) 2.00:1.00 thereafter.
The Credit Agreement also includes covenants and restrictions that limit, among other things, the Companys ability to incur additional indebtedness, create liens upon any of its property, merge, consolidate or sell all or substantially all of
its assets.
The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when
due, failure to comply with covenants, the material breach of any of representations and warranties, certain insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the occurrence
of certain ERISA events, the invalidity of the loan documents or a change in control of the Company. The amounts outstanding under the Senior Secured Credit Facilities may be accelerated upon certain events of default.
The above description does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, which is planned
to be filed with the Companys Form 10-Q for the first fiscal quarter of 2017.