LONG-TERM DEBT OBLIGATIONS

Term Loan

On June 25, 2012, the Company entered into a credit agreement (the “Credit Agreement”) by, and among, Affymetrix and its domestic subsidiaries, and General Electric Capital Corporation (“GE Capital”), Silicon Valley Bank and other financial institutions party thereto from time to time (collectively, the “Lenders”), as well as certain securities affiliates of the Lenders. The Credit Agreement provides for the Term Loan in an aggregate principal amount of $85.0 million and a revolving credit facility in an aggregate principal amount of $15.0 million (the “Revolving Credit Facility” and, together with the Term Loan, the “Senior Secured Credit Facility”), each with a term of 5 years. As of September 30, 2013, the Company had borrowed a total of $85.0 million under the Term Loan which was used to finance a portion of the Acquisition.

On October 17, 2013 the Company amended the Credit Agreement and refinanced its Senior Secured Credit Facility. Refer to Note 16. "Subsequent events" for further details regarding the amendment and refinance.

At the option of the Company (subject to certain limitations), borrowings under the Credit Agreement bear interest at either a base rate or at the London Interbank Offered Rate (“LIBOR”), plus, in each case, an applicable margin. Under the Base Rate Option, interest will be at the base rate plus 4.00% per annum, calculated on the basis of the actual number of days elapsed in a year of 365 or 366 days (as applicable) and payable quarterly in arrears. The base rate will be equal to the greatest of (a) the rate last quoted by The Wall Street Journal (or another national publication selected by GE Capital) as the U.S. “Prime Rate,” (b) the federal funds rate, plus 0.50% per annum and (c) LIBOR for an interest period of one month, plus 1.00% per annum. However, the base rate will not be less than a floor of 2.50% per annum. Under the LIBOR Option, interest will be determined based on interest periods to be selected by Affymetrix of one, two, three or six months (and, to the extent available to all relevant lenders, nine or 12 years) and will be equal to LIBOR, plus 5.00%, calculated based on the actual number of days elapsed in a 360-day year. However, LIBOR will be deemed not to be less than a floor of 1.50% per annum. Interest will be paid at the end of each interest period or, in the case of interest periods longer than three months, quarterly. In 2012, the Company entered into its Interest Rate Swap as required by the terms of the Credit Agreement with a third-party lending institution. Refer to Note 4. “Financial Instruments–Derivative Financial Instruments” for further information. At September 30, 2013, the applicable interest rate was approximately 6.50%.

The loans and other obligations under the Senior Secured Credit Facility are (i) guaranteed by substantially all of the Company’s domestic subsidiaries (subject to certain exceptions and limitations) and (ii) secured by substantially all of the assets of Affymetrix and each guarantor (subject to certain exceptions and limitations).

The Credit Agreement requires the Company to maintain a fixed charge coverage ratio of at least 1.5 to 1.0, a senior leverage ratio (which is the ratio of senior debt to trailing 12 months’ earnings before interest, taxes, depreciation, amortization and other one-time items (“EBITDAO”) not exceeding initially 2.00 to 1.00 and stepping down to 1.50 to 1.00; and a total leverage ratio (which is the ratio of total debt to trailing 12 months’ EBITDAO) not exceeding initially 4.75 to 1.00 and stepping down to 3.50 to 1.00. The Credit Agreement also includes other covenants, including negative covenants that, subject to certain exceptions, limit Affymetrix’, and that of certain of its subsidiaries’, ability to, among other things: (i) incur additional debt, including guarantees by the Company or its subsidiaries, (ii) make investments, pay dividends on capital stock, redeem or repurchase capital stock, redeem or repurchase the Company’s senior convertible notes or any subordinated obligations, (iii) create liens and negative pledges, (iv) make capital expenditures, (v) dispose of assets, (vi) make acquisitions, (vii) create or permit restrictions on the ability of Affymetrix’ subsidiaries to pay dividends or make distributions to Affymetrix, (viii) engage in transactions with affiliates, (ix) engage in sale and leaseback transactions, (x) consolidate or merge with or into other companies or sell all or substantially all the Company’s assets and (xi) change their nature of business, their organizational documents or their accounting policies.

Following the restructuring activity discussed in Note 15. “Restructuring” and lower-than-expected revenue in the first quarter of 2013, on April 8, 2013, the Company and the Lenders amended Credit Agreement to provide a limited waiver and to amend certain covenants with respect to fiscal year 2013 (the “Amendment”). Under the Amendment, the Lenders agreed to waive any event of default arising from the failure of the Company to comply with the total leverage ratio and senior leverage ratio for the three months ended March 31, 2013. For the quarters ended March 31, 2013 through September 30, 2013, the definition of EBITDAO was amended to allow the add back of up to $11.0 million of trailing twelve month restructuring and integration charges in the calculation of EBITDAO compared to an add back of up to $7 million prior to the Amendment. In addition, the quarterly senior leverage ratio was revised to not exceeding 1.80 to 1.00 for June 30, 2013 and September 30, 2013 compared to 1.75 and 1.00 for these periods prior to the Amendment. The total senior leverage multiple was revised to not exceeding 4.50 to 1.00, 4.75 to 1.00 and 4.50 to 1.00 for the quarters ending March 31, June 30 and September 30, 2013, respectively, as compared to the original total leverage ratio not exceeding 4.25 to 1.00 for each of these periods. As of September 30, 2013, the Company was in compliance with the covenants.

The Company is required to make the following mandatory prepayments: (a) annual prepayments in an amount equal to 50% of excess cash flow (as defined in the Credit Agreement), subject to a leverage-based stepdown, (b) prepayments in an amount equal to 100% of the net cash proceeds of issuances or incurrences of debt obligations of Affymetrix and its subsidiaries (other than debt incurrences expressly permitted by the Credit Agreement), (c) prepayments in an amount equal to 100% of the net proceeds of asset sales in excess of $2.5 million annually (subject to certain reinvestment rights) and (d) prepayments in an amount equal to any indemnification payments or similar payments received under the Acquisition Agreement, subject to certain exclusions.

The Credit Agreement also contains events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-default and cross-acceleration to other indebtedness in excess of specified amounts, monetary judgment defaults in excess of specified amounts, bankruptcy or insolvency, actual or asserted invalidity or impairment of any part of the credit documentation (including the failure of any lien on a material portion of the collateral to remain perfected) and change of ownership or control defaults. In addition, the occurrence of a “fundamental change” under the indenture governing the 4.00% Notes would be an event of default under the Credit Agreement. As of September 30, 2013, the Company was in compliance with the covenants.

Additionally, the proceeds from the Term Loan are net of debt issuance costs of approximately $4.5 million which are being amortized using the effective interest method.

As of September 30, 2013, the Company had an outstanding principal balance of $63.7 million and incurred $1.4 million and $4.7 million, respectively, in interest expense under the Senior Secured Credit Facility for the three and nine months ended September 30, 2013.

The Term Loan is scheduled to amortize in quarterly installments in amounts resulting in an annual amortization of 10% during the first year, 15% during the second year, 15% during the third year, 20% during the fourth year and 40% during the fifth year after June 25, 2012. The principal amount of unpaid maturities per the Credit Agreement is as follows (in thousands):



2013, remainder thereof	$	—
2014	9,563
2015	13,813
2016	17,000
2017	23,337
Total	$	63,713

4.00% Convertible Senior Notes

On June 25, 2012, the Company issued $105.0 million principal amount of 4.00% Convertible Senior Notes due July 1, 2019. The net proceeds, after debt issuance costs totaling $3.9 million from the 4.00% Notes offering, were $101.1 million. The 4.00% Notes bear interest of 4.00% per year payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2013 until the maturity date of July 1, 2019, unless converted, redeemed or repurchased earlier. The debt issuance costs are being amortized over the effective life of the 4.00% Notes, which is 7 years.

Holders of the 4.00% Notes may convert their 4.00% Notes into shares of the Company’s stock at their option any time prior to the close of business on the business day immediately preceding the maturity date. The 4.00% Notes are initially convertible into approximately 170.0319 shares of the Company’s common stock per $1,000 principal amount of notes, which equates to 17,857,143 shares of common stock, or an initial conversion price of $5.88 per share of common stock. The conversion rate is subject to certain customary anti-dilution adjustments. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event in certain circumstances. Holders may also require the Company to repurchase for cash their notes upon certain fundamental changes.

On or after July 1, 2017, the Company can redeem for cash all or part of the 4.00% Notes if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending within 5 trading days prior to the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the 4.00% Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

As of September 30, 2013, the outstanding balance on the 4.00% Notes was $105.0 million and interest incurred for the three and nine months ended September 30, 2013 was $1.2 million and $3.6 million, respectively.

3.50% Senior Convertible Notes

During the first quarter of 2012, the Company redeemed its remaining outstanding 3.50% Senior Convertible Notes for $3.9 million in total cash consideration, including accrued interest of $0.1 million. The notes were redeemed at par and the related deferred financing costs were written off.