CONVERTIBLE NOTES, OTHER DEBTS AND CAPITAL LEASES

4.00% Convertible Senior Notes

In December 2015, the Company issued $128.25 million aggregate principal amount of 4.00% Senior Convertible Notes due 2020 (the “offering” or “Notes”, as applicable) pursuant to an indenture (the “Indenture”), dated December 14, 2015, by and between the Company and U.S. Bank National Association, as trustee. The Notes bear interest at a rate of 4.00% per year, payable in cash on June 1 and December 1 of each year and the Notes will mature on December 1, 2020 unless earlier repurchased or converted. The Notes will be convertible into cash, shares of the Company’s common stock, par value $0.001 (“Common Stock”), or a combination thereof, at the Company’s election, at an initial conversion rate of 173.9978 shares of Common Stock per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $5.75 per share). The conversion rate, and thus the effective conversion price, may be adjusted under certain circumstances, including in connection with conversions made following certain fundamental changes and under other circumstances, in each case, as set forth in the Indenture.

Prior to the close of business on the business day immediately preceding September 1, 2020, the Notes will be convertible only under the following circumstances: (1) during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the Notes on each applicable trading day; (2) during the five business day period after any 5 consecutive trading day period (the “ measurement period ”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. Commencing on September 1, 2020 until the close of business on the second scheduled trading day immediately preceding the maturity date, the Notes will be convertible in multiples of $1,000 principal amount regardless of the foregoing circumstances.

If a fundamental change occurs, holders of the Notes may require the Company to purchase all or any portion of their Notes for cash at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Concurrent with the closing of the offering, the Company used $49.9 million of the net proceeds to repurchase 11.1 million shares of the Company’s common stock from purchasers of Notes in the offering in privately negotiated transactions. In addition, the Company incurred approximately $4.1 million of debt issuance cost, resulting in net proceeds to the Company of approximately $74.2 million, which was used to fund the TVN acquisition.

In accordance with accounting guidance on embedded conversion features, the conversion feature associated with the Notes was valued at $26.1 million and bifurcated from the host debt instrument and recorded in stockholders’ equity. The resulting debt discount on the Notes is being amortized to interest expense at the effective interest rate over the contractual terms of the Notes. The following table presents the components of the Notes as of December 31, 2018 and December 31, 2017 (in thousands, except for years and percentages):



	December 31,
	2018			2017
Liability:
Principal amount	$	128,250		$	128,250
Less: Debt discount, net of amortization	(11,996		)	(17,404		)
Less: Debt issuance costs, net of amortization	(1,446		)	(2,098		)
Carrying amount	$	114,808		$	108,748
Remaining amortization period (years)	1.9 years			2.9 years
Effective interest rate on liability component	9.94		%	9.94		%
Carrying amount of equity component	$	26,062		$	26,062

The following table presents interest expense recognized related to the Notes (in thousands):



	Year ended December 31,
	2018		2017		2016
Contractual interest expense	$	5,130	$	5,130	$	5,130
Amortization of debt discount	5,408		4,898		4,430
Amortization of debt issuance costs	652		591		534
Total interest expense recognized	$	11,190	$	10,619	$	10,094

Other Debts and Capital Leases

The Company has a variety of debt and credit facilities in France to satisfy the financing requirements of TVN operations. These arrangements are summarized in the table below (in thousands):



	December 31,
	2018			2017
Financing from French government agencies related to various government incentive programs ⁽¹⁾	$	18,783		$	20,565
Term loans	914			1,282
Obligations under capital leases	162			1,099
Total debt obligations	19,859			22,946
Less: current portion	(7,175		)	(7,610		)
Long-term portion	$	12,684		$	15,336

(1) Loans backed by French R&D tax credit receivables were $16.7 million and $17.7 million as of December 31, 2018 and 2017, respectively. As of December 31, 2018, the TVN French Subsidiary had an aggregate of $26.5 million of R&D tax credit receivables from the French government from 2019 through 2022. (See Note 9, “Certain Balance Sheet Components” for more information). These tax loans have a fixed rate of 0.6%, plus EURIBOR 1 month plus 1.3% and mature between 2019 through 2021. The remaining loans of $2.1 million and $2.9 million as of December 31, 2018 and 2017, respectively, primarily relate to financial support from French government agencies for R&D innovation projects at minimal interest rates, and the loans outstanding at December 31, 2018 mature between 2019 through 2025.

Future minimum repayments

The table below presents the future minimum repayments of other debts and capital lease obligations as of December 31, 2018 (in thousands):



Years ending December 31,	Capital lease obligations		Other Debt obligations
2019	91		7,084
2020	49		6,607
2021	22		5,333
2022	—		452
2023	—		155
Thereafter	—		66
Total	$	162	$	19,697

Line of Credit

On September 27, 2017, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”). The Loan Agreement provides for a secured revolving credit facility in an aggregate principal amount of up to $15.0 million. Under the terms of the Loan Agreement, the principal amount of loans, plus the face amount of any outstanding letters of credit, at any time cannot exceed up to 85% of the Company’s eligible receivables. Under the terms of the Loan Agreement, the Company may also request letters of credit from the Bank. The proceeds of any loans under the Loan Agreement will be used for working capital and general corporate purposes.

Loans under the Loan Agreement will bear interest, at the Company’s option, and subject to certain conditions, at an annual rate of either a prime rate or a LIBOR rate plus an applicable margin of 2.25%. There will be no applicable margin for prime rate advances when the Company is in compliance with the liquidity requirement of at least $20.0 million in the aggregate of consolidated cash plus availability under the Loan Agreement (the “Liquidity Requirement”) and a 0.25% margin for prime rate advances when the Company is not in compliance with the Liquidity Requirement. The Company may not request LIBOR advances when it is not in compliance with the Liquidity Requirement. Interest on each advance is due and payable monthly and the principal balance is due at maturity. The Company’s obligations under the revolving credit facility are secured by a security interest on substantially all of its assets, excluding intellectual property.

The Loan Agreement contains customary affirmative and negative covenants. The Company must comply with financial covenants requiring it to maintain (i) minimum a short-term asset to short-term liabilities ratio and (ii) minimum adjusted EBITDA, in the amounts and for the periods as set forth in the Loan Agreement. The Company must also maintain a minimum liquidity amount, comprised of unrestricted cash held at accounts with the Bank plus proceeds available to be drawn under the Loan Agreement, equal to $10.0 million at all times. As of December 31, 2018, the Company was in compliance with the covenants under the Loan Agreement.

As of December 31, 2018, the Company committed $1.8 million towards security for letters of credit issued under the Loan Agreement. There were no borrowings under the Loan Agreement from the closing of the Loan Agreement through December 31, 2018.