SENIOR CREDIT FACILITY

6 Months Ended

Jul. 03, 2011

Senior Credit Facility [Abstract]

SENIOR CREDIT FACILITY

NOTE F — SENIOR CREDIT FACILITY

As of July 3, 2011, the Company had a $5,000 secured revolving credit agreement (“credit agreement”)with Wells Fargo Bank National Association (“Wells Fargo”) with interest due monthly at LIBOR plus 4.75% (effectively 5.0% at July 3, 2011), due August 30, 2011. At July 3, 2011 and December 31, 2010, approximately$2,996 and $3,263, respectively, was outstanding on the credit facility. The borrowings under the credit facility are limited by specified percentages of the Company’s eligible receivables as defined in the credit agreement. At July 3,2011, approximately $970 of additional borrowings were available under the revolving credit agreement. The credit facility is secured by all assets of the Company.

The provisions of the revolving note include a lock-box agreement and also allow Wells Fargo, in its reasonable credit judgment, to assess additional reserves against, or reduce the advance rate againstaccounts receivable used in the borrowing base calculation. Wells Fargo, in its reasonable credit judgment, can assess additional reserves to the borrowing base calculation or reduce the advance rate against accounts receivable to account forchanges in the nature of the Company’s business that alters the underlying value of the collateral. The reserve requirements may result in an over-advance borrowing position that could require an accelerated repayment of the over-advanceportion. As a result, the Company classifies borrowings under the revolving note as a short-term obligation.

Additionally,under a real estate loan with Wells Fargo, the Company has outstanding $41 at July 3, 2011 and $322 at December 31, 2010. Under the loan agreement, the Company is to make monthly installments of $52 per month plus interest. The Companypaid interest expense of approximately $4 and $8 for the three months ended July 3, 2011 and July 4, 2010 and $8 and $18 for the six months ended July 3, 2011 and July 4, 2010, respectively.

Interest expense under the Wells Fargo credit facility, excluding amortization of debt issue costs and accretion of debt discount, was$67 and $136 for the three and six months ended July 3, 2011 and $107 and $196 for the three and six months ended July 4, 2010.

Default and Waiver Agreements

On January 14, 2010 the Company andWells Fargo executed a Sixth Amendment to the Credit Agreement (the “Sixth Amendment”). The Sixth Amendment amended the Credit Agreement in the following respects:

• Consented to the planned sale of the CES business;

• Revised the definition of “Borrowing Base”, resulting in lower available borrowings;

• Required additional weekly principal payments of $10,000 on the real estate term note; and

• Extended until January 27, 2010, and reduced to $1,000 the previously agreed upon requirement for the Company to raise $2,000 additional capitalthrough subordinated debt, asset sales, or additional cash equity.

On February 14, 2010, we received aletter agreement from Wells Fargo which amended the Credit Agreement as follows:

• Revised the terms of Wells Fargo’s consent to the sale of our CES business; and

• Extended until February 19, 2010 the requirement for the Company to raise $1,000 additional capital through subordinated debt, asset sales, oradditional cash equity.

On April 15, 2010, the Company and Wells Fargo executed a Seventh Amendment to theCredit Agreement (the “Seventh Amendment”). The Seventh Amendment amended the Credit Agreement in the following respects:

• Waived the Company’s noncompliance with the minimum book net worth and maximum capital expenditures from working capital covenants for the yearended December 31, 2009;

• Adjusted the minimum book net worth covenant to $21,500 as of December 31, 2009;

• Adjusted the allowable capital expenditures for the year ended December 31, 2010 to a maximum of $500;

• Incorporated a monthly minimum EBITDA covenant commencing in April, 2010; and

• Eliminated the previously agreed upon requirement for the Company to raise $1,000 additional capital through subordinated debt, asset sales, oradditional cash equity.

In connection with the Seventh Amendment, the Company paid Wells Fargo anaccommodation fee equal to $75.

On December 17, 2010, the Company and Wells Fargo entered into the Eighth Amendment toCredit and Security Agreement (the “Eight Amendment”), pursuant to the following revised terms:

• amortization of the term loan remained at $21 per month through January 31, 2011, when it increased to $52 per month;

• the term loan is to be paid in full upon the earlier of the sale of the Company’s HKEC business or upon maturity;

• the real estate loan was to be paid in full by December 31, 2011, using revolver availability;

• accounts receivable between 91 – 120 days cease to be eligible collateral on the earlier of a sale of the Company’s HKEC business orMay 31, 2011, having been subjected to a cap gradually decreasing from $275 in monthly increments of $50 through May 31, 2011;

• the “percentage of ineligibility” test for accounts owed by an account debtor was to reduce from 35% of the total due from an account debtorto 25%, no later than January 31, 2011;

• a stop loss covenant of ($400) measured monthly on a year-to-date basis commenced January 1, 2011; and

• Capital expenditures during 2011 are limited to $200.

Wells Fargo was paid a $25 accommodation fee in connection with the Eighth Amendment.

On June 30, 2011, the Company and Wells Fargo entered into the Ninth Amendment to Credit and Security Agreement (the “Ninth Amendment”). In the Ninth Amendment, Wells Fargo agreed to extendour senior credit facility through August 30, 2011, pursuant to the following revised terms:

• a reduced revolver availability of $5,000;

• a reduced interest rate of Daily Three Month LIBOR plus 4.75%; and

• an addition of up to the lesser of $300 or five percent (5%) of the aggregate amount of accounts receivable.

Wells Fargo was not paid an accommodation fee in connection with the Ninth Amendment.

The current agreement with Wells Fargo expires on August 30, 2011. The Company is currently renegotiating terms of a new creditfacility with Wells Fargo, and anticipates having a new credit facility in place by August 30, 2011 (See additional discussion at Note N — Management Plans).

The Company has promissory notes outstanding to BDeWees, Inc. XGenIII, Ltd., and John A. Martell, in the principal amounts of $2,000, $2,000 and $2,079, respectively (together the “SubordinatedIndebtedness”) (See Note I, Related Party Transactions). Subordination agreements have been executed which subordinate the obligations of the Company under the Subordinated Indebtedness to the Wells Fargo credit facility.