Credit Arrangements

6 Months Ended

Jun. 30, 2014

12.	Credit Arrangements

Credit Facility

The Company has a $8.5 million credit facility with Commerce consisting of a revolving credit facility of up to $2.5 million (the “Revolver”) that matures on December 30, 2016 and a 60-month term loan of $6.0 million (the “Term Loan”).

The Revolver bears interest at the prime rate plus 1.75% (totaling 5% at June 30, 2014) and is adjusted every six months for any change in the prime rate. In addition to changes in the Prime Rate, the rate can be reduced by up to .50% based on certain EBITDA achievement levels. Under the Revolver, the Company may borrow, repay and re-borrow an amount not to exceed the lesser of $2.5 million or the total of 80% of eligible billed and unbilled accounts receivable (less the aggregate outstanding on any letters of credit). There have been no borrowings under the Revolver. The Term Loan bears interest for the first 6 months at the prime rate plus 2.75% (totaling 6% at June 30, 2014), and is adjusted every six months for any change in the prime rate. In addition to changes in the prime rate, the rate can be reduced by up to .50% based on certain EBITDA achievement levels. The Term Loan is interest only for six months followed by 54 monthly principal and interest payments commencing on July 30, 2014 with a balloon payment for any remaining principal balance at maturity.

Subordinated Notes

On October 3, 2012, the Company entered into a Note Purchase Agreement with Massachusetts Capital Resource Company (“MCRC”), in which the Company entered into an 8-year, $4.0 million Subordinated Note due September 30, 2020 with MCRC (the “MCRC Note”). The MCRC Note bears interest at 10.5% and is interest only for the first four years followed by 48 equal principal payments commencing October 31, 2016. The Company must pay a premium of 3% if it prepays the MCRC Note before October 1, 2014 and a 1% premium if it prepays the MCRC Note before October 1, 2015. The MCRC Note is subordinated to the Company’s credit facility with Commerce and contains a Minimum Fixed Charge Ratio covenant that the Company is in compliance with at June 30, 2014.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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