On June
19, 2009, NetLogic Microsystems, Inc., or NetLogic, and its indirect subsidiary,
NetLogic Microsystems International Limited, or NetLogic International, entered
into a credit agreement with a group of lenders led by Silicon Valley Bank to
provide $55 million of new credit facilities for a term of three
years. The credit facilities consist of a $25 million senior secured
revolving credit facility and a $15 million senior secured term loan for Net
Logic, and a $15 million senior secured term loan for NetLogic
International. The facilities will be made available concurrently at
a single closing anticipated to occur prior to September 30,
2009. The credit agreement is secured by substantially all of the
assets of NetLogic and NetLogic International. The proceeds of the
loans will be available to fund a portion of the consideration for NetLogic’s
pending acquisitions of the network search engine process business of Integrated
Device Technologies, Inc and of RMI Corporation, as well as for working capital
and other corporate purposes. The credit facilities can be prepaid
(in whole or in part) and terminated at any time without premium or
penalty.
Any
borrowings under the credit facility will, at NetLogic’s option, bear interest
either at an annual rate equal to (a) the higher of the Silicon Valley Bank
announced prime rate or the Federal Funds Effective Rate plus 0.50% plus a
margin ranging from 0.50% to 1.75% based on the ratio of NetLogic’s reported
total consolidated debt to its consolidated EBITDA, or (b) Eurodollar borrowings
based on the applicable LIBOR interest period (with a LIBOR floor of 1.50%),
plus a margin ranging from 3.00% to 4.00% based on the ratio of NetLogic’s
reported total consolidated debt to its consolidated EBITDA. The
revolving credit facility has an unused line fee payable on the undrawn
revolving credit facility amount set at a rate per annum ranging from 0.30% to
0.50% determined based on the ratio of NetLogic’s total consolidated debt to its
consolidated EBITDA. The revolving credit facility includes a $10
million sub-limit for the issuance of letters of credit.
Beginning
on September 30, 2009, principal under the term loans must be repaid in equal
consecutive quarterly installments. There is an unused term loan
commitment fee payable from June 19, 2009 until the term loans are funded at the
closing date at a rate per annum ranging from 0.30% to 0.50% on the term loan
commitment amount determined based on the ratio of NetLogic’s total consolidated
debt to its consolidated EBITDA.
The
credit agreement includes: a maximum leverage ratio covenant requiring
that NetLogic maintain a ratio of total consolidated debt to its
consolidated EBITDA for the period of no more than 2.25:1 through March 31,
2010, 2:1 from April 1, 2010 until September 30, 2010 and 1.75:1 after September
30, 2010; a minimum fixed charge coverage covenant regarding the ratio of
NetLogic’s consolidated EBITDA less its capital expenditures to its consolidated
interest expense and other fixed charges for the period measured which is not to
be less than 1.25:1; and a minimum consolidated quick ratio
covenant regarding NetLogic’s consolidated cash and cash equivalents plus
accounts receivable to its consolidated current liabilities for the period
measured which cannot be less than 1:1, commencing with the quarter ending
December 31, 2009. Each of these financial covenants will be measured
quarterly. In addition, the credit agreement requires NetLogic and
its subsidiaries to maintain at all times at least $20 million of unencumbered
cash and cash equivalents. The credit agreement contains customary
operating covenants, including covenants restricting the ability of NetLogic and
its subsidiaries to incur indebtedness and liens; effect mergers,
consolidations and other fundamental changes to NetLogic; dispose of assets or
enter into sale-leaseback transactions; pay dividends or other restricted
payments; make loans, advances or other investments; and enter into transactions
with affiliates.
NetLogic
estimates that its fees and expenses in connection with the loan exclusive of
unused line and term loan commitment fees and interest are approximately $0.9
million.