8. LONG-TERM DEBT

Long-term debt consists of the following:


	January 31, 2015		July 31, 2014
	(in thousands)
Bank Term Loan under Credit Agreement	$	25,000	$	48,125
Bank Term Loan – Commerzbank		3,588		3,841
Seller Financing - Promissory Notes		—		18,000

Total debt		28,588		69,966
Less: financing fees		(1,072)		(1,218)
Less: current portion		(1,579)		(3,831)

Total long-term debt	$	25,937	$	64,917

The debt principal payments for the next five years and thereafter are as follows:


Payments due by fiscal year	Debt Principal Payments
	(in thousands)
2015	$	1,131
2016		2,575
2017		2,888
2018		3,825
Thereafter		18,169

Total	$	28,588

Credit Agreement

On December 15, 2014, the Company entered into a credit agreement (the “ Credit Agreement”) with Everett Charles Technologies LLC, a wholly owned subsidiary of the Company (“ECT” and together with the Company, the “Borrowers”), Silicon Valley Bank, as lender, administrative agent and issuing lender (“SVB”), and the several lenders from time to time party thereto (the “Lenders”). The Credit Agreement provides for a senior secured credit facility, consisting of a term loan facility (the “Term Loan”), in favor of the Borrowers in the aggregate principal amount of $25.0 million which was advanced to the Company on December 15, 2014 (the “Facility”).

The proceeds of the Term Loan were used to pay off $25.0 million of the outstanding indebtedness under the previous credit facility that was advanced to the Company pursuant to that certain credit agreement entered into on November 27, 2013 with ECT, SVB as lender, administrative agent and issuing lender, and the lenders from time to time party thereto (the “Original Credit Agreement”). As of December 15, 2014, no amounts remain outstanding under the credit facility issued under the Original Credit Agreement.

All obligations under the Facility are secured by a first priority security interest in substantially all of the Borrowers’ existing and future assets, including a pledge of the stock or other equity interests of the Borrowers’ domestic subsidiaries and of any first tier foreign subsidiaries, provided that not more than 66% of the voting stock of any such foreign subsidiaries shall be required to be pledged.

The Credit Agreement requires that the Term Loan be repaid in quarterly installments, with 5% of the principal due the first year, 10% of principal due in each of the second and third years, 15% of principal due the fourth year, and a final payment of $15 million due on December 14, 2018 (the “Maturity Date”). The outstanding balance of the Term Loan may, at the Borrowers’ option, be prepaid at any time in whole or in part without premium or penalty, other than customary breakage costs, if any, subject to the terms and conditions of the Credit Agreement.

As the terms of the Credit Agreement were not substantially different from the terms of the Original Credit Agreement, the Company accounted for this transaction as a modification of debt, and accordingly continues to recognize defined financing fees over the term of the Credit Agreement.

Borrowings made under the Facility bear interest, at a base rate plus a margin (such margin not to exceed a per annum rate of 1.75%) based on a ratio of the Company’s consolidated senior debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Leverage Ratio”), or at a LIBOR rate plus a margin (such margin not to exceed a per annum rate of 2.75%) based on the Leverage Ratio. The interest rate otherwise payable under the Facility will be subject to increase by 2.0% per annum during the continuance of a payment default and may be subject to increase by 2.0% per annum during the continuance of any other event of default. As of January 31, 2015, the interest rate in effect on the Facility was 2.63%.

Covenants

The Credit Agreement contains customary affirmative and negative covenants, subject in certain cases to baskets and exceptions, including negative covenants with respect to indebtedness, liens, fundamental changes, dispositions, restricted payments, investments, ERISA matters, matters relating to subordinated debt, affiliate transactions, sale and leaseback transactions, swap agreements, accounting changes, negative pledge clauses, clauses restricting subsidiary distributions, lines of business, amendments to certain documents and use of proceeds. The Credit Agreement also contains customary reporting and other affirmative covenants. The Credit Agreement contains a consolidated fixed charge coverage ratio and consolidated leverage ratio.

The Company’s obligations under the Facility may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes customary events of default, including payment defaults, the inaccuracy of representations or warranties, the failure to comply with covenants, ERISA defaults, judgment defaults, bankruptcy and insolvency defaults and cross defaults to material indebtedness

As of January 31, 2015, the Company was in compliance with all covenants under the Credit Agreement.

Seller Financing – Promissory Notes

As described in Note 3 above, pursuant to the Purchase Agreement, in connection with the closing of the Dover Acquisition, the Company issued promissory notes having an aggregate principal amount of $20.0 million to Dover. During the three months ended January 31, 2014, the original principal amount of the promissory notes issued to Dover was reduced by $2.0 million, when the company executed leases for two new facilities, which triggered a reduction to the notes in accordance with the provisions of the notes. On November 26, 2014, the Company repaid in full all outstanding amounts under these promissory notes. The $16.25 million payoff amount reflected the principal amount of $18.0 million that was outstanding under the original promissory notes, less $1.75 million pursuant to a reduction in principal for which the Company was entitled under the original promissory notes. Such reduction related to prepayment of the promissory notes before January 1, 2015 and was recorded as a gain on repayment of subordinated debt as a component of other income in the three and six months ended January 31, 2015 in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). As a result of this repayment during the interest-free period, the Company reversed approximately $0.9 million of accrued interest and recorded the benefit as a component of other income in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss) for three and six months ended January 31, 2015.