Item 1.01. Entry into a Material Definitive Agreement.
On August 24, 2020, Pure Storage, Inc. ("Pure”) entered into a Credit Agreement (the “Credit Agreement”) with Barclays Bank Plc, as administrative agent, issuing bank and swingline lender, and the several banks and other financial institutions and lenders from time to time party thereto. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $300 million (the “Credit Facility”).
Proceeds from the Credit Facility may be used for general corporate purposes and working capital. At this time, Pure has not borrowed any funds under the Credit Facility.
The interest rates applicable to loans under the Credit Facility are, at Pure’s option, equal to either a base rate plus a margin ranging from 0.50% to 1.25% per annum or LIBOR (subject to a floor of 0.00% per annum) plus a margin ranging from 1.50% to 2.25% per annum, based on the Consolidated Leverage Ratio (as defined in the Credit Agreement) of Pure and its Restricted Subsidiaries (as defined in the Credit Agreement). In addition, Pure will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.25% to 0.40% per annum, based on the then-applicable Consolidated Leverage Ratio.
Pure is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Pure is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.
The Credit Agreement contains customary representations, warranties and affirmative and negative covenants that, among other things, limit Pure’s and its Restricted Subsidiaries’ ability to sell assets and to merge or consolidate with another entity, grant liens on assets, incur other indebtedness, make certain investments and acquisitions, make certain restricted payments and certain prepayments of junior indebtedness, enter into or engage in transactions with affiliates, enter into certain swap agreements, enter into certain restrictive agreements, make material changes in its accounting practices and make amendments to its organizational documents or documents governing junior indebtedness that are adverse to the lenders, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Pure to satisfy two financial ratios measured as of the end of each fiscal quarter: a Consolidated Leverage Ratio and an Interest Coverage Ratio ( both as defined in the Credit Agreement).
The Credit Agreement contains events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events with respect to Pure and certain of its subsidiaries, material judgments, and events constituting a change of control. If any principal is not paid when due, interest on such amount may accrue at an increased rate. Upon the occurrence and during the continuance of an event of default, the lenders may accelerate Pure’s obligations under the Credit Agreement; however, that acceleration will be automatic in the case of bankruptcy and insolvency events of default involving Pure.
The Credit Facility is guaranteed by certain of Pure’s wholly owned domestic subsidiaries and secured by assets of Pure and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.
The foregoing description of the Credit Agreement is not complete and is subject to and qualified in its entirety by reference to the Credit Agreement, which will be filed as an exhibit to Pure’s Quarterly Report on Form 10-Q for the period ending August 2, 2020.