Exhibit 10.48

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”) dated as of August 26, 2011 (the
“Effective Date”) between SILICON VALLEY BANK, a California corporation
(“Bank”), and HARMONIC, INC., a Delaware corporation (“Borrower”), provides the
terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The
parties agree as follows:

 

1. ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

 

2. LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

2.1.1 Revolving Advances.

(a) Availability. Subject to the terms and conditions of this Agreement, Bank
shall make Advances not exceeding the Availability Amount. Amounts borrowed
hereunder may be repaid and, prior to the Revolving Line Maturity Date,
reborrowed, subject to the applicable terms and conditions precedent herein.

(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest
thereon, and all other Obligations relating to the Revolving Line shall be
immediately due and payable.

2.1.2 Letters of Credit Sublimit.

(a) As part of the Revolving Line, Bank shall issue or have issued Letters of
Credit denominated in United States Dollars and other currencies for Borrower’s
account. The aggregate Dollar Equivalent amount utilized for the issuance of
Letters of Credit shall at all times reduce the amount otherwise available for
Advances under the Revolving Line. The Dollar Equivalent of the face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed Ten Million Dollars
($10,000,000.00) minus (B) the sum of (i) all outstanding principal amounts of
any Advances (including any amounts used for Cash Management Services), (ii) the
Dollar Equivalent of the face amount of any outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve) and (iii) the FX Reserve.

(b) If, on the Revolving Line Maturity Date (or the effective date of any
termination of this Agreement), there are any outstanding Letters of Credit,
then on such date Borrower shall provide to Bank cash collateral in an amount
equal to (i) 105% for Letters of Credit denominated in U.S. Dollars, and
(ii) 110% of the Dollar Equivalent for Letters of Credit denominated in currency
other than U.S. Dollars, of the face amount of all such Letters of Credit, plus
all interest, fees, and costs due or to become due in connection therewith (as
estimated by Bank in its good faith business judgment), to secure all of the
Obligations relating to such Letters of Credit. All Letters of Credit shall be
in form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank’s standard Application and Letter of
Credit Agreement (the “Letter of Credit Application”). Borrower agrees to
execute any further documentation in connection with the Letters of Credit as
Bank may reasonably request. Borrower further agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by Bank and opened for Borrower’s account or by Bank’s
interpretations of any Letter of Credit issued by Bank for Borrower’s account,
and Borrower understands and agrees that Bank shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrower’s instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto.

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(c) The obligation of Borrower to immediately reimburse Bank for drawings made
under Letters of Credit shall be absolute, unconditional, and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.

(d) Borrower may request that Bank issue a Letter of Credit payable in a Foreign
Currency. If a demand for payment is made under any such Letter of Credit, Bank
shall treat such demand as an Advance to Borrower of the Dollar Equivalent of
the amount thereof (plus fees and charges in connection therewith such as wire,
cable, SWIFT or similar charges).

(e) To guard against fluctuations in currency exchange rates, upon the issuance
of any Letter of Credit payable in a Foreign Currency, Bank shall create a
reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount
equal to ten percent (10%) of the face amount of such Letter of Credit. The
amount of the Letter of Credit Reserve may be adjusted by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.

2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may
enter into foreign exchange contracts with Bank under which Borrower commits to
purchase from or sell to Bank a specific amount of Foreign Currency (each, a “FX
Forward Contract”) on a specified date (the “Settlement Date”). FX Forward
Contracts shall have a Settlement Date of at least one (1) FX Business Day after
the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract (the “FX Reserve”). The aggregate amount of FX
Forward Contracts at any one time may not exceed ten (10) times Ten Million
Dollars ($10,000,000.00), minus the sum of (i) all outstanding principal amounts
of any Advances (including any amounts used for Cash Management Services) and
(ii) the Dollar Equivalent of the face amount of any outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve). The amount otherwise available for Credit Extensions under the
Revolving Line shall be reduced by the FX Reserve. Any amounts needed to fully
reimburse Bank for any amounts not paid by Borrower in connection with FX
Forward Contracts will be treated as Advances under the Revolving Line and will
accrue interest at the interest rate applicable to Advances.

2.1.4 Cash Management Services Sublimit. Borrower may use the Revolving Line for
Bank’s cash management services, which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services identified
in Bank’s various cash management services agreements (collectively, the “Cash
Management Services”), in an aggregate amount not to exceed Ten Million Dollars
($10,000,000.00), minus the sum of (i) all outstanding principal amounts of any
Advances, (ii) the Dollar Equivalent of the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) and (iii) the FX Reserve. Any amounts Bank pays on
behalf of Borrower for any Cash Management Services will be treated as Advances
under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.

2.1.5 General Provisions Relating to the Advances. Each Advance in Dollars
shall, at Borrower’s option in accordance with the terms of this Agreement, be
either in the form of a Prime Rate Advance or a LIBOR Advance; provided, that in
no event shall Borrower maintain at any time LIBOR Advances having more than
five (5) different Interest Periods. Borrower shall pay interest accrued on the
Advances at the rates and in the manner set forth in Section 2.3(b).

2.2 Overadvances. If, at any time, the sum of (i) the outstanding principal
amount of any Advances (including any amounts used for Cash Management
Services), (ii) the face amount of any outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), and
(iii) the FX Reserve exceeds the Revolving Line, Borrower shall immediately pay
to Bank in cash such excess.

2.3 Payment of Interest on the Credit Extensions.

(a) Computation of Interest. Interest on the Credit Extensions and all fees
payable hereunder shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the period during which such interest accrues.
In computing interest on any Credit Extension, the date of the making of such
Credit Extension shall be included and the date of payment shall be excluded;
provided, however, that if any Credit Extension is repaid on the same day on
which it is made, such day shall be included in computing interest on such
Credit Extension.

 

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(b) Interest; Payment. Each Advance shall bear interest on the outstanding
principal amount thereof from the date when made, continued or converted until
paid in full at a rate per annum equal to (i) for Prime Rate Advances, the Prime
Rate plus the applicable Prime Rate Margin and (ii) for LIBOR Advances, the
LIBOR Rate plus the applicable LIBOR Rate Margin. On and after the expiration of
any Interest Period applicable to any LIBOR Advance outstanding on the date of
occurrence of an Event of Default or acceleration of the Obligations, the
Effective Amount of such LIBOR Advance shall, during the continuance of such
Event of Default or after acceleration, bear interest at a rate per annum equal
to the Prime Rate plus two percent (2.00%). Pursuant to the terms hereof,
interest on each Advance shall be paid in arrears on each Interest Payment Date.
Interest shall also be paid on the date of any prepayment of any Advance
pursuant to this Agreement for the portion of any Advance so prepaid and upon
payment (including prepayment) in full thereof. All accrued but unpaid interest
on the Advances shall be due and payable on the Revolving Line Maturity Date.

(c) Default Rate. Except as otherwise provided in Section 2.3(b), upon the
occurrence and during the continuance of an Event of Default, Obligations shall
bear interest at a rate two percent (2.00%) above the rate that would otherwise
be applicable thereto (the “Default Rate”) unless Bank otherwise elects from
time to time in its sole discretion to impose a smaller increase. Payment or
acceptance of the increased interest provided in this Section 2.3(c) is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

(d) Prime Rate Advances. Each change in the interest rate of the Prime Rate
Advances based on changes in the Prime Rate shall be effective on the effective
date of such change and to the extent of such change.

(e) LIBOR Advances. The interest rate applicable to each LIBOR Advance shall be
determined in accordance with Section 3.6(a). Subject to Sections 3.6 and 3.7,
such rate shall apply during the entire Interest Period applicable to such LIBOR
Advance, and interest calculated thereon shall be payable on the Interest
Payment Date applicable to such LIBOR Advance. Debit of Accounts. Bank may debit
any of Borrower’s deposit accounts, including the Designated Deposit Account,
for principal and interest payments or any other amounts Borrower owes Bank when
due. These debits shall not constitute a set-off.

(f) Interest Payment Date. Unless otherwise provided, interest is payable
monthly on the first calendar day of each month.

2.4 Fees. Borrower shall pay to Bank:

(a) Revolving Line Fee. If, at any time, Borrower fails to maintain a minimum
aggregate amount of Thirty Million Dollars ($30,000,000.00) of unrestricted
funds on deposit with Bank, SVB Asset Management and/or SVB Securities and such
failure continues for a period of ten (10) consecutive Business Days, Borrower
shall pay to Bank a one-time fee of Ten Thousand Dollars ($10,000.00);

(b) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, including, without limitation, a letter of credit
fee of three-quarters of one percent (0.75%) per annum of the Dollar Equivalent
of the face amount of each Letter of Credit issued, upon the issuance of such
Letter of Credit, each anniversary of the issuance during the term of such
Letter of Credit, and upon the renewal of such Letter of Credit by Bank; and

(c) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses for documentation and negotiation of this Agreement) incurred through
and after the Effective Date, within ten (10) Business Days after delivery of
invoice to Borrower.

2.5 Payments; Application of Payments. All payments (including prepayments) to
be made by Borrower under any Loan Document shall be made in immediately
available funds in U.S. Dollars, without setoff or counterclaim, before
12:00 p.m. Pacific time on the date when due. Payments of principal and/or
interest received after 12:00 p.m. Pacific time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment shall be due the next Business Day, and
additional fees or interest, as applicable, shall continue to accrue until paid.

 

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3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make
the initial Credit Extension is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, such documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation:

(a) duly executed original signatures to the Loan Documents;

(b) duly executed original signatures to the completed Borrowing Resolutions for
Borrower; and

(c) payment of the fees and Bank Expenses then due as specified in Section 2.4
hereof.

3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following conditions precedent:

(a) except as otherwise provided in Section 3.5(a), timely receipt of an
executed Notice of Borrowing;

(b) the representations and warranties in this Agreement shall be true,
accurate, and complete in all material respects on the date of the Notice of
Borrowing and on the Funding Date of each Credit Extension; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, and no Event of Default shall have
occurred and be continuing or result from the Credit Extension; and

(c) there has not been, in Bank’s good faith business judgment, a material
adverse change in the general affairs, management, results of operation,
condition (financial or otherwise) or the prospect of repayment of the
Obligations (a “Material Adverse Change”).

3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required
to be delivered to Bank under this Agreement as a condition precedent to any
Credit Extension. Borrower expressly agrees that a Credit Extension made prior
to the receipt by Bank of any such item shall not constitute a waiver by Bank of
Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole discretion.

3.4 Procedures for Borrowing.

(a) Subject to the prior satisfaction of all other applicable conditions to the
making of an Advance set forth in this Agreement, each Advance shall be made
upon Borrower’s irrevocable written notice delivered to Bank in the form of a
Notice of Borrowing, each executed by a Responsible Officer of Borrower or his
or her designee or without instructions if the Advances are necessary to meet
Obligations which have become due. Bank may rely on any telephone notice given
by a person whom Bank believes is a Responsible Officer or designee. Borrower
will indemnify Bank for any loss Bank suffers due to such reliance. Such Notice
of Borrowing must be received by Bank prior to 12:00 p.m. Pacific time, (i) at
least three (3) Business Days prior to the requested Funding Date, in the case
of LIBOR Advances, and (ii) on the requested Funding Date, in the case of Prime
Rate Advances, specifying: (1) the amount of the Advance; (2) the requested
Funding Date; (3) whether the Advance is to be comprised of LIBOR Advances or
Prime Rate Advances; and (4) the duration of the Interest Period applicable to
any such LIBOR Advances included in such notice; provided that if the Notice of
Borrowing shall fail to specify the duration of the Interest Period for any
Advance comprised of LIBOR Advances, such Interest Period shall be one
(1) month.

(b) The proceeds of all such Advances will then be made available to Borrower on
the Funding Date by Bank by transfer to the Designated Deposit Account and,
subsequently, by wire transfer to such other account as Borrower may instruct in
the Notice of Borrowing. No Advances shall be deemed made to Borrower, and no
interest shall accrue on any such Advance, until the related funds have been
deposited in the Designated Deposit Account.

 

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3.5 Conversion and Continuation Elections.

(a) So long as (i) no Event of Default exists; (ii) Borrower shall not have sent
any notice of termination of this Agreement; and (iii) Borrower shall have
complied with such customary procedures as Bank has established from time to
time for Borrower’s requests for LIBOR Advances, Borrower may, upon irrevocable
written notice to Bank:

(i) elect to convert on any Business Day, Prime Rate Advances into LIBOR
Advances;

(ii) elect to continue on any Interest Payment Date any LIBOR Advances maturing
on such Interest Payment Date; or

(iii) elect to convert on any Interest Payment Date any LIBOR Advances maturing
on such Interest Payment Date into Prime Rate Advances.

(b) Borrower shall deliver a Notice of Conversion/Continuation in accordance
with Section 10 to be received by Bank prior to 12:00 p.m. Pacific time (i) at
least three (3) Business Days in advance of the Conversion Date or Continuation
Date, if any Advances are to be converted into or continued as LIBOR Advances;
and (ii) on the Conversion Date, if any Advances are to be converted into Prime
Rate Advances, in each case specifying the:

(i) proposed Conversion Date or Continuation Date;

(ii) aggregate amount of the Advances to be converted or continued;

(iii) nature of the proposed conversion or continuation; and

(iv) duration of the requested Interest Period.

(c) If upon the expiration of any Interest Period applicable to any LIBOR
Advances, Borrower shall have timely failed to select a new Interest Period to
be applicable to such LIBOR Advances, Borrower shall be deemed to have elected
to convert such LIBOR Advances into Prime Rate Advances.

(d) Any LIBOR Advances shall, at Bank’s option, convert into Prime Rate Advances
in the event that (i) an Event of Default shall exist, or (ii) the aggregate
principal amount of the Prime Rate Advances which have been previously converted
to LIBOR Advances, or the aggregate principal amount of existing LIBOR Advances
continued, as the case may be, at the beginning of an Interest Period shall at
any time during such Interest Period exceed the Revolving Line. Borrower agrees
to pay Bank, upon demand by Bank (or Bank may, at its option, charge the
Designated Deposit Account or any other account Borrower maintains with Bank)
any amounts required to compensate Bank for any loss (including loss of
anticipated profits), cost, or expense incurred by Bank as a result of the
conversion of LIBOR Advances to Prime Rate Advances pursuant to this
Section 3.6(d).

(e) Notwithstanding anything to the contrary contained herein, Bank shall not be
required to purchase United States Dollar deposits in the London interbank
market or other applicable LIBOR market to fund any LIBOR Advances, but the
provisions hereof shall be deemed to apply as if Bank had purchased such
deposits to fund the LIBOR Advances.

3.6 Special Provisions Governing LIBOR Advances. Notwithstanding any other
provision of this Agreement to the contrary, the following provisions shall
govern with respect to LIBOR Advances as to the matters covered:

(a) Determination of Applicable Interest Rate. As soon as practicable on each
Interest Rate Determination Date, Bank shall determine (which determination
shall, absent manifest error in calculation, be final,

 

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conclusive and binding upon all parties) the interest rate that shall apply to
the LIBOR Advances for which an interest rate is then being determined for the
applicable Interest Period and shall promptly give notice thereof (in writing or
by telephone confirmed in writing) to Borrower.

(b) Inability to Determine Applicable Interest Rate. In the event that Bank
shall have determined (which determination shall be final and conclusive and
binding upon all parties hereto), on any Interest Rate Determination Date with
respect to any LIBOR Advance, that by reason of circumstances affecting the
London interbank market adequate and fair means do not exist for ascertaining
the interest rate applicable to such Advance on the basis provided for in the
definition of LIBOR, Bank shall on such date give notice (by facsimile or by
telephone confirmed in writing) to Borrower of such determination, whereupon
(i) no Advances may be made as, or converted to, LIBOR Advances until such time
as Bank notifies Borrower that the circumstances giving rise to such notice no
longer exist, and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to Advances in respect of
which such determination was made shall be deemed to be rescinded by Borrower.

(c) Compensation for Breakage or Non-Commencement of Interest Periods. Borrower
shall compensate Bank, upon written request by Bank (which request shall set
forth the manner and method of computing such compensation), for all losses,
expenses, unrealized gains and liabilities (including any interest paid by Bank
to lenders of funds borrowed by it to make or carry its LIBOR Advances, any
loss, expense or liability incurred by Bank in connection with the liquidation
or re-employment of such funds, and, in the case of complete or partial
principal payments or conversions of LIBOR Advances prior to the last day of the
applicable Interest Period, any amount by which (A) the additional interest
which would have been payable on the amount so prepaid or converted had it not
been paid or converted until the last day of the applicable Interest Period
exceeds (B) the interest which would have been recoverable by Bank by placing
the amount so received on deposit in the certificate of deposit markets, the
offshore currency markets, or United States Treasury investment products, as the
case may be, for a period starting on the date on which it was so paid or
converted and ending on the last day of such Interest Period at the interest
rate determined by Bank in its reasonable discretion), if any, that Bank may
incur: (i) if for any reason (other than a default by Bank or due to any failure
of Bank to fund LIBOR Advances due to impracticability or illegality under
Sections 3.7(d) and 3.7(e)) a borrowing or a conversion to or continuation of
any LIBOR Advance does not occur on a date specified in a Notice of Borrowing or
a Notice of Conversion/Continuation, as the case may be, or (ii) if for any
reason (including voluntary or mandatory prepayment or acceleration) any
complete or partial principal payment or any conversion of any of Borrower’s
LIBOR Advances occurs on a date prior to the last day of an Interest Period
applicable to that Advance. Bank’s determination as to such amount shall be
conclusive absent manifest error. Borrower shall immediately notify Borrower’s
account officer at Bank if any of the situations described in (ii) above occur.

(d) Assumptions Concerning Funding of LIBOR Advances. Calculation of all amounts
payable to Bank under this Section 3.6 and under Section 3.7 shall be made as
though Bank had actually funded each of its relevant LIBOR Advances through the
purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant
to the definition of LIBOR Rate in an amount equal to the amount of such LIBOR
Advance and having a maturity comparable to the relevant Interest Period;
provided, however, that Bank may fund each of its LIBOR Advances in any manner
it sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this Section 3.6 and under
Section 3.7.

(e) LIBOR Advances After Default. After the occurrence and during the
continuance of an Event of Default, (i) Borrower may not elect to have an
Advance be made or continued as, or converted to, a LIBOR Advance after the
expiration of any Interest Period then in effect for such Advance and
(ii) subject to the provisions of Section 3.6(c), any Notice of
Conversion/Continuation given by Borrower with respect to a requested
conversion/continuation that has not yet occurred shall, at Bank’s option, be
deemed to be rescinded by Borrower and be deemed a request to convert or
continue Advances referred to therein as Prime Rate Advances.

 

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3.7 Additional Requirements/Provisions Regarding LIBOR Advances.

(a) Borrower shall pay Bank, upon demand by Bank, from time to time such amounts
as Bank may determine to be necessary to compensate it for any costs incurred by
Bank that Bank determines are attributable to its making or maintaining of any
amount receivable by Bank hereunder in respect of any LIBOR Advances relating
thereto (such increases in costs and reductions in amounts receivable being
herein called “Additional Costs”), in each case resulting from any Regulatory
Change which:

(i) changes the basis of taxation of any amounts payable to Bank under this
Agreement in respect of any LIBOR Advances (other than changes which affect
taxes measured by or imposed on the overall net income of Bank by the
jurisdiction in which Bank has its principal office);

(ii) imposes or modifies any reserve, special deposit or similar requirements
relating to any extensions of credit or other assets of, or any deposits with,
or other liabilities of Bank (including any LIBOR Advances or any deposits
referred to in the definition of LIBOR); or

(iii) imposes any other condition affecting this Agreement (or any of such
extensions of credit or liabilities).

Bank will notify Borrower of any event occurring after the Effective Date which
will entitle Bank to compensation pursuant to this Section 3.7(a) as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. Bank will furnish Borrower with a statement setting forth the
basis and amount of each request by Bank for compensation under this
Section 3.7(a). Determinations and allocations by Bank for purposes of this
Section 3.7(a) of the effect of any Regulatory Change on its costs of
maintaining its obligations to make LIBOR Advances, of making or maintaining
LIBOR Advances, or on amounts receivable by it in respect of LIBOR Advances, and
of the additional amounts required to compensate Bank in respect of any
Additional Costs, shall be conclusive absent manifest error.

(b) If Bank shall determine that the adoption or implementation of any
applicable law, rule, regulation, or treaty regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank, or comparable agency, has or would have the effect of reducing the rate of
return on capital of Bank or any person or entity controlling Bank (a “Parent”)
as a consequence of its obligations hereunder to a level below that which Bank
(or its Parent) could have achieved but for such adoption, change, or compliance
(taking into consideration policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time, within five
(5) days after demand by Bank, Borrower shall pay to Bank such additional amount
or amounts as will compensate Bank for such reduction. A statement of Bank
claiming compensation under this Section 3.7(b) and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive absent manifest
error.

(c) If, at any time, Bank, in its sole and absolute discretion, determines that
(i) the amount of LIBOR Advances for periods equal to the corresponding Interest
Periods are not available to Bank in the offshore currency interbank markets, or
(ii) LIBOR does not accurately reflect the cost to Bank of lending the LIBOR
Advances, then Bank shall promptly give notice thereof to Borrower. Upon the
giving of such notice, Bank’s obligation to make the LIBOR Advances shall
terminate; provided, however, LIBOR Advances shall not terminate if Bank and
Borrower agree in writing to a different interest rate applicable to LIBOR
Advances.

(d) If it shall become unlawful for Bank to continue to fund or maintain any
LIBOR Advances, or to perform its obligations hereunder, upon demand by Bank,
Borrower shall prepay the LIBOR Advances in full with accrued interest thereon
and all other amounts payable by Borrower hereunder (including, without
limitation, any amount payable in connection with such prepayment pursuant to
Section 3.6(c)(ii)). Notwithstanding the foregoing, to the extent a
determination by Bank as described above relates to a LIBOR Advance then being
requested by Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Borrower shall have the option, subject to the
provisions of Section 3.6(c)(ii), to (i) rescind such Notice of Borrowing or
Notice of Conversion/Continuation by giving notice (by facsimile or by telephone
confirmed in writing) to Bank of such rescission on the date on which Bank gives
notice of its determination as described above, or (ii) modify such Notice of
Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Advance or
to have outstanding Advances converted into or continued as Prime Rate Advances
by giving notice (by facsimile or by telephone confirmed in writing) to Bank of
such modification on the date on which Bank gives notice of its determination as
described above.

 

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4. RESERVED

 

5. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization, Authorization; Power and Authority. Borrower is duly
existing and in good standing as a Registered Organization in its jurisdiction
of formation and is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its business or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Change on
Borrower’s business.

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any of its Subsidiaries or any of their property or assets may
be bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or (v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to have a Material Adverse Change on Borrower’s
business.

5.2 Intellectual Property. Borrower is the sole owner of the Intellectual
Property which it owns or purports to own except for (a) non-exclusive licenses
granted to its customers in the ordinary course of business,
(b) over-the-counter software that is commercially available to the public, and
(c) material Intellectual Property licensed to Borrower. Each Patent which it
owns or purports to own and which is material to Borrower’s business is valid
and enforceable, and no part of the Intellectual Property which Borrower owns or
purports to own and which is material to Borrower’s business has been judged
invalid or unenforceable, in whole or in part. To the best of Borrower’s
knowledge, no claim has been made that any part of the Intellectual Property
violates the rights of any third party except to the extent such claim would not
reasonably be expected to have a Material Adverse Change on Borrower’s business.

5.3 Reserved.

5.4 Litigation. Except as shown on Schedule 5.4, there are no actions or
proceedings pending or, to the knowledge of the Responsible Officers, threatened
in writing by or against Borrower or any of its Subsidiaries in which a likely
adverse decision could reasonably be expected to cause a Material Adverse
Change.

5.5 Financial Statements; Financial Condition. All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations. There has not been a Material
Adverse Change in Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to Bank.

5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.7 Regulatory Compliance. Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act of
1940, as amended. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations X, T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with
the Federal Fair Labor Standards Act. Neither Borrower nor any of its
Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or
a “subsidiary company” of a “holding company” as each term is defined and used
in the Public Utility Holding Company Act of 2005. Borrower has not violated any
laws, ordinances or rules, the violation of which could reasonably be expected
to have a Material Adverse Change on its business. None of Borrower’s or any of
its Subsidiaries’ properties or assets has been used by Borrower or any
Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each of its Subsidiaries have obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all Government Authorities that are necessary to
continue their respective businesses as currently conducted.

 

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5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

5.9 Tax Returns and Payments; Pension Contributions. Except as specified in
Schedule 5.9, or to the extent liability in excess of $5,000,000 in the
aggregate is not reasonably likely to result, Borrower has timely filed all
required tax returns and reports, and Borrower has timely paid all federal,
state, material local, and material foreign taxes, assessments, deposits and
contributions owed by Borrower. Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps
required to prevent the governmental authority levying such contested taxes from
obtaining a Lien other than a “Permitted Lien.” Borrower is unaware of any
claims or adjustments proposed for any of Borrower’s prior tax years which could
result in additional taxes becoming due and payable by Borrower. Borrower has
paid all amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely to fund its general business requirements and not for personal, family,
household or agricultural purposes.

5.11 Full Disclosure. No written representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank, as of the date
such representation, warranty, or other statement was made, taken together with
all such written certificates and written statements given to Bank, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are not
viewed as facts and that actual results during the period or periods covered by
such projections and forecasts may differ from the projected or forecasted
results).

5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, to the
“best of” Borrower’s knowledge, or with a similar qualification, knowledge or
awareness means the actual knowledge, after reasonable investigation, of the
Responsible Officers.

 

6. AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to have a Material Adverse Change on Borrower’s
business or operations. Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, noncompliance
with which could have a Material Adverse Change on Borrower’s business.

6.2 Financial Statements, Reports, Certificates. Deliver to Bank:

(a) Quarterly Financial Statements. As soon as available, but no later than
forty-five (45) days after the last day of each of the Borrower’s 1st, 2nd, and
3rd fiscal quarters, a company prepared consolidated balance sheet and income
statement covering Borrower’s consolidated operations for such quarter certified
by a Responsible Officer and in a form acceptable to Bank (the “Quarterly
Financial Statements”). The financial statements in Borrower’s Form 10-Q for
each such quarter shall be deemed to constitute Quarterly Financial Statements;

 

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(b) Quarterly Compliance Certificate. Within forty-five (45) days after the last
day of each of Borrower’s 1st, 2nd, and 3rd fiscal quarters, except for the
fourth quarter within one-hundred and twenty (120) days, and together with the
Quarterly Financial Statements, a duly completed Compliance Certificate signed
by a Responsible Officer, certifying that as of the end of such period, Borrower
was in full compliance with all of the terms and conditions of this Agreement,
and setting forth calculations showing compliance with the financial covenants
set forth in this Agreement and such other information as Bank shall reasonably
request;

(c) Annual Audited Financial Statements. As soon as available, but no later than
one hundred and twenty (120) days after the last day of Borrower’s fiscal year,
audited consolidated financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion on the financial statements from
one of the so-called “Big Four” national accounting firms or an independent
certified public accounting firm acceptable to Bank in its reasonable
discretion. Such audited consolidated financial statements and unqualified
opinion in Borrower’s Form 10-K for each of its fiscal years shall be deemed to
meet the requirements for annual audited financial statements;

(d) SEC Filings. Within five (5) days of filing, copies of all periodic and
other reports, proxy statements and other materials filed by Borrower with the
SEC, any Governmental Authority succeeding to any or all of the functions of the
SEC or any national securities exchange, or distributed to its shareholders, as
the case may be. Documents required to be delivered pursuant to the terms hereof
(to the extent any such documents are included in materials otherwise filed with
the SEC) may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the date on which Borrower posts such documents, or
provides a link thereto, on Borrower’s website on the Internet at Borrower’s
website address;

(e) Legal Action Notice. A prompt report of any legal actions pending or
threatened in writing against Borrower or any of its Subsidiaries that could
reasonably be expected to result in damages or costs to Borrower or any of its
Subsidiaries of, individually or in the aggregate, Ten Million Dollars
($10,000,000.00) or more; and

(f) Other Financial Information. Budgets, sales projections, operating plans and
other financial information once per year, as reasonably requested by Bank;
provided that if an Event of Default has occurred, there shall be no limitation
on the number of requests by Bank.

6.3 Reserved.

6.4 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely
file, all required tax returns and reports and timely pay, and require each of
its Subsidiaries to timely pay, all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower and each of its
Subsidiaries, except for deferred payment of any taxes contested pursuant to the
terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.

In the event any payments are received by Bank from Borrower pursuant to this
Agreement, such payments will be made subject to applicable withholding for any
taxes, levies, fees, deductions, withholding, restrictions or conditions of any
nature whatsoever. Notwithstanding the foregoing, if at any time any
Governmental Authority, applicable law, regulation or international agreement
requires Borrower to make any such deduction or withholding from any such
payment or other sum payment hereunder to Bank, the amount due from Borrower
with respect to such payment or other sum payable hereunder will be increased to
the extent necessary to ensure that, after the making of such required deduction
or withholding, Bank receives a net sum equal to the sum which it would have
received had no deductions or withholding been required, and Borrower shall pay
the full amount deducted or withheld to the relevant Governmental Authority.
Borrower will, upon request, furnish Bank with proof satisfactory to Bank
indicating that Borrower has made such withholding payment; provided, however,
that Borrower need not make any withholding payment if the amount or validity of
such withholding payment is contested in good faith by appropriate proceedings
and as to which payment in full is bonded or reserved against by Borrower. The
agreements and obligations of Borrower contained in this provision shall survive
the termination of this Agreement.

6.5 Insurance. Keep its business insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Bank may reasonably
request. Insurance policies shall be in a form, with companies, and in amounts
that are satisfactory to Bank. At Bank’s request, Borrower shall deliver
certified copies

 

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of policies and evidence of all premium payments. All policies (or their
respective endorsements) shall provide that the insurer shall give Bank at least
twenty (20) days notice before canceling, amending, or declining to renew its
policy. If Borrower fails to obtain insurance as required under this Section 6.5
or to pay any amount or furnish any required proof of payment to third persons
and Bank, Bank may make all or part of such payment or obtain such insurance
policies required in this Section 6.5, and take any action under the policies
Bank deems prudent. Upon the occurrence and continuance of an Event of Default,
proceeds payable under any policy shall, at Bank’s option, be payable to Bank on
account of the Obligations, and not later than ten (10) Business Days following
notice from Bank as to such Event of Default, (i) all property policies shall
have a lender’s loss payable endorsement showing Bank as a lender loss payee and
waive subrogation against Bank, and (ii) all liability policies shall show, or
have endorsements showing, Bank as an additional insured.

6.6 Reserved.

6.7 Financial Covenants. Maintain at all times, to be tested as of the last day
of each fiscal quarter of Borrower, on a consolidated basis with respect to
Borrower and its Subsidiaries:

(a) Quick Ratio. A ratio of Quick Assets to Current Liabilities of at least 1.75
to 1.0.

6.8 Protection of Intellectual Property Rights. (i) Protect, defend and maintain
the validity and enforceability of its material Intellectual Property;
(ii) promptly advise Bank in writing of material infringements of its
Intellectual Property; and (iii) not allow any Intellectual Property material to
Borrower’s business to be abandoned, forfeited or dedicated to the public
without Bank’s written consent.

6.9 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank
relating to Borrower.

6.10 Reserved.

6.11 Reserved.

6.12 Access Books and Records. Allow Bank, or its agents, at reasonable times,
on three (3) Business Day’s notice (provided no notice is required if an Event
of Default has occurred and is continuing), to inspect and audit and copy
Borrower’s Books. The foregoing inspections and audits shall be at Borrower’s
expense.

6.13 Reserved.

6.14 Further Assurances. Execute any further instruments and take further action
as Bank reasonably requests or to effect the purposes of this Agreement.

 

7. NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent:

7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (a) at fair market
value upon commercially reasonably terms; (b) of Inventory in the ordinary
course of business; (c) of worn out, surplus or obsolete equipment; (d) in
connection with Permitted Liens and Permitted Investments; (e) of non-exclusive
licenses for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business.

7.2 Changes in Business, Control. (a) Engage in or permit any of its
Subsidiaries to engage in any business other than the businesses currently
engaged in by Borrower and such Subsidiary, as applicable, or reasonably related
thereto; (b) liquidate or dissolve; or (c) permit or suffer any Change in
Control.

 

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7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person except where (a) no Event of Default
has occurred and is continuing or would exist after giving effect to the
transactions, and (b) Borrower, or in the case of a transaction not including
Borrower, such Subsidiary, is the surviving legal entity. A Subsidiary may merge
or consolidate into another Subsidiary or into Borrower.

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, except as is otherwise permitted in Section 7.1 hereof and the definition
of “Permitted Liens” herein.

7.6 Reserved.

7.7 Distributions; Investments. (a) Pay any dividends or make any distribution
or payment or redeem, retire or purchase any capital stock; provided that
Borrower may repurchase its capital stock so long as an Event of Default does
not exist at the time of such repurchase and would not exist after giving effect
to such repurchase; or (b) directly or indirectly make any Investment other than
Permitted Investments, or permit any of its Subsidiaries to do so.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for
transactions that are fair and reasonable or in the ordinary course of
Borrower’s business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a
non-affiliated Person.

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or adversely affect the subordination thereof to Obligations owed
to Bank.

7.10 Compliance. Become an “investment company” or a company controlled by an
“investment company,” under the Investment Company Act of 1940, as amended, or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a Material
Adverse Change on Borrower’s business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.

 

8. EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day cure period shall not apply to payments
due on the Revolving Line Maturity Date). During the cure period, the failure to
make or pay any payment specified under clause (a) or (b) hereunder is not an
Event of Default (but no Credit Extension will be made during the cure period);

 

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8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4,
6.5, 6.7, 6.8, or violates any covenant in Section 7; or

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8(a)) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default (but no Credit Extensions shall be made
during such cure period). Cure periods provided under this Section 8.2(b) shall
not apply, among other things, to financial covenants or any other covenants set
forth in Section 8.2(a);

8.3 Reserved.

8.4 Attachment; Levy; Restraint on Business.

(a)(i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or of any entity under the control of Borrower (including
a Subsidiary) on deposit or otherwise maintained with Bank or any Bank
Affiliate, or (ii) a notice of lien or levy is filed against Borrower’s assets
with an aggregate fair value of Ten Million Dollars ($10,000,000.00) or more by
any government agency, and the same under subclauses (i) and (ii) hereof are
not, within thirty (30) days after the occurrence thereof, discharged or stayed
(whether through the posting of a bond or otherwise); provided, however, no
Credit Extensions shall be made during any such thirty (30) day cure period; or

(b)(i) any material portion of Borrower’s assets is attached, seized, levied on,
or comes into possession of a trustee or receiver, or (ii) any court order
enjoins, restrains, or prevents Borrower from conducting any material part of
its business;

8.5 Insolvency. (a) Borrower fails to be solvent as described under Section 5.6
hereof; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency
Proceeding is begun against Borrower and not dismissed or stayed within
forty-five (45) days (but no Credit Extensions shall be made while of any of the
conditions described in clause (a) exist and/or until any Insolvency Proceeding
is dismissed);

8.6 Other Agreements. There is, under any agreement to which Borrower is a party
with a third party or parties, (a) any default resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount individually or in the aggregate in excess of
Ten Million Dollars ($10,000,000.00); or (b) any default by Borrower, the result
of which could reasonably be deemed to cause a Material Adverse Change on
Borrower’s business;

8.7 Judgments. One or more final judgments, orders, or decrees for the payment
of money in an amount, individually or in the aggregate, of at least Ten Million
Dollars ($10,000,000.00) (not covered by independent third-party insurance as to
which liability has been accepted by such insurance carrier) shall be rendered
against Borrower and the same are not, within thirty (30) days after the entry
thereof or such shorter period required by law or order, discharged or execution
thereof stayed or bonded pending appeal, or such judgments are not discharged
prior to the expiration of any such stay (provided that no Credit Extensions
will be made prior to the discharge, stay, or bonding of such judgment, order,
or decree);

8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made; or

 

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8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any
Subordinated Debt shall for any reason be revoked or invalidated or otherwise
cease to be in full force and effect, any Person shall be in breach thereof or
contest in any manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder, or the Obligations shall for any
reason be subordinated or shall not have the priority contemplated by this
Agreement;

 

9. BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies. While an Event of Default occurs and continues Bank
may, without notice or demand, do any or all of the following:

(a) declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

(b) stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

(c) demand that Borrower (i) deposit cash with Bank in an amount equal to
(a) 105% for Letters of Credit denominated in U.S. Dollars and (b) 110% of the
Dollar Equivalent for Letters of Credit denominated in currency other than U.S.
Dollars of the aggregate face amount of all Letters of Credit remaining undrawn
(plus all interest, fees, and costs due or to become due in connection therewith
(as estimated by Bank in its good faith business judgment)), to secure all of
the Obligations relating to such Letters of Credit, as collateral security for
the repayment of any future drawings under such Letters of Credit, and Borrower
shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter
of credit fees scheduled to be paid or payable over the remaining term of any
Letters of Credit;

(d) terminate any FX Forward Contracts;

(e) apply to the Obligations any (i) balances and deposits of Borrower it holds,
or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower;

(f) demand and receive possession of Borrower’s Books, in form reasonably
satisfactory to Bank; and

(g) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code.

9.2 Reserved.

9.3 Protective Payments. If Borrower fails to obtain the insurance called for by
Section 6.5 or fails to pay any premium thereon or fails to pay any other amount
which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest rate applicable to the Obligations. Bank will make
reasonable efforts to provide Borrower with ten (10) days notice of Bank
obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank’s waiver of any Event of Default.

9.4 Application of Payments and Proceeds Upon Default. If an Event of Default
has occurred and is continuing, Bank may apply any funds in its possession,
whether from Borrower account balances, payments, or otherwise, to the
Obligations in such order as Bank shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency.

9.5 Reserved.

9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No

 

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waiver hereunder shall be effective unless signed by the party granting the
waiver and then is only effective for the specific instance and purpose for
which it is given. Bank’s rights and remedies under this Agreement and the other
Loan Documents are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an
election and shall not preclude Bank from exercising any other remedy under this
Agreement or other remedy available at law or in equity, and Bank’s waiver of
any Event of Default is not a continuing waiver. Bank’s delay in exercising any
remedy is not a waiver, election, or acquiescence.

9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

 

10. NOTICES

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

If to Borrower:    Harmonic, Inc.    4300 North First Street    San Jose,
California 95134    Attn: Treasurer    Fax:                          
                          Email:                                                
Harmonic, Inc.    4300 North First Street    San Jose, California 95134    Attn:
General Counsel    Fax:                                                    
Email:                                              If to Bank:    Silicon
Valley Bank    2400 Hanover Street    Palo Alto, CA 94304   

Attn: Tom Smith

  

Email: tsmith@svb.com

 

11. CHOICE OF LAW, VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
for the Obligations, or to enforce a judgment or other court order in favor of
Bank. Borrower expressly submits and consents in advance to such jurisdiction in
any action or suit commenced in any such court, and Borrower hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper
venue, or forum non conveniens and hereby consents to the granting of such legal
or equitable relief as is deemed appropriate by such court. Borrower hereby
waives personal service of the summons, complaints, and other process issued in
such action or suit and agrees that service of such summons, complaints, and
other process may be made by registered or certified mail addressed to Borrower
at the address set forth in, or subsequently provided by Borrower in accordance
with, Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

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TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court), appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including, without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery, which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and orders applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this
paragraph shall limit the right of any party at any time to exercise self-help
remedies or obtain provisional remedies. The private judge shall also determine
all issues relating to the applicability, interpretation, and enforceability of
this paragraph.

 

12. GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion). Bank has the
right, without the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents.

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its
directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against: (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by such
Indemnified Person’s gross negligence or willful misconduct.

12.3 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

12.4 Severability of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.

 

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12.5 Correction of Loan Documents. Bank may correct patent errors and fill in
any blanks in the Loan Documents consistent with the agreement of the parties.

12.6 Amendments in Writing; Waiver; Integration. No purported amendment or
modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought. Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document. Any waiver granted shall be limited to the specific
circumstance expressly described in it, and shall not apply to any subsequent or
other circumstance, whether similar or dissimilar, or give rise to, or evidence,
any obligation or commitment to grant any further waiver. The Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of the Loan Documents merge into the Loan Documents.

12.7 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, is an original, and all taken together, constitute one Agreement.

12.8 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been paid in full and satisfied. The obligation of Borrower in
Section 12.2 to indemnify Bank shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

12.9 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with
Bank, collectively, “Bank Entities”); (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided, however, Bank
shall use its best efforts to obtain any prospective transferee’s or purchaser’s
agreement to the terms of this provision); (c) as required by law, regulation,
subpoena, or other order; (d) to Bank’s regulators or as otherwise required in
connection with Bank’s examination or audit; (e) as Bank considers appropriate
in exercising remedies under the Loan Documents; and (f) to third-party service
providers of Bank so long as such service providers have executed a
confidentiality agreement with Bank with terms no less restrictive than those
contained herein. Confidential information does not include information that is
either: (i) in the public domain or in Bank’s possession when disclosed to Bank,
or becomes part of the public domain after disclosure to Bank; or (ii) disclosed
to Bank by a third party if Bank does not know that the third party is
prohibited from disclosing the information.

Bank Entities may use the confidential information for reporting purposes and
the development and distribution of databases and market analyses so long as
such confidential information is aggregated and anonymized prior to distribution
unless otherwise expressly prohibited by Borrower. The provisions of the
immediately preceding sentence shall survive the termination of this Agreement.

12.10 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between
Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.

12.11 Electronic Execution of Documents. The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

12.12 Captions. The headings used in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.

 

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12.13 Construction of Agreement. The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist.

12.14 Relationship. The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement. The parties do not intend
to create any agency, partnership, joint venture, trust, fiduciary or other
relationship with duties or incidents different from those of parties to an
arm’s-length contract.

12.15 Third Parties. Nothing in this Agreement, whether express or implied, is
intended to: (a) confer any benefits, rights or remedies under or by reason of
this Agreement on any persons other than the express parties to it and their
respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

 

13. DEFINITIONS

13.1 Definitions. As used in the Loan Documents, the word “shall” is mandatory,
the word “may” is permissive, the word “or” is not exclusive, the words
“includes” and “including” are not limiting, the singular includes the plural,
and numbers denoting amounts that are set off in brackets are negative. As used
in this Agreement, the following capitalized terms have the following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

“Advance” or “Advances” means an advance (or advances) under the Revolving Line.

“Affiliate” is, with respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.

“Agreement” is defined in the preamble hereof.

“Availability Amount” is (a) the Revolving Line minus (b) the sum of (i) the
Dollar Equivalent amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit and any Letter of Credit Reserve), (ii) the
FX Reserve, (iii) any amounts used for Cash Management Services, and (iv) the
outstanding principal balance of any Advances.

“Bank” is defined in the preamble hereof.

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower.

“Borrower” is defined in the preamble hereof.

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, business operations or financial condition, and all computer
programs or storage or any equipment containing such information.

“Borrowing Resolutions” are, with respect to any Person, those resolutions
substantially in the form attached hereto as Exhibit A and delivered by such
Person to Bank approving the Loan Documents to which such Person is a party and
the transactions contemplated thereby, together with a certificate executed by
its Secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that included in such certificate is
a true, correct, and complete copy of the resolutions then in full force and
effect authorizing and ratifying the execution, delivery, and

 

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performance by such Person of the Loan Documents to which it is a party, (c) the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate canceling or
amending such prior certificate.

“Business Day” is any day that is not a Saturday, Sunday or other day on which
banking institutions in the State of California are authorized or required by
law or other governmental action to close, except that if any determination of a
“Business Day” shall relate to a LIBOR Advance, the term “Business Day” shall
also mean a day on which dealings are carried on in the London interbank market,
and if any determination of a “Business Day” shall relate to an FX Forward
Contract, the term “Business Day” shall mean a day on which dealings are carried
on in the country of settlement of the Foreign Currency.

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having at least a A-1 or P-1 rating from either Standard & Poor’s
Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of
deposit issued maturing no more than one (1) year after issue; and (d) money
market funds at least ninety-five percent (95%) of the assets of which
constitute Cash Equivalents of the kinds described in clauses (a) through (c) of
this definition.

“Cash Management Services” is defined in Section 2.1.4.

“Change in Control” means any event, transaction, or occurrence as a result of
which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Borrower, is or becomes a beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of Borrower, representing fifty percent (50%) or
more of the combined voting power of Borrower’s then outstanding securities; or
(b) during any period of twelve consecutive calendar months, individuals who at
the beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose election by the Board of Directors of
Borrower was approved by a vote of not less than two-thirds of the directors
then still in office who either were directions at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason other than death or disability to constitute a majority of the
directors then in office.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of California, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit B.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation, in each
case, directly or indirectly guaranteed, endorsed, co made, discounted or sold
with recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.

 

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“Continuation Date” means any date on which Borrower continues a LIBOR Advance
into another Interest Period.

“Conversion Date” means any date on which Borrower converts a Prime Rate Advance
to a LIBOR Advance or a LIBOR Advance to a Prime Rate Advance.

“Credit Extension” is any Advance, FX Forward Contract, amount utilized for Cash
Management Services, or any other extension of credit by Bank for Borrower’s
benefit.

“Current Assets” are amounts that under GAAP should be included on that date as
current assets on Borrower’s consolidated balance sheet.

“Current Liabilities” are all obligations and liabilities of Borrower to Bank,
plus, without duplication, the aggregate amount of Borrower’s Total Liabilities
that mature within one (1) year, excluding deferred revenue.

“Default Rate” is defined in Section 2.3(b).

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Deposit Account” is Borrower’s deposit account, account number
341964970, maintained with Bank.

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

“Effective Date” is defined in the preamble hereof.

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.

“Event of Default” is defined in Section 8.

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

“Foreign Currency” means lawful money of a country other than the United States.

“Funding Date” is any date on which a Credit Extension is made to or for the
account of Borrower which shall be a Business Day.

“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

“FX Forward Contract” is defined in Section 2.1.3.

“FX Reserve” is defined in Section 2.1.3.

 

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“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.

“Indemnified Person” is defined in Section 12.2.

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Intellectual Property” means all of Borrower’s right, title, and interest in
and to the following:

(a) its Copyrights, Trademarks and Patents;

(b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, and operating
manuals;

(c) any and all source code;

(d) any and all design rights which may be available to a Borrower;

(e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents.

“Interest Expense” means for any fiscal period, interest expense (whether cash
or non-cash) determined in accordance with GAAP for the relevant period ending
on such date, including, in any event, interest expense with respect to any
Credit Extension and other Indebtedness of Borrower and its Subsidiaries,
including, without limitation or duplication, all commissions, discounts, or
related amortization and other fees and charges with respect to letters of
credit and bankers’ acceptance financing and the net costs associated with
interest rate swap, cap, and similar arrangements, and the interest portion of
any deferred payment obligation (including leases of all types).

“Interest Payment Date” means, with respect to any LIBOR Advance, the last day
of each Interest Period applicable to such LIBOR Advance and, with respect to
Prime Rate Advances, the first day of each month (or, if that day of the month
does not fall on a Business Day, then on the first Business Day following such
date), and each date a Prime Rate Advance is converted into a LIBOR Advance to
the extent of the amount converted to a LIBOR Advance.

 

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“Interest Period” means, as to any LIBOR Advance, the period commencing on the
date of such LIBOR Advance, or on the conversion/continuation date on which the
LIBOR Advance is converted into or continued as a LIBOR Advance, and ending on
the date that is 1, 2 or 3 months thereafter, in each case as Borrower may elect
in the applicable Notice of Borrowing or Notice of Conversion/Continuation;
provided, however, that (a) no Interest Period with respect to any LIBOR Advance
shall end later than the Revolving Line Maturity Date, (b) the last day of an
Interest Period shall be determined in accordance with the practices of the
LIBOR interbank market as from time to time in effect, (c) if any Interest
Period would otherwise end on a day that is not a Business Day, that Interest
Period shall be extended to the following Business Day unless, in the case of a
LIBOR Advance, the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period shall
end on the preceding Business Day, (d) any Interest Period pertaining to a LIBOR
Advance that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period, and (e) interest shall accrue from and
include the first Business Day of an Interest Period but exclude the last
Business Day of such Interest Period.

“Interest Rate Determination Date” means each date for calculating the LIBOR for
purposes of determining the interest rate in respect of an Interest Period. The
Interest Rate Determination Date shall be the second Business Day prior to the
first day of the related Interest Period for a LIBOR Advance.

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

“Letter of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.

“Letter of Credit Application” is defined in Section 2.1.2(b).

“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(e).

“LIBOR” means, for any Interest Rate Determination Date with respect to an
Interest Period for any Advance to be made, continued as or converted into a
LIBOR Advance, the rate of interest per annum determined by Bank to be the per
annum rate of interest at which deposits in United States Dollars are offered to
Bank in the London interbank market (rounded upward, if necessary, to the
nearest 0.0001%) in which Bank customarily participates at 11:00 a.m. (local
time in such interbank market) two (2) Business Days prior to the first day of
such Interest Period for a period approximately equal to such Interest Period
and in an amount approximately equal to the amount of such Advance.

“LIBOR Advance” means an Advance that bears interest based at the LIBOR Rate.

“LIBOR Rate” means, for each Interest Period in respect of LIBOR Advances
comprising part of the same Advances, an interest rate per annum (rounded
upward, if necessary, to the nearest 0.0001%) equal to LIBOR for such Interest
Period divided by one (1) minus the Reserve Requirement for such Interest
Period.

“LIBOR Rate Margin” is one and three-quarters percent (1.75%).

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

“Loan Documents” are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower, and any other present or future agreement
between Borrower any future guarantor and/or for the benefit of Bank in
connection with this Agreement, all as amended, restated, or otherwise modified.

 

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“Material Adverse Change” is defined in Section 3.2(c).

“Notice of Borrowing” means a notice given by Borrower to Bank in accordance
with Section 3.2(a), substantially in the form of Exhibit C, with appropriate
insertions.

“Notice of Conversion/Continuation” means a notice given by Borrower to Bank in
accordance with Section 3.5, substantially in the form of Exhibit D, with
appropriate insertions.

“Obligations” are Borrower’s obligations to pay when due any principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later, under
this Agreement or any of the Loan Documents, including, without limitation, all
obligations relating to letters of credit (including reimbursement obligations
for drawn and undrawn letters of credit), cash management services, and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin, and to perform Borrower’s duties under the Loan Documents.

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified with the Secretary of State of such Person’s state of formation on a
date that is no earlier than 30 days prior to the Effective Date, and, (a) if
such Person is a corporation, its bylaws in current form, (b) if such Person is
a limited liability company, its limited liability company agreement (or similar
agreement), and (c) if such Person is a partnership, its partnership agreement
(or similar agreement), each of the foregoing with all current amendments or
modifications thereto.

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

“Payment/Advance Form” is that certain form attached hereto as Exhibit E.

“Permitted Indebtedness” is:

(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;

(b) Indebtedness existing on the Effective Date;

(c) Subordinated Debt;

(d) Indebtedness of Borrower to any Subsidiary of Borrower and of Subsidiaries
to any other Subsidiary of Borrower;

(e) unsecured Indebtedness to trade creditors incurred in the ordinary course of
business;

(f) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

(g) Indebtedness to financial institutions other than Bank in connection with
obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement
designated to protect Borrower against fluctuation in interest rates, currency
exchange rates or commodity prices so long as such Indebtedness does not exceed
Ten Million Dollars ($10,000,000.00);

(h) Indebtedness secured by Permitted Liens permitted and under clauses (a) and
(c) of the definition of “Permitted Liens” hereunder;

(i) Indebtedness of any Person existing at the time such Person is merged with
or into Borrower or becomes a Subsidiary as permitted hereby, provided that such
Indebtedness is not incurred in connection with, or in contemplation of, such
Person merging with and into the Borrower or becoming a Subsidiary of the
Borrower; and

 

-23-

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(j) Indebtedness with respect to surety, appeal, indemnity, performance or other
similar bonds incurred in the ordinary course of business, consistent with past
practices.

(k) Other Indebtedness not otherwise permitted by Section 7.4 not exceeding
Ten Million Dollars ($10,000,000.00) in the aggregate outstanding at any time;
and

(l) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness described in (a) through (f) above, provided
that the principal amount thereof is not increased or the terms thereof are not
modified to impose more burdensome terms upon Borrower or its Subsidiary, as the
case may be.

“Permitted Investments” are:

(a) Investments (including, without limitation, Subsidiaries) existing on the
Effective Date;

(b)(i) Investments consisting of (i) Cash Equivalents, and (ii) any Investments
permitted by Borrower’s investment policy, as amended from time to time,
provided that such investment policy (and any such amendment thereto) has been
approved by borrower’s Board of Directors or its Audit Committee;

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower;

(d) Investments consisting of deposit accounts in which Bank has a perfected
security interest;

(e) Investments accepted in connection with Transfers permitted by Section 7.1;

(f) Investments (i) by Borrower in Subsidiaries not to exceed
Twenty-Five Million Dollars ($25,000,000.00) in the aggregate in any fiscal year
and (ii) by Subsidiaries in other Subsidiaries not to exceed Ten Million Dollars
($10,000,000.00) in the aggregate in any fiscal year or in Borrower;

(g) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business not to
exceed One Million Dollars ($1,000,000.00) outstanding at any time, and
(ii) non-cash loans to employees, officers or directors relating to the purchase
of equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors or its
Compensation Committee;

(h) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business;

(i) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in
the ordinary course of business; provided that this paragraph (i) shall not
apply to Investments of Borrower in any Subsidiary;

(j) Investments in connection with the acquisition of any part of the capital
stock or property of another person so long as (i) no Event of Default has
occurred and is continuing or would result from such act during the term of this
Agreement, and (ii) Borrower is in compliance with Section 7.3 hereof,;

(k) Joint ventures or strategic alliances in the ordinary course of Borrower’s
business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
(i) any cash investments by Borrower do not exceed Fifteen Million Dollars
($15,000,000) in the aggregate in any fiscal year and (ii) Borrower remains in
compliance with Section 6.7; and

(l) other Investments not otherwise permitted by Section 7.7 not exceeding
Ten Million Dollars ($10,000,000.00) in the aggregate outstanding at any time.

 

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“Permitted Liens” are:

(a) Liens existing on the Effective Date;

(b) Liens for taxes, fees, assessments or other government charges or levies,
either (i) not due and payable or (ii) being contested in good faith and for
which Borrower maintains adequate reserves on its Books, provided that no notice
of any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;

(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred
for financing the acquisition of the Equipment, or (ii) existing on Equipment
when acquired, if the Lien is confined to the property and improvements and the
proceeds of the Equipment;

(d) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory and which are not delinquent or remain payable
without penalty or which are being contested in good faith and by appropriate
proceedings which proceedings have the effect of preventing the forfeiture or
sale of the property subject thereto;

(e) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);

(f) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payments of customers duties in connection with the important of
goods;

(g) Liens in connection with surety or appeals bonds or letters of credit
securing such bonds or reimbursement obligations in connection with statutory
obligations, bids, tenders, or otherwise in the ordinary course of business
provided all such Liens in the aggregate could not (even if enforced) reasonably
be likely cause or result in an Event of Default;

(h) Additional Liens consented to in writing by Bank which consent may be
withheld in Bank’s good faith business judgment;

(i) leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Bank a security interest
therein;

(j) non-exclusive license of Intellectual Property granted to third parties in
the ordinary course of business;

(k) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
and

(l) Liens in favor of other financial institutions arising in connection with
Borrower’s deposit and/or securities accounts held at such institutions.

(m) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (l), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase;

Bank shall have the right to require, as a condition to its consent under
clause (h) above, that the holder of the additional Lien sign an intercreditor
agreement, in favor of Bank in form and substance satisfactory to Bank in its
sole discretion, and that Borrower agree that any uncured default in any
obligation secured by the subordinate Lien shall also constitute an Event of
Default under this Agreement.

 

-25-

--------------------------------------------------------------------------------

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

“Prime Rate”: the rate of interest per annum from time to time published in the
money rates section of the Wall Street Journal or any successor publication
thereto as the “prime rate” then in effect; provided that if such rate of
interest, as set forth from time to time in the money rates section of the Wall
Street Journal, becomes unavailable for any reason as determined by the Bank,
the “Prime Rate” shall mean the rate of interest per annum announced by Bank as
its prime rate in effect at its principal office in the State of California
(such announced Prime Rate not being intended to be the lowest rate of interest
charged by Bank in connection with extensions of credit to debtors).

“Prime Rate Margin” is zero percent (0%).

“Quick Assets” is, on any date, Borrower’s unrestricted cash and Cash
Equivalents, net billed accounts receivable and short-term investments
determined according to GAAP.

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

“Regulatory Change” means, with respect to Bank, any change on or after the date
of this Agreement in United States federal, state, or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives, or requests applying to a class of
lenders including Bank, of or under any United States federal or state, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

“Reserve Requirement” means, for any Interest Period, the average maximum rate
at which reserves (including any marginal, supplemental, or emergency reserves)
are required to be maintained during such Interest Period under Regulation D
against “Eurocurrency liabilities” (as such term is used in Regulation D) by
member banks of the Federal Reserve System. Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves required to
be maintained by Bank by reason of any Regulatory Change against (a) any
category of liabilities which includes deposits by reference to which the LIBOR
Rate is to be determined as provided in the definition of LIBOR or (b) any
category of extensions of credit or other assets which include Advances.

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer and Corporate Controller of Borrower.

“Revolving Line” is an Advance or Advances in an amount equal to Ten Million
Dollars ($10,000,000.00) in the aggregate outstanding at any time.

“Revolving Line Maturity Date” is August 25, 2012.

“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority.

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

“Settlement Date” is defined in Section 2.1.3.

 

-26-

--------------------------------------------------------------------------------

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless the context otherwise requires, each reference
to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness.

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

“Transfer” is defined in Section 7.1.

[Signature page follows.]

 

-27-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

BORROWER:

HARMONIC, INC.

 

By:   /S/Patrick Harshman

Name:

  Patrick Harshman Title:   CEO

BANK:

SILICON VALLEY BANK

 

By:   /s/Nick Tsiagkas

Name:

  Nick Tsiagkas Title:   Relationship Manager

[Signature page to Third Amended and Restated Loan and Security Agreement]

--------------------------------------------------------------------------------

Schedule 5.4 - Litigation

On March 4, 2010, Interkey ELC Ltd, or Interkey, filed a lawsuit in Israel,
alleging breach of contract against Harmonic and Scopus Video Networks Ltd. (now
Harmonic Video Networks Ltd. or “HVN”), which was acquired by Harmonic in
March 2009, and Harmonic. The plaintiffs are seeking damages in the amount of
6,300,000 ILS (approximately $1.7 million).

--------------------------------------------------------------------------------

Schedule 5.9 - Tax Returns and Payments

The Company had gross unrecognized tax benefits, which include interest and
penalties, of approximately $54.0 million as of July 1, 2011. If all of these
unrecognized tax benefits were recognized, the entire amount would impact the
provision for income taxes. We anticipate the unrecognized tax benefits to
decrease by $4.4 million in the next 12 months due to statute of limitation
expirations.

--------------------------------------------------------------------------------

EXHIBIT A – CORPORATE BORROWING CERTIFICATE

 

BORROWER: Harmonic, Inc.    DATE: August [ ], 2011 BANK:           Silicon
Valley Bank   

I hereby certify as follows, as of the date set forth above:

1. I am the Secretary, Assistant Secretary or other officer of the Borrower. My
title is as set forth below.

2. Borrower’s exact legal name is set forth above. Borrower is a corporation
existing under the laws of the state of Delaware.

3. Attached hereto are true, correct and complete copies of Borrower’s
Certificate of Incorporation (including amendments), as filed with the Secretary
of State of the state in which Borrower is incorporated as set forth in
paragraph 1 above. Such Certificate of Incorporation has not been amended,
annulled, rescinded, revoked or supplemented, and remain in full force and
effect as of the date hereof.

4. The following resolutions were duly and validly adopted by Borrower’s Board
of Directors at a duly held meeting of such directors (or pursuant to a
unanimous written consent or other authorized corporate action). Such
resolutions are in full force and effect as of the date hereof and have not been
in any way modified, repealed, rescinded, amended or revoked, and Bank may rely
on them until Bank receives written notice of revocation from Borrower.

RESOLVED, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name

 

Title

 

Signature

 

Authorized

to Add or

Remove

Signatories

 

      ¨  

 

 

 

 

 

      ¨  

 

 

 

 

 

      ¨  

 

 

 

 

 

      ¨  

 

 

 

 

RESOLVED FURTHER, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

Borrow Money. Borrow money from Silicon Valley Bank (“Bank”).

Execute Loan Documents. Execute any loan documents Bank requires.

Grant Security. Grant Bank a security interest in any of Borrower’s assets.

--------------------------------------------------------------------------------

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.

Letters of Credit. Apply for letters of credit from Bank.

Foreign Exchange Contracts. Execute spot or forward foreign exchange contracts.

Further Acts. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they believe to be
necessary to effectuate such resolutions.

RESOLVED FURTHER, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

5. The persons listed above are Borrower’s officers or employees with their
titles and signatures shown next to their names.

 

By:  

 

Name:  

 

Title:  

 

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

 

I, the    
of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth 
above.   [print title]  

 

By:  

 

Name:  

 

Title:  

 

--------------------------------------------------------------------------------

EXHIBIT B - COMPLIANCE CERTIFICATE

 

TO: SILICON VALLEY BANK   Date:                                      FROM:
HARMONIC, INC.  

The undersigned authorized officer of Harmonic, Inc. (the “Borrower”) certifies
that under the terms and conditions of the Loan Agreement between Borrowers and
Bank (the “Loan Agreement”):

(1) Borrower is in complete compliance for the period ending             with
all required covenants except as noted below; (2) there are no Events of
Default; and (3) all representations and warranties in the Loan Agreement are
true and correct in all material respects on this date except as noted below;
provided, however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date.

Attached are the required documents supporting the certification. The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Loan Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Loan Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

  

Reporting Covenant

  

Required

  

Complies

Quarterly Financial Statements with Compliance Certificate    Quarterly within
45 days    Yes No Annual financial statement (CPA Audited) + CC    FYE within
120 days    Yes No 10-Q, 10-K and 8-K    Within 5 days after filing with SEC   
Yes No Budgets, Projections, Operating Plans    Once per year, as reasonably
requested by Bank; provided that if an Event of Default has occurred, no
limitation on the number of requests by Bank    Yes No

 

The following Intellectual Property was registered (or a registration
application submitted) after the Effective Date (if no registrations, state
“None”)

 

 

The following financial covenant analys[is][es] and information set forth in
Schedule 1 attached hereto are true and accurate as of the date of this
Certificate.

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

 

 

 

 

 

--------------------------------------------------------------------------------

Harmonic, Inc.       BANK USE ONLY       Received by:
                                              By
                                                        AUTHORIZED SIGNER Name:
                                                      Date:
                                                          Title:
                                                              Verified:
                                                        AUTHORIZED SIGNER      
Date:                                                             Compliance
Status:     Yes     No

--------------------------------------------------------------------------------

Schedule 1 to Compliance Certificate

Financial Covenants of Borrowers

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.

Dated:                                     

 

I. Minimum Quick Ratio (Section 6.7(a))

Required:

 

At all times, tested as of the last day of each Fiscal Quarter:   Minimum Quick
Ratio September 30, 2011 and each fiscal quarter thereafter   1.75:1.00

Actual:

A

   Quick Assets         

1.      Unrestricted cash and Cash Equivalents

   $                          

2.      Net billed accounts receivable

   $                          

3.      short-term investments determined according to GAAP

   $                          

4.      Quick Assets (sum of 1, 2 and 3)

   $                        B    Current Liabilities         

1.      All obligations and liabilities of Borrower to Bank

   $                          

2.      Borrower’s Total Liabilities (excluding amounts on line 1) that mature
within one (1) year (excluding deferred revenue)

   $                          

3.      Total Current Liabilities

   $                       

C

   Quick Ratio         

1.      Quick Assets (A.4)

   $                          

2.      Current Liabilities (B.3)

   $                          

3.      Actual Liquidity Coverage Ratio (C.1 divided by C.2)

      to 1.000      

 

 

    

Is line C.3 equal to or greater than the applicable requirement set forth in the
table above?

 

                    No, not in compliance                       Yes, in
compliance

--------------------------------------------------------------------------------

EXHIBIT C - FORM OF NOTICE OF BORROWING

HARMONIC, INC.

Date:                     

 

TO: SILICON VALLEY BANK

2400 Hanover Street

Palo Alto, CA 94304

Attention: Corporate Services Department

 

RE: Loan Agreement dated as of August [    ], 2011 (as amended, modified,
supplemented or restated from time to time, the “Loan Agreement”), by and
between Harmonic, Inc. (the “Borrower”), and Silicon Valley Bank

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, the terms defined therein and used
herein as so defined, and hereby gives you notice irrevocably, pursuant to
Section 3.4 of the Loan Agreement, of its request for a Loan.

1. The requested Borrowing Date, which shall be a Business Day, is             .

2. The aggregate amount of the requested Loan is $            .

3. The requested Loan shall consist of $            of Prime Rate Loan and
$            of LIBOR Loan.

4. The duration of the Interest Period for the LIBOR Loan included in the
requested Loan shall be             [1, 2, or 3] months.

5. The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Advance before and
after giving effect thereto, and to the application of the proceeds therefrom,
as applicable:

(a) each of the representations and warranties made by Borrower in or pursuant
to the Loan Documents shall be true and correct in all material respects on and
as of such date as if made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects as of such earlier date;

(b) no default or Event of Default shall have occurred as of or on such date or
after giving effect to the extensions of credit requested to be made on such
date; and

(c) the requested Loan, if an Advance, will not, when added to the aggregate
outstanding amount of the FX Reserves and the aggregate undrawn amount of all
outstanding Letters of Credit, exceed the Availability Amount.

--------------------------------------------------------------------------------

HARMONIC, INC.

By:

 

 

Name:

 

 

Title:

 

 

For internal Bank use only

 

Eurodollar Pricing Date

  

Eurodollar Rate

  

Eurodollar Variance

  

Maturity Date

              %   

--------------------------------------------------------------------------------

EXHIBIT D - FORM OF NOTICE OF CONVERSION/CONTINUATION

HARMONIC, INC.

Date:                    

 

TO: SILICON VALLEY BANK

2400 Hanover Street

Palo Alto, CA 94304

Attention: Nick Tsiagkas

 

RE: Loan Agreement dated as of August [    ], 2011 (as amended, modified,
supplemented or restated from time to time, the “Loan Agreement”), by and
between Harmonic, Inc. (the “Borrower”), and Silicon Valley Bank

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, the terms defined therein being
used herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 3.5(b) of the Loan Agreement, of the [conversion]
[continuation] of the Loans specified herein, that:

1. The date of the [conversion] [continuation] is                    , 20    .

2. The aggregate amount of the proposed Loans to be [converted] is $         or
[continued] is $        .

3. The Loans are to be [converted into] [continued as] [LIBOR] [Prime Rate]
Loans.

4. The duration of the Interest Period for the LIBOR Loans included in the
[conversion] [continuation] shall be         months.

5. The undersigned, on behalf of Borrower, hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
proposed [conversion] [continuation], before and after giving effect thereto and
to the application of the proceeds therefrom:

(a) each of the representations and warranties made by Borrower in or pursuant
to the Loan Documents shall be true and correct in all material respects on and
as of such date as if made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects as of such earlier date; and

(b) no default or Event of Default shall have occurred as of or on such date or
after giving effect to the [conversion] [continuation] requested to be made on
such date.

 

HARMONIC, INC.

By:

 

 

Name:

 

 

Title:

 

 

--------------------------------------------------------------------------------

EXHIBIT E – LOAN PAYMENT/ADVANCE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS NOON PACIFIC TIME

 

Fax To:

  Date:                                 

 

LOAN PAYMENT:

 

   

[Harmonic, Inc.]

 

From Account#                                                           
                     To Account #                
                                                                     
                                         (Deposit Account #)  
                                             (Loan Account #) Principal
$                                         
                                          and/or Interest
$                                                                       
Authorized Signature:                                       
                                                
Phone Number:                                                         

Print Name/Title:                                       
                                 

 

   

 

LOAN ADVANCE:

 

    Complete Outgoing Wire Request section below if all or a portion of the
funds from this loan advance are for an outgoing wire. From Account
#                                                                               
To Account #                                         
                                                             
                       (Loan Account #)                       
                    (Deposit Account #)

Amount of Advance $                                         
                           

 

   

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date:

 

Authorized Signature:                                                          
              Phone Number:                                        
                                     Print
Name/Title:                                                                     
         

 

OUTGOING WIRE REQUEST:    

Complete only if all or a portion of funds from the loan advance above is to be
wired.

Deadline for same day processing is noon, Pacific Time

 

Beneficiary Name:                                        
                               Amount of Wire:
$                                                              Beneficiary
Bank:                                                                       
Account Number:                                                             

City and State:                                        
                                    

 

    Beneficiary Bank Transit (ABA) #:                                        
       Beneficiary Bank Code (Swift, Sort, Chip, etc.):                         
   

                         (For International Wire Only)

 

Intermediary Bank:                                        
                               Transit (ABA)
#:                                                                         

For Further Credit to:                   
                                         
                                         
                                                                                

 

Special Instruction:                                       
                                         
                                         
                                                            

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

 

Authorized Signature:                                                          
              2nd Signature (if required):
                                                              Print Name/Title:
                                                                               
Print Name/Title:                                                          
                 Telephone #: :                                       
                                            Telephone #: :
                                                                               
   

 

                                                      

     

Unless otherwise provided for an Advance bearing interest at LIBOR