Harman Kardon 2011 Annual Report Download - page 84

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in the amount of $550 million (the “Aggregate Commitment”), of which up to $60 million will be available for
letters of credit. Subject to certain conditions set forth in the Credit Agreement, the Aggregate Commitment may
be increased up to a maximum aggregate amount of $700 million.
The Credit Agreement effectively replaced our previous revolving credit facility, the second amended and
restated multi-currency, multi-option credit agreement dated March 31, 2009, as amended (the “2009 Credit
Agreement”), which had a maximum borrowing capacity of $231.6 million (the “2009 Maximum Borrowing
Capacity”), including outstanding letters of credit. As a result of such replacement, we voluntarily terminated the
2009 Credit Agreement. There were no outstanding borrowings under the 2009 Credit Agreement as of
December 1, 2010, and we incurred no early termination penalties due to the termination of the 2009 Credit
Agreement.
Interest rates for borrowings under the Revolving Credit Facility range from 0.875 percent to 1.375 percent
above the applicable base rate for base rate loans and range from 1.875 percent to 2.375 percent above the
London Interbank Offered Rate (“LIBOR”) for Eurocurrency loans based on our Total Leverage Ratio (as
defined below). In addition, we are obligated to pay an annual facility fee on the Aggregate Commitment,
whether drawn or undrawn, ranging from 0.375 percent to 0.625 percent based on our Total Leverage Ratio. Any
proceeds from borrowings under the Revolving Credit Facility may be used for general corporate purposes.
Interest rates for borrowings under the 2009 Credit Agreement were 3.0 percent above the applicable base
rate for base rate loans and 4.0 percent above LIBOR for Eurocurrency loans. In addition, the annual facility fee
rate payable under the 2009 Credit Agreement was one percent based on the 2009 Maximum Borrowing
Capacity, whether drawn or undrawn.
The Credit Agreement contains financial condition covenants that require us to maintain the following
ratios, each calculated as of the end of the applicable fiscal quarter on a rolling four-quarter basis:
• The ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”)
less capital expenditures, to consolidated cash interest expense, must be more than 3.25 to 1.00 (the
“Interest Coverage Ratio”);
• The ratio of consolidated total debt to consolidated EBITDA must be less than 4.00 to 1.00 (the “Total
Leverage Ratio”); and
• The ratio of consolidated senior debt to consolidated EBITDA must be less than 3.00 to 1.00 (the
“Senior Leverage Ratio”).
The Credit Agreement also contains covenants that require us to maintain minimum levels of liquidity in
certain specified circumstances and imposes limitations on our ability to do the following: incur debt, place liens
on our assets, make fundamental changes, sell assets, make investments, undertake transactions with affiliates,
undertake sale and leaseback transactions, incur guarantee obligations, modify or prepay certain material debt
(including the Convertible Senior Notes), enter into hedging agreements, pay dividends, make capital
expenditures and acquire certain types of collateral.
The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including
failure to make timely payments, breaches of representations or covenants, or a change in control of our
Company, as defined in the Credit Agreement.
At June 30, 2011, we had no borrowings under the Credit Agreement and had outstanding letters of credit of
$7.3 million. Unused available credit under the Credit Agreement was $542.7 million at June 30, 2011. In
connection with the Credit Agreement, we incurred $7.0 million in fees and other expenses which have been
capitalized within Other assets in our Consolidated Balance Sheet. These costs will be amortized over the term of
the Credit Agreement on a straight-line basis. In addition, we wrote off $0.7 million of debt issuance costs
associated with the 2009 Credit Agreement, which represented the portion of these costs that were attributed to
the 2009 Credit Agreement.
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