Loan Agreement

In 2012, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with The PrivateBank and Trust Company. The Loan Agreement consists of a $40.0 million revolving line of credit facility, which includes a $10.0 million sub-facility for letters of credit. Certain terms of the original Loan Agreement were revised in December 2013 and in September 2016. The Loan Agreement, as amended, expires in August 2020. Due to the lock box arrangement and a subjective acceleration clause contained in the Loan Agreement, any outstanding borrowings under the revolving line of credit are classified as a current liability.

Credit available under the Loan Agreement is based upon:


a)	85% of the face amount of the Company’s eligible accounts receivable, generally less than 60 days past due, and


b)	the lesser of 60% of the lower of cost or market value of the Company’s eligible inventory, generally inventory expected to be sold within 18 months, or $20.0 million.

The applicable interest rates for borrowings are the Prime rate or, if the Company elects, the LIBOR rate plus 1.50% to 1.85% based on the Company’s debt to EBITDA ratio, as defined in the amended Loan Agreement. The Loan Agreement is secured by a first priority perfected security interest in substantially all existing assets of the Company. Dividends are restricted so as not to exceed $7.0 million annually.

At December 31, 2016, the Company had $0.8 million outstanding balance under its revolving line of credit facility and additional borrowing availability of $35.0 million. The carrying amount of the Company’s debt at December 31, 2016 approximates its fair value.The Company paid interest of $0.2 million, $0.5 million and $0.8 million in 2016, 2015 and 2014, respectively. The weighted average interest rate was 3.5% in 2016. The Company had $1.5 million of outstanding letters of credit as of December 31, 2016.

In addition to other customary representations, warranties and covenants, and if the excess capacity is below $10.0 million, the Company is required to meet a minimum trailing twelve month EBITDA to fixed charges ratio, as defined in the amended Loan Agreement, and a minimum quarterly tangible net worth level as defined in the amended Loan Agreement. On December 31, 2016, the Company's borrowing capacity exceeded $10.0 million, therefore, the Company was not subject to these financial covenants, however, for informational purposes the results of the financial covenants are provided below:



Quarterly Financial Covenants	Requirement	Actual
EBITDA to fixed charges ratio	1.10 : 1.00	1.75 : 1.00
Minimum tangible net worth	$45.0 million	$48.6 million