| Item 1.01. | Entry into a Material Definitive Agreement. |
On November 14, 2024, Dolby Laboratories, Inc., a Delaware corporation (the “Company”), entered into a Credit Agreement (the “Credit Agreement”) among the Company, certain subsidiaries of the Company party thereto, as guarantors, and Bank of America, N.A., as the lender. The Credit Agreement provides for a $250,000,000 unsecured revolving credit facility, in addition to an uncommitted incremental facility to increase the amount of the revolving credit facility by up to an additional $150,000,000, subject to certain terms and conditions as set forth therein. The Company did not borrow any amount under the Credit Agreement at closing. The Company may use the proceeds of future borrowings under the Credit Agreement for general corporate purposes.
Revolving loans may be borrowed, repaid and reborrowed until November 14, 2029, at which time all amounts outstanding must be repaid. Revolving loans may be prepaid without premium or penalty, subject to customary breakage costs for loans bearing interest with reference to Term SOFR (as defined in the Credit Agreement).
Revolving loans will bear interest, at the Company’s option, at either (i) a floating rate per annum equal to a base rate (the “Base Rate”) plus an applicable margin (adjusted periodically) based upon the Company’s total gross leverage ratio or (ii) a per annum rate equal to Term SOFR plus an applicable margin (adjusted periodically) based upon the Company’s total gross leverage ratio. The applicable margin for Base Rate loans will range from 0.00% to 0.50%. The applicable margin for Term SOFR loans will range from 0.90% to 1.50%.
The Company is required to pay customary fees for a credit facility of this size and type, including a quarterly commitment fee (adjusted periodically) on the unused portion of the commitments at a rate based upon the Company’s total gross leverage ratio.
The obligations under the Credit Agreement are required to be guaranteed by certain material domestic subsidiaries of the Company. The Credit Agreement contains customary affirmative covenants and negative covenants (and customary baskets and exceptions with respect thereto) for a credit facility of this size and type, including covenants that require delivery of financial statements and notices of events of default and covenants that limit the ability of the Company and its subsidiaries to incur debt and grant liens, to undertake certain consolidations, and to enter into certain transactions with their respective affiliates. The Credit Agreement also requires the Company to maintain a total gross leverage ratio of no greater than 3.0 to 1.0 as of the last day of each fiscal quarter.
The Credit Agreement includes customary events of default (subject to customary grace periods), including payment defaults, inaccuracy of representations or warranties in any material respect, violation of covenants, cross-default to other material indebtedness, bankruptcy and insolvency events, material judgments, certain ERISA defaults, invalidity of the loan documents, and a change of control. The occurrence of an event of default could result in the termination of the lenders’ commitments and the acceleration of the obligations under the Credit Agreement, if any. Under certain circumstances, a default interest rate will apply on the obligations during the existence of certain specified events of default under the Credit Agreement at a per annum rate equal to 2.00% above the otherwise applicable interest rate.
The lender under the Credit Agreement and its affiliates have engaged in, and may in the future engage in, other commercial dealings in the ordinary course of business with the Company or its affiliates, including the provision of financial, banking and related services. These parties have received, and in the future may receive, compensation from the Company for these services.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Credit Agreement, a copy of which is filed as Exhibit 10.1 hereto.
