4—DEBT

As of May 31, 2014, the Company had $76.5 million outstanding on its $130 million secured revolving credit facility (which, as amended, is referred to herein as the “2012 Agreement”) with a syndicate of banks. The lenders’ loan commitment may be increased under certain circumstances. On March 21, 2014, in connection with the Company’s acquisition of Gum Technology, the 2012 Agreement was amended to adjust certain financial covenants.

The maturity date for the revolving loans under the 2012 Agreement is July 9, 2017. Interest rates under the 2012 Agreement are based on either the London Interbank Offered Rate (“LIBOR”) or the prime rate, depending on the selection of available borrowing options under the 2012 Agreement. Pursuant to the 2012 Agreement, the interest rate margin over LIBOR can range between 2% and 4%, depending upon the ratio of the Company’s funded debt to earnings before interest, taxes, depreciation and amortization (defined in the 2012 Agreement as the “Total Leverage Ratio”).

The 2012 Agreement provides that the Total Leverage Ratio shall not exceed 4.25 on May 31, 2014, 3.50 on August 31, 2014 and 3.0 at the end of each quarter thereafter. In addition, the Company must maintain a Fixed Charge Coverage Ratio, as defined in the 2012 Agreement of not less than 1.35. Annual capital expenditures will be restricted to $15 million ($17.5 million for fiscal 2014) if the Total Leverage Ratio is greater than 2.50 for the last two consecutive fiscal quarters. The Company’s obligations under the 2012 Agreement are secured by substantially all of the Company’s assets. At May 31, 2014, the Company was in compliance with the covenants of the 2012 Agreement.

In 2009, the Iowa Department of Economic Development (“IDED”) provided two five-year non-interest bearing loans to the Company with terms as follows: (1) a $1.0 million term loan to be repaid in 60 equal monthly payments of $16,667 beginning December 1, 2009; and (2) a $1.0 million loan, which was forgivable if the Company maintained certain levels of employment at the Cedar Rapids plant. During the third quarter of fiscal 2014, the Company repaid the outstanding balance on the $1.0 million term loan. In May 2014, the Company was notified by IDED that its obligations to maintain certain levels of employment at the Cedar Rapids plant had been met and that repayment of the $1.0 million forgivable loan had been waived. The Company recorded the loan forgiveness of $1.0 million as non-operating income.

Pursuant to the 2012 Agreement, the Company may declare and pay dividends on its common stock in an amount not to exceed, in any consecutive four quarters, the lesser of $10 million or 50% of Free Cash Flow, as defined in the 2012 Agreement. As of May 31, 2014, the Company was not permitted to pay dividends.