Harmonic Inc. (NASDAQ:HLIT) Files An 8-K Entry into a Material Definitive Agreement

On December 19, 2019, Harmonic Inc. (the “Company”) entered into a Credit Agreement (the “Credit Agreement”), by and among the Company and Harmonic International GmbH, as co-borrowers (together, the “Borrowers”), certain subsidiaries of the Company from time to time party thereto, as guarantors, and JPMorgan Chase Bank, N.A., as lender. The Credit Agreement provides for a secured revolving loan facility in an aggregate principal amount of up to $25 million, based on a borrowing base of eligible accounts receivable and inventory, with a maturity date of October 31, 2020. The Borrowers may use availability under the revolving loan facility for the issuance of letters of credit. The proceeds of the revolving loans may be used for general corporate purposes. As of December 19, 2019, there were no revolving loans outstanding under the revolving loan facility.

The revolving loans bear interest, at the Borrowers’ election, at a floating rate per annum equal to either (1) 1.25% plus the greater of (i) 1 month LIBOR on any day plus 2.50% and (ii) the prime rate as reported in the Wall Street Journal from time to time or (2) 2.25% plus LIBOR for an interest period of one, two or three months. Interest on the revolving loans is payable monthly in arrears, in the case of prime rate loans, and at the end of the applicable interest period, in the case of LIBOR loans. The Borrowers are also obligated to pay other customary closing fees, commitment fees and letter of credit fees for a credit facility of this size and type.

The Borrowers may borrow, repay and reborrow funds under the revolving loan facility until October 31, 2020, at which time the revolving loan facility will terminate, and all outstanding revolving loans, together with all accrued and unpaid interest, must be repaid.

The Borrowers’ obligations under the Credit Agreement are required to be guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the personal property of the Company and the Company’s subsidiary guarantors and certain assets of Harmonic International GmbH.

The Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Borrowers and their restricted subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the Credit Agreement. The Company is also required to maintain compliance with an adjusted quick ratio, a minimum EBITDA covenant (tested quarterly) and a minimum liquidity covenant, in each case, determined in accordance with the terms of the Credit Agreement.

The Credit Agreement also contains customary events of default that include, among other things, certain payment defaults, cross defaults to other indebtedness, inaccuracy of representations and warranties, covenant defaults, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults. If an event of default exists, the lender may require immediate payment of all obligations under the Credit Agreement and may exercise certain other rights and remedies provided for under the Credit Agreement, the other loan documents and applicable law. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Credit Agreement at a per annum rate equal to 2.00% above the applicable interest rate.

The foregoing description of the Credit Agreement is a summary and is qualified in its entirety by the terms and conditions of the Credit Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory.

(e) Compensatory.

2020 Executive and Key Contributor Incentive Plans

On December 19, 2019, the Compensation Committee (the “Compensation Committee”) of the board of directors (the “Board”) of the Company, following a review of the Company’s executive compensation program in conjunction with its outside compensation consultant, approved the adoption of the Harmonic (i) 2020 Corporate Executive and Key Contributor Incentive Plan (the “Corporate Plan”), (ii) 2020 Video Executive and Key Contributor Incentive Plan (the “Video Plan”) and (iii) 2020 Cable Access Executive and Key Contributor Incentive Plan (the “Cable Access Plan” and, together with the Corporate Plan and the Video Plan, the “Plans”).

The participants in the Plans include the following executive officers of the Company:

Each Plan is comprised of a non-GAAP gross profit target and spending targets for the first fiscal half-year of 2020 (the “H1 Targets”), and certain full-year 2020 strategic objectives (the “Strategic Objectives”). Payment of any bonus amounts based on performance against the H1 Targets will be made after the second fiscal quarter of 2020. Payment of any bonus amounts based on performance against the Strategic Objectives will be made following the end of fiscal year 2020.

With respect to the second half of fiscal 2020, the Compensation Committee will establish second-half 2020 non-GAAP gross profit and spending targets for each Plan, and any payouts for performance against such second-half targets will be made following the end of fiscal year 2020.

For all Plans, a minimum threshold must be exceeded before any bonus payments will be made with respect to any Plan component, and in the event any of the half-year target metrics or full-year Strategic Objectives are surpassed, a Plan participant may receive total bonus payments of up to a maximum of 200% of the portion of such participant’s half-year or full-year target bonus that is related to that metric, as applicable.

The current base salary and full-year target bonus of each executive officer is as follows:

* converted from Israeli Shekel

Participants in the Plans must remain employed through the date that any bonus amount is paid in order to qualify for the bonus payment. The Compensation Committee, in its sole discretion, retains the right to amend, supplement, supersede or cancel any Plan for any reason, and reserves the right to determine whether and when to pay out any bonus amounts, regardless of the achievement of the performance targets.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

HARMONIC INC Exhibit
EX-10.1 2 jpmcreditagreementfinal1.htm EXHIBIT 10.1 jpmcreditagreementfinal1 CREDIT AGREEMENT dated as of December 19,…
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About Harmonic Inc. (NASDAQ:HLIT)

Harmonic Inc. (Harmonic) designs, manufactures and sells video infrastructure products and system solutions. The Company has two segments: Video and Cable Edge. Harmonic provides technical support and professional services to its customers around the world. The Video segment sells video processing and production, and playout solutions and services to broadcast and media companies, streaming media companies, cable operators, and satellite and telecommunications (telco), and pay television (TV) service providers. Its Cable Edge business sells cable edge solutions and related services to cable operators. The Video segment offers software-based media processing platforms. The products in the video segment include video processing solutions, and video production platforms and playout solutions. The Cabled Edge segment offers products, including edge quadrature amplitude modulation (QAM) products, centralized converged cable access platform (CCAP) Solution and Distributed CCAP Solution.