Note 11 — Credit Facility

On September 27, 2012, the Company and its domestic subsidiaries entered into a secured credit facility with Wells Fargo Bank, National Association (the “Loan Agreement”). The Loan Agreement provides for a $75 million working capital revolving credit facility. The amounts outstanding under the revolving credit facility are payable in full upon maturity of the credit facility on April 30, 2013. The credit facility is secured by a substantial amount of the assets of the Company. The amount outstanding on the credit facility at December 31, 2012 was $70.7 million; the total borrowing capacity was approximately $75.0 million.

Aggregate maturities of the debt related to this credit facility are as follows (in thousands):

Year ending December 31:	2013		$	70,710
	Total		$	70,710

The Company’s ability to borrow under the Loan Agreement is subject to its ongoing compliance with certain financial covenants, including that the Company and its subsidiaries (a) maintain and earn on a consolidated basis as of the last day of each fiscal quarter, for the rolling four quarter period ending on such date, consolidated Net Profit (as defined in the Loan Agreement) equal to or greater than $1 (one dollar); (b) maintain a ratio of consolidated total funded debt to consolidated EBITDA (the “consolidated leverage ratio”) of not greater than (i) 4.00:1.0 on September 30, 2012, (ii) 3.00:1.0 on December 31, 2012 and thereafter; and (c) maintain Liquidity (as defined in the Loan Agreement) of at least $100.0 million.

The Loan Agreement allows the Company to borrow under the credit facility at LIBOR or at a base rate, plus applicable margins based upon the funded debt to EBITDA leverage ratio for the most recent twelve month rolling quarter end. Applicable margins vary between a 150 to 200 basis point spread over LIBOR and between a negative 50 to zero basis point spread on base rate loans. As of December 31, 2012, the rate on the credit facility was 3.25%. In addition, the credit facility has an unused line fee, ranging from 12.5 to 25 basis points based upon the unused amount of the credit facility.

The Loan Agreement also contains customary events of default, including a cross default provision and a change of control provision. In the event of a default, all of the obligations of the Company and its subsidiaries under the Loan Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations become due and payable.

As of December 31, 2012, the Company was not in compliance with two of the three financial covenants under the Loan Agreement, but was in compliance with all of the remaining covenants. At December 31, 2012, the Company had consolidated Net Profit of negative $22.8 million, a consolidated leverage ratio of 17.66 and Liquidity of $189.5 million. The Company was required to obtain waivers from its lender to avoid breaches of financial covenants for the period ending December 31, 2012. Based upon current internal financial forecasts for the first quarter of 2013, the Company may not comply with the consolidated Net Profit covenant required under the Loan Agreement for the period ending March 31, 2013.

Accordingly, as a result of the failure to meet any of these financial covenants or any other covenants under the Loan Agreement, the lender may declare an event of default, which would have a material adverse effect on the Company’s financial condition and results of operations. The Company would be required to obtain amendments and/or waivers or renegotiate the Loan Agreement with its lender; however, there is no assurance that the lender will grant any waiver or agree to an amendment or renegotiation of the Loan Agreement. Any such amendment or waiver will likely require payment of a fee, result in higher interest rates on outstanding loan amounts and/or impose other restrictions. If the lender does not agree to a waiver and/or amendment and determines that an event of default has occurred, the lender may accelerate all obligations of the Company under the Loan Agreement, demand immediate repayment of all obligations and/or terminate all commitments to extend further credit under the Loan Agreement. If access to the credit facility is limited or terminated, liquidity would be constrained, affecting the Company’s operations and growth prospects and requiring that the Company seek additional equity or debt financing. There is no assurance that such alternative financing will be available on acceptable terms or at all. Furthermore, any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants that could impede the Company’s ability to effectively operate and grow its business in the future.