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Credit Line And Notes
12 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Credit Line and Notes
CREDIT LINE AND NOTES
6.00% Convertible Senior Notes due 2020 ("6.00% Notes")
On February 12, 2015, we entered into a Purchase Agreement (the “Purchase Agreement”), with Jefferies LLC (the “Initial Purchaser”), pursuant to which we agreed to issue and sell to the Initial Purchaser up to $65.0 million in aggregate principal Convertible Senior Notes due 2020 (the “6.00% Notes”). On February 19, 2015, we closed the private placement of $65.0 million aggregate principal amount of the 6.00% Notes. The initial exchange price was $1.95 per share of common stock. The 6.00% Notes were sold at 100 percent of par, resulting in net proceeds of approximately $61.6 million, after deducting the Initial Purchaser’s discounts of $3.4 million. We also incurred offering expenses of $0.6 million. The net proceeds of this offering have been used for general corporate purposes, including working capital for, among other things, investing in development of new products and technologies.
The Purchase Agreement contained customary representations and warranties of the parties and indemnification and contribution provisions under which we, on the one hand, and the Initial Purchaser, on the other, agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).
The 6.00% Notes were governed by an Indenture, dated February 19, 2015 (the “Indenture”), entered into between us and U.S. Bank National Association, as trustee (the “Trustee”). The Indenture contained affirmative and negative covenants that, among other things, limited our ability to incur, assume or guarantee additional indebtedness; create liens; sell or otherwise dispose of substantially all of our assets; and enter into mergers and consolidations. The Indenture also contained customary events of default. Upon the occurrence of certain events of default, the Trustee or the holders of the 6.00% Notes could have declared all outstanding 6.00% Notes to be due and payable immediately.
On February 19, 2015, we also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Initial Purchaser to provide the holders of the 6.00% Notes with registration rights with respect to shares of common stock that have been issued upon conversion of the 6.00% Notes and are then outstanding, but only if Rule 144 under the Securities Act is unavailable to holders of the 6.00% Notes who are not affiliates of ours on and following the date that is six months after the original issuance date of the 6.00% Notes.
On February 19, 2015, we entered into a Consent and First Loan Modification Agreement (the “Amendment”) with Silicon Valley Bank (“SVB”). The Amendment modified the Loan and Security Agreement, dated as of March 28, 2014, by and among us, Oclaro Technology Limited and SVB to allow the cash payments provided for in the Indenture and the 6.00% Notes and include the 6.00% Notes as permitted indebtedness.
Prior to February 15, 2018, in the event that the last reported sale price of our common stock for 20 or more trading days (whether or not consecutive) in a period of 30 consecutive trading days ending within 5 trading days immediately prior to the date we would have received a notice of conversion had exceeded the conversion price in effect on each such trading day, we would have, in addition to delivering shares upon conversion by the holder of 6.00% Notes, together with cash in lieu of fractional shares, make an interest make-whole payment in cash equal to the sum of the remaining scheduled payments of interest on the 6.00% Notes to be converted through February 15, 2018.
Prior to February 15, 2018, we could not redeem the 6.00% Notes. On or after February 15, 2018, we could redeem for cash all of the 6.00% Notes if the last reported sale price per share of our common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within 5 trading days prior to the date on which we provide notice of redemption. The redemption price would equal (i) 100 percent of the principal amount of the Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date plus (iii) the sum of the present values of each of the remaining scheduled payments of interest that would have been made on the 6.00% Notes to be redeemed had such 6.00% Notes remained outstanding from the redemption date to the maturity date (excluding interest accrued to, but excluding, the redemption date that is otherwise paid pursuant to the immediately preceding clause (ii)). Once notified, the holders of the 6.00% Notes could elect to convert, at which point they would receive their shares of common stock based on the initial exchange rate plus up to an additional 11.2 million shares.
The 6.00% Notes were scheduled to mature on February 15, 2020 and bore interest at a fixed rate of 6.00 percent per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2015.
In August 2016, we entered into multiple privately negotiated agreements, pursuant to which all of our 6.00% Notes were canceled, and the Indenture was satisfied and discharged. In connection with these privately negotiated agreements, we issued a total of 34,659,972 shares of our common stock and made total cash payments of $4.7 million.
Pursuant to the terms of the Indenture governing the 6.00% Notes, we recorded an interest make-whole charge of $5.9 million in interest (income) expense, net, in the consolidated statement of operations for the year ended July 1, 2017, which was settled with a combination of common stock issuances and cash payments. We also recorded an induced conversion expense of $7.4 million, which we recorded in interest (income) expense, net, in the consolidated statement of operations for the year ended July 1, 2017.
During the year ended July 2, 2016, we recorded interest expense of $4.7 million, which included the amortization of the debt discount and the issuance costs related to these 6.00% Notes. During the year ended July 2, 2016, we made interest payments of $3.9 million related to the 6.00% Notes.
Silicon Valley Bank Credit Facility
On March 28, 2014, Oclaro, Inc. and its subsidiary, Oclaro Technology Limited (the “Borrower”), entered into a loan and security agreement (the “Loan Agreement”) with SVB pursuant to which SVB provided the Borrower with a three-year revolving credit facility of up to $40.0 million. Under the Loan Agreement, advances were available based on up to 80 percent of “eligible accounts” as defined in the Loan Agreement. The Loan Agreement had a $10.0 million sub-facility for letters of credit, foreign exchange contracts and cash management services. On September 17, 2015, we entered into an amendment to the Loan Agreement with SVB increasing from $5.0 million to $15.0 million the amount of equipment liens that may qualify as "Permitted Liens" thereunder.
The obligations of the Borrower under the Loan Agreement were guaranteed by us and certain subsidiaries of ours (collectively, the “Guarantors”) pursuant to an Unconditional Guaranty in favor of SVB (the “Guaranty”), and were secured by substantially all of the assets of the Borrower and the Guarantors, including a pledge of the capital stock holdings of the Borrower and the Guarantors in their direct subsidiaries.
Borrowings made under the Loan Agreement bore interest at a rate based on either the London Interbank Offered Rate plus 2.25 percent or The Wall Street Journal’s prime rate plus 1.00 percent. If the sum of (a) the Borrower’s unrestricted cash and cash equivalents that are subject to SVB’s liens less (b) the amount outstanding to SVB under the Loan Agreement (such sum being “Net Cash”) was less than $15.0 million, then the interest rates were increased by 0.75 percent until Net Cash exceeds $15.0 million for a calendar month. If interest paid under the Loan Agreement was less than $45,000 in any fiscal quarter, the Borrower was required to pay SVB an additional amount equal to the difference between $45,000 and the actual interest paid during such fiscal quarter. The minimum interest payment was in lieu of a stand-by charge.
The obligations of the Borrower under the Loan Agreement could have been accelerated, and the Guarantors could have become obligated under the Guaranty, upon the occurrence of an event of default under the Loan Agreement. The Loan Agreement includes customary events of default. Upon the occurrence and during the continuance of an event of default, obligations would have borne interest at a rate per annum which was 2 percentage points above the rate that was otherwise applicable thereto, unless SVB had elected otherwise, in its sole discretion.
The Loan Agreement contained covenants applicable to us, the Borrower and our subsidiaries, including a financial covenant that, on a consolidated basis, required us to maintain a minimum fixed charge coverage ratio of no less than 1.10 to 1.00, if the Borrower had not maintained Net Cash of at least $15.0 million, and other customary covenants. The Loan Agreement also contained restrictions on our ability to pay cash dividends on our common stock.
On March 28, 2017, the Loan Agreement expired, and was not renewed. There were no amounts outstanding under the Loan Agreement during fiscal year 2017 or at the time of the Loan Agreement expiration.