ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On June 29, 2021, NeoPhotonics Corporation (the “Company”) entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent (“Agent”) and the lenders party thereto. The A&R Credit Agreement amends and restates in full that certain Credit Agreement dated as of September 8, 2017 (as amended, the "Former Credit Agreement"), by and among the Company, the Agent, and the lenders party thereto.
The A&R Credit Agreement provides for continuation of the $50 million revolving credit facility (the "Credit Facility") and matures on June 30, 2026. Prior to the signing of the A&R Credit Agreement, the Company had drawn $21 million under the Former Credit Agreement, which amount was rolled over and is now treated as outstanding under the Credit Facility. The A&R Credit Agreement requires the Company to maintain a minimum liquidity of $20 million and provides flexibility of increasing the borrowing base to a broader set of customers, as defined in the A&R Credit Agreement. The Company will use the proceeds of the Credit Facility for working capital needs and general corporate purposes.
Loans under the Credit Facility bear interest, at the Company’s option, at a rate equal to either (a) the LIBOR rate, plus an applicable margin ranging from 1.50% to 1.75% per annum, based upon the average excess availability (as defined in the Credit Facility), or (b) the prime lending rate, plus an applicable margin ranging from 0.50% to 0.75% per annum, based upon the average excess availability. The Company is required to pay a commitment fee equal to 0.25% of the unused portion of the Credit Facility, monthly in arrears.
The obligations of the Company under the Credit Facility are not currently guaranteed by any of the Company’s wholly-owned subsidiaries, but may in the future be guaranteed by certain material domestic subsidiaries of the Company (collectively, the “Loan Parties”). The obligations of the Loan Parties under the A&R Credit Agreement and other loan documents are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (a) all tangible and intangible assets of the Loan Parties, except for intellectual property and other certain excluded assets, and (b) all of the equity interests of the subsidiaries of the Loan Parties held by the Loan Parties (limited, in the case of the voting equity interests of certain material foreign subsidiaries and certain domestic subsidiaries that hold no assets other than equity interests of foreign subsidiaries, to 65% of the voting equity interests of such subsidiaries).
The Company is permitted to terminate or reduce the revolving commitments of the lenders and to make voluntary prepayments at any time, without premium or penalty. The Company is not required to make mandatory prepayments of outstanding indebtedness under the A&R Credit Agreement other than in the case that the aggregate amount of all outstanding loans and letters of credit issued under the Credit Facility exceed the aggregate commitment of all lenders under the Credit Facility.
The A&R Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Loan Parties and its consolidated subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions.
Events of default under the A&R Credit Agreement include: (a) the failure by the Company to timely make payments due under the A&R Credit Agreement; (b) material misrepresentations or misstatements in any representation or warranty by any Loan Party when made; (c) the failure by any Loan Party to comply with the covenants under the A&R Credit Agreement and other related agreements; (d) certain defaults under a specified amount of other indebtedness of the Company or its subsidiaries; (e) insolvency or bankruptcy-related events with respect to the Company or any of its subsidiaries; (f) certain judgments against either the Company or any of its subsidiaries; (g) the failure by the collateral documents to create a valid and perfected security interest in any material portion of the collateral purported to be covered thereby; (h) any material provision of any loan document ceasing to be, or being asserted by any Loan Party not to be, valid, binding and enforceable, or a denial in writing by any Loan Party of any further liability under the loan documents and (i) the occurrence of a change in control with respect to the Company. If one or more events of default occurs and continues, the Agent may, with the consent of the lenders holding a majority of the loans and commitments under the facilities, or will, at the request of such lenders, terminate the commitments of the lenders to make further loans and declare all of the obligations of the Loan Parties under the A&R Credit Agreement to be immediately due and payable. If any bankruptcy event of default described in clause (e) above occurs, the commitments will be terminated and the obligations of the Loan Parties under the A&R Credit Agreement will become due and payable automatically without any action by the Agent or the lenders.
The foregoing summary description of the A&R Credit Agreement is not intended to be complete and is qualified in its entirety by reference to the full text of the A&R Credit Agreement, which is filed as an exhibit hereto.
