| ITEM 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. |
On December 19, 2018, DexCom, Inc. (“DexCom”) entered into an Amended and Restated Credit Agreement (the “AmendedCredit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, Bank of America, Silicon Valley Bank and Union Bank, amending and restating that certain Credit Agreement (the “Original Credit Agreement”) dated June 16, 2016, as amended by Amendment No. 1 to Credit Agreement dated May 8, 2017 and Amendment No. 2 to Credit Agreement dated November 26, 2018, among DexCom, JPMorgan, as administrative agent, Bank of America, Silicon Valley Bank and Union Bank.
The Amended Credit Agreement provides for a $200.0 million revolving credit agreement, and a subfacility of up to $10.0 million for letters of credit. As of December 19, 2018, DexCom had no outstanding loans under the Original Credit Agreement and $4.4 million outstanding letters of credit.
The revolving loans under the Amended Credit Agreement will be available for general corporate purposes, including working capital and capital expenditures. In addition to allowing borrowings in US dollars, the Amended Credit Agreement provides a $50.0 million sublimit for borrowings in Canadian Dollars, Euros, British Pounds, Swedish Kroner, Japanese Yen and any other currency that is subsequently approved by JPMorgan and each lender. Subject to customary conditions and the approval of any lender whose commitment would be increased, DexCom has the option to increase the maximum principal amount available under the Amended Credit Agreement by up to an additional $300.0 million, resulting in a maximum available principal amount under the Amended Credit Agreement of $500.0 million. However, none of the lenders has committed at this time to provide any such increase in their commitments.
The revolving loans under the Amended Credit Agreement bear interest at one of two base rates plus an applicable margin based on DexCom’s leverage ratio from time to time ranging from 0.375% to 1.000% (in the case of alternative base rate loans) or from 1.375% to 2.000% (in the case of LIBOR-based rate loans). The base rate, at the option of DexCom, is either (a) an alternative base rate equal to the highest of (i) the rate of interest per annum publicly announced from time to time by JPMorgan as its prime rate, (ii) the greater of (A) the federal funds effective rate and (B) the overnight bank funding rate (as determined by the Federal Reserve Bank of New York) plus 0.5% or (iii) a LIBOR-based rate (subject to a floor of 0.00%) plus 1% or (b) a LIBOR-based rate (subject to a floor of 0.00%). DexCom will also pay a commitment fee of between 0.200% and 0.300%, payable quarterly in arrears, on the average daily unused amount of the revolving facility based on DexCom’s leverage ratio from time to time.
The obligations of DexCom under the Amended Credit Agreement are guaranteed by DexCom’s existing and future wholly-owned domestic subsidiaries, and are secured by a first-priority security interest in substantially all of the assets of DexCom and the guarantors, including all or a portion of the equity interests of DexCom’s domestic subsidiaries and first-tier foreign subsidiaries but excluding real property and intellectual property (which is subject to a negative pledge).
The Amended Credit Agreement contains customary representations, warranties and ongoing affirmative and negative covenants and agreements. The negative covenants include, among other things, limitations on certain indebtedness, liens, investments, transactions with affiliates, dividends and other restricted payments, subordinated indebtedness and amendments to subordinated indebtedness documents and sale and leaseback transactions of DexCom or any of its domestic subsidiaries. The Amended Credit Agreement also requires DexCom to maintain a maximum leverage ratio and minimum fixed charge coverage ratio.
The Amended Credit Agreement also contains usual and customary events of default, which include:non-payment of principal, interest, fees and other amounts; material breach of a representation or warranty;non-performance of covenants and obligations; default on other material debt; bankruptcy or insolvency; material judgments; incurrence of certain material ERISA liabilities; and a change of control of DexCom.
The Amended Credit Agreement matures on December 19, 2023, the fifth anniversary of the effective date of the Amended Credit Agreement, provided that it will mature the earlier of (i) 91 days prior to the maturity date of the 0.75% convertible senior notes due 2022 (the “2022 Notes”) or (ii) 91 days prior to the maturity date of the 0.75% convertible senior notes due 2023 (the “2023 Notes”) if both (a) the aggregate outstanding principal amount of the 2022 Notes or the 2023 Notes, as applicable, is greater than EBITDA for the period of four consecutive fiscal quarters ending prior to such date and (b) unrestricted domestic cash on hand is then less than the aggregate outstanding principal amount of the 2022 Notes or the 2023 Notes, as applicable. On the maturity date, the full balance of the revolving loans and all other obligations under the Amended Credit Agreement must be paid at that time. In addition, DexCom is required to prepay the revolving loan balance if at any time the aggregate principal amount outstanding under the Amended Credit Agreement exceeds the aggregate commitments thereunder.
