Short-Term Borrowings

Silicon Valley Bank

On September 19, 2016, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with Silicon Valley Bank (“SVB”), as administrative agent, and the other lenders party thereto. The Credit Agreement replaces the Company’s Third Amended and Restated Loan and Security Agreement with SVB, dated March 14, 2014 (as amended, the “2014 Agreement”). On June 30, 2017, the Company entered into the Second Amendment to the Credit Agreement. The following takes into account the terms per the agreement as amended on June 30, 2017.

The Credit Agreement provides for a revolving loan commitment of $55.0 million and has a stated maturity date of September 19, 2019. The Credit Agreement includes a $10.0 million sub-limit for swingline loans and a $10.0 million sub-limit for letters of credit. The Credit 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 Credit Agreement are subject to a borrowing base, which is a formula based upon certain eligible accounts receivable plus up to $7.5 million if the Company’s Liquidity (as defined in the Credit 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 85% of certain U.S. and 75% of certain foreign accounts receivable (85% in certain cases). The Credit Agreement also provides for non-formula advances during the last business day of any fiscal quarter, provided that Liquidity on the date of a requested non-formula advance must be greater than or equal to $40.0 million, the non-formula advance must be repaid on or before the first business day after the applicable fiscal quarter end, and subject to the satisfaction of certain other conditions.

Outstanding borrowings under the revolving loan commitment bear interest at a per annum rate based upon the Company's Availability (as defined in the Credit Agreement), which means the quotient of the amount available for borrowings under the Credit 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 Credit Agreement provides that the per annum interest rate commencing on June 30, 2017 when the Consolidated Adjusted EBITDA (as defined in the Credit Agreement) as measured on a trailing twelve-month basis for the immediately preceding fiscal quarter period is less than $8.0 million will be as follows:


•	When Availability is 70% or more, the interest rate is the prime rate (as published in Wall Street Journal) plus 0.75%;


•	When Availability is 30% or more and less than 70%, the interest rate is the prime rate plus 1.00%; and


•	When Availability is below 30%, the interest rate is the prime rate plus 1.25%.

Commencing on June 30, 2017, if Consolidated Adjusted EBITDA as measured on a trailing twelve-month basis for the immediately preceding fiscal quarter period is equal to or greater than $8.0 million, the rate per annum will be as follows:


•	When Availability is 70% or more, the interest rate is the prime rate plus 0.25%;


•	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 Credit 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.

The Company paid a total of $0.4 million loan origination fees which were capitalized and will be expensed over the term of the Credit Agreement. If the Company reduces or terminates the revolving loan commitment under the Credit 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 Credit 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 Credit Agreement requires the Company to maintain a minimum trailing twelve months Consolidated Adjusted EBITDA in the second, third, and fourth quarter of fiscal year 2017 as follows:



Quarter Ending	Minimum Consolidated Adjusted EBITDA
6/30/17	$0
9/30/17	($1,500,000)
12/31/17	$3,000,000

The Credit Agreement also provides limits for the add-back of certain restructuring costs on a trailing twelve month basis in the calculation of Consolidated Adjusted EBITDA as follows:



Quarter Ending	Restructuring Costs
6/30/17	$5,205,000
9/30/17	$9,550,000
12/31/17	$8,235,000

The Credit Agreement also provides that following fiscal year 2017, SVB, as administrative agent, and the required lenders under the Credit Agreement will re-set the required minimum Consolidated Adjusted EBITDA levels for the periods tested in fiscal years 2018 and 2019.

All obligations under the Credit Agreement are unconditionally guaranteed by the Company's wholly owned subsidiary, Radisys International LLC. The obligations under the Credit 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 Credit Agreement and grant a first priority lien on its assets.

As of June 30, 2017 and December 31, 2016, the Company had an outstanding balance of $45.0 million and $25.0 million under the Credit Agreement. Under the revolving credit facility, the Company may borrow up to $55.0 million at fiscal quarter ends. At June 30, 2017, the Company utilized the quarter end availability feature to borrow beyond our ongoing available borrowing base of $31.4 million. At June 30, 2017, the Company was in compliance with all covenants under the Amended Agreement.