4. Indebtedness

Debt outstanding as of October 31, 2013, and January 31, 2013, was as follows:


	October 31,			January 31,
(in thousands)	2013			2013
Credit agreement	$	101,000		$	95,000
Capital lease obligations		3,536			3,645
Less amounts representing interest		(870	)		(993	)
Notes payable		14,899			11,676

Total debt		118,565			109,328
Less notes payable and current maturities of long-term debt		(15,822	)		(12,789	)

Total long-term debt	$	102,743		$	96,539

Credit Agreement

The Company maintains a revolving credit facility (the “Credit Agreement”) which extends to March 25, 2016. During the nine months ended October 31, 2013, the Credit Agreement was amended as the Company believed it unlikely that it would be in compliance with its covenants for the quarters ended April 30, 2013, July 31, 2013 and October 31, 2013. The details of each amendment are more fully described below.

On June 4, 2013, the Company and its lenders amended the Credit Agreement to suspend the minimum fixed charge coverage ratio and the maximum leverage ratio covenants for the fiscal quarters ending July 31 and October 31, 2013. It also temporarily added a minimum EBITDA and maximum capital expenditure covenant on a quarterly and fiscal year to date basis. The amendment also modified the definition of Adjusted EBITDA to exclude up to $3.0 million per quarter of relocation expense related to the move of the Company’s headquarters to The Woodlands, Texas.

In connection with the June 2013 amendment, the Company and its domestic subsidiaries granted liens on substantially all of their assets, subject to certain exceptions, including a pledge of up to 65.0% of the equity interests in their first-tier foreign subsidiaries, to secure the Company’s obligations under the Credit Agreement. The term of the agreement was not changed.

Prior to the June 2013 amendment of the Credit Agreement, the Company also maintained a private shelf agreement whereby it could issue up to $150.0 million of unsecured notes before July 8, 2021. In connection with the June 2013 amendment of the Credit Agreement, the shelf agreement was terminated. There were no outstanding notes at the time of the termination.

Due to the continued deterioration in operating results for the quarter ended July 31, 2013, the Company and its lenders amended the Credit Agreement again on September 5, 2013. The September 2013 amendment to the Credit Agreement provided for a waiver of the financial covenants for the quarter ended July 31, 2013. Effective with the September 2013 amendment, the Credit Agreement reduced the commitments from $300.0 million to $200.0 million, provided for interest at variable rates equal to, at the Company’s option, a LIBOR rate plus 1.5% to 3.0% or, a base rate (as defined in the Credit Agreement), plus 0.5% to 2.0%, each depending on the Company’s leverage ratio.

On November 4, 2013, the Company and its lenders amended the Credit Agreement to among other things, (i) reduce the commitments under the Credit Agreement from $200.0 million to $180.0 million, and eliminate the accordion feature under the Credit Agreement; (ii) temporarily increase the interest rate under the Credit Agreement to LIBOR plus 6.0% (or the base rate plus 5.0%); (iii) relax or suspend certain of the Company’s financial covenants on a short-term basis; (iv) reduce the amount of capital expenditures permitted each quarter; (v) require proceeds from asset sales (other than in the ordinary course) to be used to repay amounts outstanding under the Credit Agreement; (vi) decrease the amount of permitted investments; (vii) permit an offering of convertible notes that results in gross proceeds of at least $75.0 million (the “Permitted Convertible Notes Offering”), (viii) eliminate the ability of the Company to incur any additional Priority Indebtedness (as defined in the Credit Agreement), consummate certain acquisitions or make certain restricted payments; and (ix) add-back certain accruals related to any FCPA settlement in computing Consolidated EBITDA.

The November 2013 amendment also provides that effective upon the closing of the Permitted Convertible Notes Offering, described below, that the net proceeds from such offering must be applied to repay amounts outstanding under the Credit Agreement. Pursuant to the terms of the November 2013 amendment on November 12, 2013 (the date the Permitted Convertible Notes Offering was closed) among other things: (i) the commitments under the Credit Agreement were further reduced from $180.0 million to $150.0 million; (ii) the interest rate under the Credit Agreement was reduced to, at the Company’s option, either the LIBOR rate plus 4.0% or the base rate plus 3.0% until the delivery of the financial statements for the fiscal year ended January 31, 2015, at which time the interest rate will vary based on the Company’s leverage; (iii) a minimum Asset Coverage Ratio (generally defined as the ratio of accounts receivable and inventory for the Company and its subsidiaries to outstanding borrowings and letters of credit under the credit agreement) of 2.00 to 1.00 was added to the Credit Agreement; (iv) a covenant was added requiring the Company to have Minimum Liquidity (generally defined as the remaining amount available for borrowing under the revolving credit facility plus up to $15.0 million of unrestricted cash) of at least $50.0 million; (v) the amount of Priority Indebtedness, investments, acquisitions and restricted payments permitted under the Credit Agreement (although such amounts are lower than the amounts permitted prior to the November 2013 amendment); and (vi) amend the financial covenants as follows:


	Quarter Ended
(in thousands except for ratios)	October 31, 2013		January 31, 2014		April 30, 2014		July 31, 2014		October 31, 2014		Thereafter
Minimum Quarterly EBITDA	$	5,000		6,750		11,500		12,500		10,500		—
Minimum Ratio of EBITDA to Fixed Charges		—		—		1.5X		1.5X		1.5X		1.5X
Maximum Funded Debt to EBITDA		—		—		—		—		—		3.0X
Maximum Capital Expenditures (1)	$	—	$	9,500	$	14,000	$	14,000	$	14,000	$	14,000

(1)	Maximum capital expenditures presented above include a rollover feature that allows for any unused portion of the previous quarter’s capital expenditures to be carried forward and utilized only in the next quarter.

On November 12, 2013, the Company received the proceeds net of the Initial Purchaser’s discount and commission from the Convertible Notes Offering in the amount of $106.4 million. As of November 15, 2013, the Company had paid the outstanding balance of the Credit Agreement in full. The balance of the proceeds received from the Convertible Notes Offering were used to pay the additional fees associated with the transaction and other working capital needs. With the pay down on the outstanding balance of the Credit Agreement, the amount available for borrowing under on this facility is approximately $71.5 million (the $150 million of commitments under the Credit Agreement less outstanding letters of credit of $28.5 million and the $50.0 million of required minimum liquidity).

The Company incurred a total of $1.5 million in fees in connection with the June 2013, September 2013 and November 2013 amendments. Of that amount, $0.4 million was written off during the third quarter ending October 31, 2013 as this portion of the fee was associated with the reduction in the revolver capacity associated with the September 2013 amendment. The Company expects to write off an additional $0.3 million, in the fourth quarter of fiscal 2014, associated with the reduction in the borrowing capacity associated with the November 2013 amendment. The remaining portion of the fees will be amortized over the life of the agreement.

As of October 31, 2013, debt outstanding will mature as follows:


					Capitalized
	Notes		Credit		Lease
(in thousands)	Payable		Agreement		Obligations		Total
2014	$	14,583	$	—	$	1,239	$	15,822
2015		296		—		1,085		1,381
2016		12		101,000		342		101,354
2017		8		—		—		8

As of October 31, 2013, we are in compliance with our covenants as amended.

4.25% Convertible Senior Notes due 2018

On November 5, 2013, in connection with a private offering, the Company entered into a purchase agreement (the “Purchase Agreement”) with Jefferies LLC (the “Initial Purchaser”) relating to the sale by the Company of $110.0 million aggregate principal amount of 4.25% Convertible Notes due 2018 (the “Notes”), in a private placement to “qualified institutional buyers” in the United States, as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Purchase Agreement contained customary representations, warranties and covenants by the Company together with customary closing conditions. Under the terms of the Purchase Agreement, the Company agreed to indemnify the Initial Purchaser against certain liabilities. The offering of the Notes was completed on November 12, 2013, in accordance with the terms of the Purchase Agreement. The sale of the Notes generated net proceeds of approximately $105.2 million after deducting the Initial Purchaser’s discount and commission and the estimated offering expenses payable by the Company. The Purchase Agreement also included an option to purchase up to an additional $15.0 million aggregate principal amount of Notes. On December 5, 2013, the Initial Purchaser exercised this option, which generated proceeds net of the Initial Purchaser’s discount and commission in the amount of $14.6 million. The Company used these proceeds primarily as an increase in cash on hand. The Notes were issued pursuant to an Indenture, dated November 12, 2013 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Notes are senior, unsecured obligations of the Company. The Notes will be convertible, at the option of the holders, into consideration consisting of, at the Company’s election, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock (and cash in lieu of fractional shares) until the close of business on the scheduled trading day immediately preceding May 15, 2018. However, before May 15, 2018, the Notes will not be convertible only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2013 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on such trading day; (2) during the consecutive five business day period immediately after any five consecutive trading day period (the five consecutive trading day period being referred to as the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes, as determined following a request by a holder of the Notes in the manner required by the Indenture, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; (3) upon the occurrence of specified corporate events described in the Indenture; and (4) if the Company has called the Notes for redemption. The Company will be required to settle conversions in shares of the Company’s common stock, together with cash in lieu of any fractional shares, until it has obtained stockholder approval.

The 4.25% Convertible Notes bear interest at a rate of 4.25% per year, payable semi-annually in arrears in cash on May 15 and November 15 of each year, beginning on May 15, 2014. The 4.25% Convertible Notes will mature on November 15, 2018, unless earlier repurchased, redeemed or converted.

The initial conversion rate is 43.6072 shares of the Company’s common stock per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $22.93 per share of the Company’s common stock). The conversion rate will be subject to adjustment upon the occurrence of certain events. In addition, the Company may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including the Company’s calling the Notes for redemption.

On and after November 15, 2016, and prior to the maturity date, the Company may redeem all, but not less than all, of the Notes for cash if the sale price of the Company’s common stock equals or exceeds 130% of the applicable conversion price for a specified time period ending on the trading day immediately prior to the date the Company delivers notice of the redemption. The redemption price will equal 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, upon the occurrence of a fundamental change (as defined in the Indenture), holders of the Notes will have the right, at their option, to require the Company to repurchase their Notes in cash at a price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In accordance with Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options, the Company will separately account for the liability and equity conversion components of the 4.25% Convertible Notes. The principal amount of the liability component of the 4.25% Convertible Notes was $93.3 million as of the date of issuance based on the present value of its cash flows using a discount rate of 8.0%, our approximate borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity conversion component was $16.7 million. A portion of the initial purchaser’s discount and commission and the offering costs totaling $0.6 million was allocated to the equity conversion component. The liability component will be accreted to the principal amount of the 4.25% Convertible Notes using the effective interest method over five years.

In accordance with guidance in ASC 470-20 and ASC 815-15, Embedded Derivatives , the Company determined that the embedded conversion components and other embedded derivatives of the 4.25% Convertible Note do not require bifurcation and separate accounting.