SUBORDINATED DEBT



		September 30, 2017		March 31, 2017
a)	U.S. Dollar denominated term loan (Second Lien CDN Term loan) bearing interest at LIBOR rate (as defined) plus 9.5% or U.S. base rate (as defined) plus 8.5% at the Company’s option. The loan is repayable upon maturity on March 11, 2020.	$	43,987	$	41,645

b)	U.S. Dollar denominated term loan (Second Lien U.S. Term loan) bearing interest at LIBOR rate (as defined) plus 9.5% or U.S. base rate (as defined) plus 8.5% at the Company’s option. The loan is repayable upon maturity on March 11, 2020.	42,301		40,049
		86,288		81,694
	Less unamortized debt issuance costs	—		(1,117		)
		86,288		80,577
	Less amounts classified as current	86,288		80,577
		$	—	$	—

As a result of the covenant violations and other matters described below, the Company has classified the entire balance of this debt as a current liability at September 30, 2017 and March 31, 2017.

The effective interest rates at September 30, 2017 were 15.82% (13.75% at March 31, 2017) on each of the Second Lien CDN Term Loan (defined below) and the Second Lien U.S. Term Loan (defined below).

On March 11, 2014, Lower Lakes Towing, Grand River and Black Creek, as borrowers, Rand LL Holdings, Rand Finance, Black Creek Holdings and the Company, as guarantors, Guggenheim Corporate Funding, LLC, as agent, and certain other lenders, entered into a Term Loan Credit Agreement (as amended from time to time, the “Second Lien Credit Agreement”). The Second Lien Credit Agreement initially provided for (i) a U.S. Dollar denominated term loan facility under which Lower Lakes Towing was obligated to the lenders in the amount of $34,200 (the “Second Lien CDN Term Loan”), (ii) a U.S. dollar denominated term loan facility under which Grand River and Black Creek were obligated to the Lenders in the amount of $38,300 (the “Second Lien U.S. Term Loan”) and (iii) an uncommitted incremental term loan facility of up to $32,500.

The outstanding principal amount of the Second Lien CDN Term Loan borrowings and the Second Lien U.S. Term Loan borrowings will be repayable upon their maturity on March 11, 2020. The Second Lien CDN Term Loan and Second Lien U.S. Term Loan bear an interest rate per annum at borrowers’ option, equal to (i) LIBOR (as defined in the Second Lien Credit Agreement) plus 9.50% per annum, or (ii) the U.S. Base Rate (as defined in the Second Lien Credit Agreement), plus 8.50% per annum.

Obligations under the Second Lien Credit Agreement are secured by the second-priority liens and security interests in substantially all of the assets of the borrowers and the guarantors, including a pledge of all or a portion of the equity interests of the borrowers and the guarantors. The indebtedness of each domestic borrower under the Second Lien Credit Agreement is unconditionally guaranteed by each other domestic borrower and by the guarantors which are domestic subsidiaries, and such guaranty is secured by a lien on substantially all of the assets of each borrower and each guarantor. Each domestic borrower also guarantees the obligations of the Canadian borrower and each Canadian guarantor guarantees the obligations of the Canadian borrower. Under the Second Lien Credit Agreement and subject to the terms of the Intercreditor Agreement (as defined below), the borrowers will be required to make mandatory prepayments of principal on term loan borrowings (i) in the event of certain dispositions of assets and insurance proceeds (all subject to certain exceptions), in an amount equal to 100% of the net proceeds received by the borrowers therefrom, and (ii) in an amount equal to 100% of the net proceeds to a borrower from any issuance of a borrower’s debt or equity securities (all subject to certain exceptions).

15. SUBORDINATED DEBT (continued)

The Second Lien Credit Agreement contains certain covenants, including those limiting the guarantors, the borrowers, and their subsidiaries’ ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the Second Lien Credit Agreement requires the borrowers to maintain certain financial ratios. Failure of the borrowers or the guarantors to comply with any of these covenants or financial ratios could result in the outstanding principal amounts of the loans under the Second Lien Credit Agreement being accelerated. The obligations of the borrowers and the liens of the Second Lien Lender are subject to the terms of an Intercreditor Agreement, which is further described below under the heading “Intercreditor Agreement”.

On April 11, 2014, the parties under the Second Lien Credit Agreement entered into a First Amendment to the Second Lien Credit Agreement, which extended the due date of certain post-closing deliverables. On March 27, 2015, the parties to the Second Lien Credit Agreement entered into a Second Amendment (the “Second Amendment”) to the Second Lien Credit Agreement. The Second Amendment conformed certain provisions of the Second Lien Credit Agreement to the First Lien Credit Agreement, reduced the uncommitted incremental facility to $22,500, and also amended certain other covenants and terms thereof. On February 9, 2016, the parties to the Second Lien Credit Agreement executed a Third Amendment and Waiver Under Term Loan Credit Agreement pursuant to which the Second Lien Lender (i) waived breach of the Minimum Fixed Charge Coverage Ratio, the Maximum Senior Funded Debt to EBITDA Ratio, and the Maximum Total Funded Debt to EBITDA Ratio covenants contained in the Second Lien Credit Agreement which existed as of December 31, 2015; and (ii) added a temporary minimum EBITDA covenant for the period from April 1, 2016 through May 31, 2016. On August 26, 2016, the parties to the Second Lien Credit Agreement entered into a Fourth Amendment and Waiver To Term Loan Credit Agreement (the "Fourth Amendment") pursuant to which the Second Lien Lender waived the breach of certain financial and other covenants by the Company, including the Maximum Senior Funded Debt to EBITDA Ratio and the Maximum Total Funded Debt to EBITDA Ratio covenants therein, in each case calculated as of June 30, 2016. The Fourth Amendment also modified the Minimum Fixed Charge Coverage Ratio, the Maximum Senior Funded Debt to EBITDA Ratio and the Maximum Total Funded Debt to EBITDA Ratio covenants, further limits the exceptions to the Restricted Payments (as defined in the Second Lien Credit Agreement) allowed to be made by the Company, incorporated new restrictions on certain Company activities, provided for (1) additional fees, (2) additional pay-in-kind interest under certain circumstances, and (3) certain additional Events of Default (as defined in the Second Lien Credit Agreement), including the non-payment of certain current and potential future fees that will only become due and payable if certain milestones are not met related to the Company's progress towards a refinancing of the Second Lien Credit Agreement.

On June 1, 2017, the parties under the Second Lien Credit Agreement entered in to a Fifth Amendment and Waiver to Credit Agreement (the “Fifth Amendment”), pursuant to which the Second Lien Lender waived, until June 14, 2017, the Company’s failure to deliver its audited financial statements for the fiscal year ending March 31, 2017 by May 31, 2017 (the “Specified Default”). The Fifth Amendment, among other things, further provided for (i) enhanced or new restrictions on certain Company activities not in the ordinary course of business, including with respect to consummating a merger or sale, making certain intercompany payments, or incurring new liens or indebtedness (other than under the First Lien Credit Agreement), (ii) extension of certain rights of the agent under the Second Lien Credit Agreement applicable during an Event of Default during the Second Lien Waiver Period to the Second Lien Lender and continuation of certain of such rights during the Second Lien Waiver Period (notwithstanding waiver of the Specified Default), including with respect to (a) reimbursement of fees and expenses, (b) entitlement to default interest and (c) enhanced entitlement to Company access and reporting, and (iii) restrictions on the Company's right to designate a LIBOR based interest rate for new loans under the Second Lien Credit Agreement. Finally, the Fifth Amendment provided for an Event of Default under the Second Lien Credit Agreement if the Company did not agree to a recapitalization transaction with the Second Lien Lender by June 30, 2017.

As of June 14, 2017, the parties to the Second Lien Credit Agreement entered into a First Amendment to Fifth Amendment pursuant to which the waiver provided in the Fifth Amendment was extended to June 30, 2017, subject to the other terms and conditions of the Fifth Amendment.

15. SUBORDINATED DEBT (continued)

Effective as of June 30, 2017, the parties to the Second Lien Credit Agreement entered into a Second Amendment to the Fifth Amendment pursuant to which (i) the waiver with respect to the Company's failure to deliver the Company's audited financial statements for the fiscal year ending March 31, 2017 without a qualified audit opinion was further extended to July 14, 2017, (ii) the date by which the Company shall have agreed to a recapitalization transaction with the Second Lien Lender was further extended to July 28, 2017, (iii) the date by which the Company shall have delivered its April and May 2017 monthly financial statements was extended to July 10, 2017, and (iv) the Second Lien Lender waived a breach of (a) the Maximum Senior Funded Debt to EBITDA Ratio and the Maximum Total Funded Debt to EBITDA Ratio covenants for the fiscal quarter ended March 31, 2017, and (b) the requirement that the debt under the First Lien Credit Agreement and Second Lien Credit Agreement not cease to be classified as long-term debt in the Company's audited financial statements, in each case, (a) and (b), through July 14, 2017.

As of September 30, 2017, the aggregate principal outstanding under the Second Lien Credit Agreement was $86,288.

As of July 14, 2017, the waivers previously obtained from the First Lien Lenders and the Second Lien Lender expired, resulting in the reinstatement of the previously waived events of default under the First Lien Credit Agreement and Second Lien Credit Agreement, respectively. As of September 30, 2017, the Company was not in compliance with the covenants discussed above under either credit agreement. To date, the Company has not been successful in obtaining further waivers from the lenders under its credit facilities or in refinancing its debt facilities, but the Company continues to pursue a resolution with its lenders. The Company, in the interim, has been permitted to borrow funds at the discretion of the First Lien Lenders, however, there can be no assurance as to whether, or how long, the First Lien Lenders will continue to permit such discretionary borrowings by the Company. In this regard, the First Lien Lenders have reserved their rights relative to the pending defaults, have instituted a $15,000 availability reserve on the Company's borrowing ability, and have exercised their rights to control and apply company receipts against the outstanding indebtedness under the First Lien Credit Agreement.

The Company's discussions with the Second Lien Lender with respect to a potential recapitalization transaction have continued, but the terms of a potential recapitalization transaction have not been agreed upon by the parties. The Company, with the assistance of its financial advisor, has also continued to evaluate other possible transactions potentially available to the Company that could potentially resolve the credit facility defaults. Notwithstanding the Company's efforts, there can be no assurance as to whether the Company will be able to reach an agreement with respect to a recapitalization or other transaction in a timely manner or at all, or as to whether the terms of any such transaction, if achieved, would provide any value to holders of the Company's common and preferred stock. Moreover, the inability of the Company to complete a satisfactory recapitalization, refinancing or other transaction in a timely manner could result in the Company's need to voluntarily seek protection under applicable bankruptcy laws, which in turn could also result in a significant or complete loss of value to the holders of the Company's common and preferred stock. In addition, the terms of any recapitalization or other transaction agreed to by the Company may require that the transaction be implemented through a bankruptcy process.

Intercreditor Agreement

In connection with the First Lien Credit Agreement and the Second Lien Credit Agreement described above, on March 27, 2015, the Company and certain of its subsidiaries (collectively, the “Credit Parties”) entered into an Intercreditor Agreement (the “Intercreditor Agreement”) with Bank of America, N.A., as agent for the First Lien Lenders and Guggenheim Corporate Funding, LLC, as agent for the Second Lien Lender.

Under the Intercreditor Agreement, the Second Lien Lender has agreed to subordinate the obligations of the Credit Parties to them to the repayment of the obligations of the Credit Parties to the First Lien Lenders and have further agreed to subordinate their liens on the assets of the Credit Parties to the liens granted in favor of the First Lien Lenders. Absent the occurrence of an Event of Default under the First Lien Credit Agreement, the Second Lien Lender is permitted to receive regularly scheduled principal and interest payments under the Second Lien Credit Agreement.