Item 1.01 Entry into a Material Definitive Agreement
On October 2, 2009, Finisar Corporation, a Delaware corporation, and its
subsidiaries (collectively, "Finisar"), entered into a series of agreements with
Wells Fargo Foothill LLC, a subsidiary of Wells Fargo & Company, to establish a
new senior secured revolving credit facility (the "Credit Facility") to finance
working capital and to refinance existing indebtedness, including the repurchase
of a portion of the Company's outstanding convertible notes due October 2010.
The Credit Facility provides for a $70 million revolving line of credit and
includes a $10 million letter of credit sub-facility. Borrowings under the
Credit Facility will bear interest at rates based on the prime rate and LIBOR
plus variable margins, under which applicable interest rates currently range
from 5.75% to 6.25% per annum. Borrowings will be guaranteed by Finisar's U.S.
subsidiaries, and are secured by substantially all of the assets of Finisar and
its U.S. subsidiaries, including a pledge of the capital stock holdings of
Finisar in its subsidiaries. The maturity date of the Credit Facility is
scheduled to be October 2, 2013; however, if Finisar does not repay or refinance
its currently outstanding convertible subordinated notes on or prior to
August 12, 2010, the maturity date of the Credit Facility will be August 12,
2010.
The Company's ability to borrow under the Credit Facility is tied to the
value of its eligible accounts receivable and certain assets located in the
United States. The Credit Facility also contains both affirmative and negative
covenants, including covenants that limit or restrict Finisar's ability to,
among other things, incur indebtedness, grant liens, merge or consolidate,
dispose of assets, pay dividends or make distributions, change its fiscal year
or its method of accounting, make investments and enter into certain
transactions with affiliates, in each case subject to customary exceptions for a
credit facility of this size and type. The Credit Facility also contains
financial covenants that require Finisar to maintain a specified fixed charge
coverage ratio and a specified amount of excess liquidity.
The Company's obligations under the Credit Facility may be accelerated upon
the occurrence of an event of default under the Credit Facility documentation,
which includes customary events of default, including payment defaults, defaults
in the performance of affirmative and negative covenants, the inaccuracy of
representations or warranties, a cross-default related to material indebtedness,
bankruptcy and insolvency related defaults, defaults relating to such matters as
certain judgments in excess of $500,000, loss of perfected lien status and the
occurrence of a change of control.
The Credit Facility remains subject to various closing conditions for the
initial advance. These conditions are expected to be satisfied, and the initial
advance is expected to take place, by the end of October 2009. Once in place,
the Credit Facility will replace Finisar's existing $45 million credit facility
with another bank.
Prior to the closing of the transactions contemplated by the Credit Facility,
there were no material relationships between Finisar and Wells Fargo Foothill or
any related parties or affiliates of Wells Fargo & Company.
A copy of the press release announcing the Credit Facility is attached hereto
as Exhibit 99.1 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.
Reference is made to Item 1.01 of this report regarding the Credit Facility.
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