Short-Term Borrowings

Silicon Valley Bank

On September 19, 2016, the Company entered into a Credit Agreement (the “2016 Agreement”) with Silicon Valley Bank (“SVB”), as administrative agent, and the other lenders party thereto. The 2016 Agreement replaces the Company’s Third Amended and Restated Loan and Security Agreement with SVB, dated March 14, 2014 (as amended, the “2014 Agreement”).

The 2016 Agreement provides for a revolving loan commitment of $55.0 million and has a stated maturity date of September 19, 2019. The 2016 Agreement includes a $10.0 million sub-limit for swingline loans and a $10.0 million sub-limit for letters of credit. The 2016 Agreement also includes an accordion feature that allows the Company, at any time, to increase the aggregate revolving loan commitments by up to an additional $25.0 million, subject to the satisfaction of certain conditions, including obtaining the lenders’ agreement to participate in the increase. Borrowings under the 2016 Agreement are subject to a borrowing base, which is a formula based upon certain eligible accounts receivable plus up to $5.0 million if the Company’s Liquidity (as defined in the 2016 Agreement) is above $20.0 million in the first and second month of any fiscal quarter and $25.0 million for the last month of a fiscal quarter, measured as of the last day of the applicable month. Eligible accounts receivable include 80% of certain U.S. and 75% of certain foreign accounts receivable (80% in certain cases).

Outstanding borrowings under the revolving loan commitment bear interest at a per annum rate based upon the Company's Availability, which means the quotient of the amount available for borrowings under the 2016 Agreement divided by the lesser of the total commitment and the borrowing base, calculated as a daily average over the immediately preceding fiscal month. The per annum interest rate under the 2016 Agreement is determined as follows:


•	When Availability is 70% or more, the interest rate is the prime rate (as published in Wall Street Journal) plus 0.25%; and


•	When Availability is 30% or more and less than 70%, the interest rate is the prime rate plus 0.50%; and


•	When Availability is below 30%, the interest rate is the prime rate plus 0.75%.

Under the 2016 Agreement, the Company is required to make interest payments monthly. The Company is further required to pay $25,000 in annual administrative fees, $82,500 in annual commitment fees and a commitment fee based on the average unused portion of the revolving credit commitment, and certain other fees in connection with letters of credit. The commitment fee is determined as follows and is payable quarterly in arrears:


•	When Availability is 70% or more, the commitment fee is 0.35% of the average unused portion of the revolving credit commitment;


•	When Availability is 30% or more and less than 70%, the commitment fee is 0.325% of the average unused portion of the revolving credit commitment; and


•	When Availability is below 30%, the commitment fee is 0.3% of the average unused portion of the revolving credit commitment.

A total of $0.3 million loan origination fees are to be capitalized and expensed over the term of the 2016 Agreement. The Company paid $25,000 in annual administrative fees, $170,663 in loan origination fees and $82,500 in annual commitment fees in September 2016. If the Company reduces or terminates the revolving loan commitment under the 2016 Agreement prior to September 19, 2017, the Company is required to pay a cancellation fee equal to 0.75% of the total revolving loan commitment.

The 2016 Agreement requires that the Company comply with financial covenants requiring the Company to maintain a minimum monthly Liquidity of $15.0 million as of the last day of the first and second month of any fiscal quarter and $20.0 million as of the last day of the third month of any fiscal quarter. Additionally, the 2016 Agreement requires the Company to maintain a minimum trailing twelve months Adjusted EBITDA based on the following schedule:

•$12.0M for each quarter through December 31, 2016

•$7.0M for each quarter ending March 31, 2017 and June 30, 2017

•$10.0M for quarter ending September 30, 2017

•$13.0M for quarter ending December 31, 2017

•$14.5M for quarter ending March 31, 2018

•$16.5M for quarter ending June 30, 2018

•$19.0M for quarter ending September 30, 2018

•$22.5M for quarter ending December 31, 2018

•$24.0M for quarter ending March 31, 2019

•$26.5M for quarter ending June 30, 2019

•$30.0M for quarter ending September 30, 2019

•$35.0M for quarter ending December 31, 2019

The 2016 Agreement defines Adjusted EBITDA as net income plus interest expense, depreciation expense, amortization expense, income tax expense, non-cash stock compensation expense and restructuring expense (with restructuring expense limited to $1.7 million and $1.1 million at the first and second quarter 2016, and $1.0 million at the third and fourth quarter 2016, and $0.8 million, $0.8 million and $0.5 million at the first, second, and third quarter 2017 measurement dates and $0 thereafter).

The 2016 Agreement also requires the Company to make certain representations and warranties and comply with certain agreements and covenants that are customary in credit agreements of this type. All obligations under the 2016 Agreement are unconditionally guaranteed by the Company's wholly owned subsidiary, Radisys International LLC. The obligations under the 2016 Agreement are secured by a first priority lien on the assets of the Company and the subsidiary guarantor. If the Company acquires or forms a material U.S. subsidiary, then that subsidiary will also be required to guarantee the obligations under the 2016 Agreement and grant a first priority lien on its assets.

As of September 30, 2016 and December 31, 2015, the Company had an outstanding balance of $25.0 million and $15.0 million under the Amended Agreement. At September 30, 2016, the Company had $16.8 million of total borrowing availability remaining under the Amended Agreement. At September 30, 2016, the Company was in compliance with all covenants under the Amended Agreement.