NOTE E – NOTES PAYABLE

                               

On May 4, 2010, Company and its subsidiaries entered into a Loan and Security Agreement (the "Loan Agreement") with Silicon Valley Bank (the "Bank").   On April 25, 2011, the Company, its subsidiaries and the Bank entered into an Amended and Restated Loan and Security Agreement (the "Amended Loan Agreement") in order to, among other things, extend the maturity date of the Loan Agreement and to increase the revolving line of credit (the "Credit Facility") from $5.0 million to $10.0 million. The Company may use the borrowings under the Credit Facility for working capital and general business requirements.

 

The amount available to the Company under the Credit Facility at any given time is the lesser of (a) $10.0 million or (b) the amount available under its borrowing base (two times Adjusted EBITDA, measured on a 12 month trailing average, minus the principal amount of any Term Loan Advances) minus (1) the dollar equivalent amount of all outstanding letters of credit plus an amount equal to the letter of credit reserve amount (as set forth in the Amended Loan Agreement), (2) 10% of each outstanding foreign exchange contract, (3) any amounts used for cash management services, (4) the outstanding principal balance of any advances and (5) the outstanding principal balance of any Term Loan Advances.  Under the Amended Loan Agreement, if the principal outstanding balance of any advance is equal or greater to $1 million for a period of time equal to or greater than 90 days from the funding date, then the principal balance becomes a "Term Loan Advance" and the Company must repay 5% of the original principal amount commencing on the first calendar day of the quarter following the conversion of the advance to a Term Loan Advance and on the first day of each fiscal quarter thereafter.

 

The Credit Facility also includes a sublimit of up to $2.0 million for letters of credit, cash management and foreign exchange services. The interest rate applicable to amounts drawn from the Credit Facility is, at the Company's option, equal to either (i) the Prime Rate plus the Prime Rate Margin (as such terms are defined in the Amended Loan Agreement) or (ii) the LIBOR Rate plus the LIBOR Rate Margin (as defined in the Amended Loan Agreement). The Credit Facility includes an annual fee of 0.375% of the average unused portion of the credit facility.

 

 All unpaid principal and accrued interest is due and payable in full on April 30, 2015, which is the maturity date.  Our obligations under the Credit Facility are secured by substantially all of our assets and the assets of our subsidiaries, including our intellectual property.  The Amended Loan Agreement contains customary terms and conditions for credit facilities of this type.  In addition, we are required to meet certain financial covenants customary with this type of facility, including maintaining a senior leverage ratio and a fixed charge coverage ratio.  The Amended Loan Agreement contains customary events of default.  If a default occurs and is not cured within any applicable cure period or is not waived, our obligations under the Credit Facility may be accelerated.  

 

We were in compliance with all financial covenants under the Credit Facility at June 30, 2011 and, as of that date, we had aggregate borrowing of $6.0 million outstanding  under the Credit Facility at an interest rate of 5%, and no letters of credit.