Loan and Security Agreements

In the first quarter of 2013, the Company entered into a three year 2013 Loan and Security Agreement, as amended on March 28, 2013 by the First Amendment, with Keltic Financial. Borrowings under the 2013 Loan and Security Agreement are to be used for working capital purposes and capital expenditures. The amount available for borrowing may be less than the $10 million under this facility at any given time due to the manner in which the maximum available amount is calculated. The Company has an available borrowing base subject to reserves established at the lender's discretion of 85% of Eligible Receivables up to $10 million under this facility. Eligible Receivables do not include Heritage Labs receivables, certain Hooper Holmes Services receivables, and other receivables deemed ineligible by Keltic Financial. Eligible Receivables include only billed receivables such that borrowing capacity may be affected by the Company's billing cycles. As of December 31, 2013, the lender applied a discretionary reserve of $1.5 million. Available borrowing capacity, net of this discretionary reserve was $2.0 million based on Eligible Receivables as of December 31, 2013. As of December 31, 2013, there were no borrowings outstanding under the 2013 Loan and Security Agreement.

On March 28, 2013, the Company entered into the First Amendment to the 2013 Loan and Security Agreement. In addition to increases in the annual facility fee, monthly collateral management fee and early termination fees, there were revisions to collateral and the first measurement date of the EBITDA covenant was changed. In connection with the amendment, the Company paid fees of $0.2 million.

Interest on revolving credit loans is calculated based on the greatest of (i) the annualized prime rate plus 2.75%, (ii) the 90 day LIBOR rate plus 5.25%, and (iii) 6% per annum. The interest rate on the 2013 Loan and Security Agreement was 6.00% as of December 31, 2013. In connection with the 2013 Loan and Security Agreement, the Company incurred a commitment fee of $0.1 million and other debt issue costs totaling $0.9 million. The Company is also obligated to pay, on a monthly basis in arrears, an annual facility fee equal to 1% of the revolving credit limit of $10 million. During the year ended December 31, 2013, in connection with the 2013 Loan and Security Agreement, the Company incurred $0.1 million in facility fees.

The revolving credit loans are payable in full, together with all accrued interest and fees, on February 28, 2016. The 2013 Loan and Security Agreement provides for the prepayment of the entire outstanding balance of the revolving credit loans. The Company would be required to pay an early termination fee equal to 3% of the revolving credit limit if the termination occurs prior to February 28, 2015, and 2% if the termination occurs after February 28, 2015 but prior to February 28, 2016.

As security for payment and other obligations under the 2013 Loan and Security Agreement, the Company granted Keltic Financial a security interest in all of its, and its subsidiary guarantors, existing and after-acquired property, including receivables (which are subject to a lockbox account arrangement), inventory, equipment and the Basking Ridge, NJ real estate. The aforementioned security interest is collectively referred to herein as the “collateral”.

Pursuant to the terms of the 2013 Loan and Security Agreement, Keltic Financial, at its sole discretion, may establish reserves with respect to (a) any event which in Keltic Financial's reasonable determination diminishes the value of any collateral or (b) any of the Company's contingent liabilities. A reserve may reduce the aggregate amount of indebtedness that may be incurred under the 2013 Loan and Security Agreement.

The 2013 Loan and Security Agreement contains covenants that, among other things, restricts the Company's ability, and that of its subsidiaries, to:


•	pay any dividends or distributions on, or redeem or retire any shares of any class of capital stock or other equity interests;


•	incur additional indebtedness or otherwise become liable for the indebtedness, except for transactions in the ordinary course of business;


•	permit a change of control of the board of directors and certain senior management positions of the Company without prior consent of Keltic Financial;


•	sell or otherwise dispose of any of the Company's assets, other than in the ordinary course of business;


•	create liens or encumbrances on the Company's assets; and


•	enter into transactions with any of its affiliates on other than an arm's-length or no less favorable basis.

Keltic Financial consented to the change in CEO and CFO that occurred during 2013 as well as the sale of Portamedic. There were no waiver or amendment fees paid or associated with these consents.

The 2013 Loan and Security Agreement contains various covenants, including financial covenants which required the Company to achieve a minimum EBITDA amount (earnings before interest expense, income taxes, depreciation and amortization) beginning with the twelve months ending June 30, 2014 as the first measurement date. The lender recently waived the minimum EBITDA covenants for the 2014 fiscal period. The Company continues to have limitations on the maximum amount of unfunded capital expenditures for each fiscal year.

The failure of the Company or any subsidiary guarantor to comply with any of the covenants or the breach of any of its or their representations and warranties, contained in the 2013 Loan and Security Agreement, constitutes an event of default under the agreement. In addition, the 2013 Loan and Security Agreement provides that "Events of Default" include the occurrence or failure of any event or condition that, in Keltic Financial's sole judgment, could have a material adverse effect (i) on the business, operations, assets, management, liabilities or condition of the Company, (ii) in the value, collectability or salability of the collateral, or (iii) on the ability of the Company and its subsidiary guarantors to perform under the 2013 Loan and Security Agreement.

2009 Loan and Security Agreement

Prior to February 28, 2013, the Company maintained a loan and security agreement (the “2009 Loan and Security Agreement”) with TD Bank, N.A. (“TD Bank”), which was scheduled to expire on March 8, 2013. On February 28, 2013, in conjunction with entering into a new three year 2013 Loan and Security Agreement with Keltic Financial Partners II, LP, the Company terminated the 2009 Loan and Security Agreement with TD Bank. During the years ended December 31, 2012 and 2011, in connection with the TD Bank 2009 Loan and Security Agreement, the Company incurred unused line fees of $0.1 million and $0.1 million, respectively. In addition, the Company was required to pay annual loan fees of $0.1 million for both 2012 and 2011.