DEBT

Term Loan and Line of Credit

In December 2013, we amended and restated our previously outstanding senior credit agreement and amended the subordinated credit agreement with Fifth Third Bank to increase the senior term loan to $8,500,000, reduce the interest rates, and extend the maturity of the senior term loan and the revolving line of credit to December 1, 2018 and December 1, 2015, respectively. In January 2014, we paid the subordinated term loan in full. The outstanding senior term loan was secured by substantially all of our assets. The senior term loan principal balance was payable in monthly installments of $101,000, which started in January 2014 and would have continued through the maturity date, with the full remaining unpaid principal balance due at maturity. Borrowings under the senior term loan bore interest at a rate of LIBOR plus 5.25%. However, as a result of our interest rate swap, the interest rate was fixed at 6.42% until October 27, 2014, when the interest rate swap agreement was terminated. Accrued and unpaid interest on the senior term loan was due monthly through maturity. We paid $116,000 in closing fees in connection with this senior term loan, which was recorded as a debt discount and was being amortized to interest expense over the term of the loan using the effective interest method.

Borrowings under the revolving line of credit bore interest at a rate equal to LIBOR plus 3.50%. A commitment fee of 0.40% was incurred on the unused revolving line of credit balance, and was payable quarterly.

On November 21, 2014, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and other lender parties thereto. Pursuant to the Credit Agreement, the lenders agreed to provide a $10,000,000 senior term loan and a $5,000,000 revolving line of credit to our primary operating subsidiary. Amounts outstanding under the Credit Agreement bear interest at either LIBOR or the base rate, as elected by the Company, plus an applicable margin. Subject to the Company’s leverage ratio, the applicable LIBOR rate margin varied from 4.25% to 5.25%, and the applicable base rate margin varied from 3.25% to 4.25%. Pursuant to the terms of the amendment to the Credit Agreement entered into as of April 15, 2015, the applicable LIBOR rate margin was changed to vary from 4.25% to 6.25%, and the applicable base rate margin was changed to vary from 3.25% to 5.25%. The term loan and line of credit mature on November 21, 2019 and provide support for working capital, capital expenditures and other general corporate purposes, including permitted acquisitions. At closing, the Company repaid indebtedness under its prior credit facility using approximately $7,400,000 of the proceeds provided by the term loan. The prior credit facility with Fifth Third Bank was terminated concurrent with the entry of the Credit Agreement and unamortized debt financing costs and discount of $315,000 associated with the terminated debt was included in loss on early extinguishment of debt. Financing costs of $355,000 associated with the new credit facility are being amortized over its term on a straight-line basis, which is not materially different from the effective interest method.

The Credit Agreement includes customary financial covenants, including the requirements that the Company maintain minimum liquidity and achieve certain minimum EBITDA levels. In addition, the credit facility prohibits the Company from paying dividends on the common and preferred stock. In April 2015 the Credit Agreement was amended to increase the applicable LIBOR rate margin, which will vary from 4.25% to 6.25%, and to reset the financial covenants. As such, the Company is required to maintain minimum liquidity of at least (i) $5,000,000 through April 15, 2015, (ii) $6,500,000 from April 16, 2015 through and including July 30, 2015, (iii) $7,000,000 from July 31, 2015 through and including January 30, 2016, and (iv) $7,500,000 from January 31, 2016 through and including the maturity date of the credit facility.

The following table shows our future minimum EBITDA covenant thresholds, as modified by the amendment to the Credit Agreement:



For the four-quarter period ending	Minimum EBITDA
April 30, 2015	$	(2,500,000	)
July 31, 2015	(1,750,000		)
October 31, 2015	(750,000		)
January 31, 2016	500,000

For the four-quarter period ending April 30, 2016, and fiscal quarters thereafter, the minimum EBITDA will be determined within 30 days following delivery of, and based upon, the projections then most recently delivered by the Company.

As of April 30, 2015, the Company had no outstanding borrowings under the revolving line of credit, and had accrued $3,000 in unused line fees.

Outstanding principal balances on debt consisted of the following at:



	April 30, 2015		January 31, 2015
Senior term loan	$	9,875,000	$	10,000,000
Capital lease	1,166,000		1,365,000
Total	11,041,000		11,365,000
Less: Current portion	1,329,000		1,282,000
Non-current portion of debt	$	9,712,000	$	10,083,000

Future principal repayments of debt consisted of the following at April 30, 2015:



	Senior Term Loan		Capital Lease (1)		Total
2015	$	375,000	$	641,000	$	1,016,000
2016	750,000		511,000		1,261,000
2017	1,000,000		93,000		1,093,000
2018	1,000,000		—		1,000,000
2019	6,750,000		—		6,750,000
Total repayments	$	9,875,000	$	1,245,000	$	11,120,000

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(1)	Future minimum lease payments include principal plus interest.

Note Payable

In November 2013, as part of the settlement of the earn-out consideration in connection with the Interpoint acquisition, we issued an unsecured, subordinated three-year note in the amount of $900,000 that was originally scheduled to mature on November 1, 2016 and accrued interest on the unpaid principal amount actually outstanding at a per annum rate equal to 8%. The promissory note had annual principal payments of $300,000 due on November 1, 2014, 2015 and 2016. At closing of the Credit Agreement with Wells Fargo described above, we repaid our indebtedness under this note using approximately $600,000 of the proceeds provided by the term loan.