Loan Agreement

In 2012, the Company entered into a Loan and Security Agreement (“Loan Agreement”) which expires in August 2017. Due to the lock box arrangement and a subjective acceleration clause contained in the borrowing agreement, the revolving line of credit is classified as a current liability. 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. In December 2013, the Company entered into a Second Amendment to Loan and Security Agreement ("Second Amendment") which revised certain terms of the original Loan Agreement.

Credit available under the Loan Agreement is based upon:


a)	80% of the face amount of the Company’s eligible accounts receivable, generally less than 60 days past due, and


b)	the lesser of 50% 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 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, 2015, the Company had $0.9 million outstanding balance under its revolving line of credit facility and additional borrowing availability of $30.0 million. The Company paid interest of $0.5 million, $0.8 million and $1.1 million in 2015, 2014 and 2013, respectively. The weighted average interest rate was 3.26% in 2015. The Company had $1.5 million of outstanding letters of credit as of December 31, 2015.

In addition to other customary representations, warranties and covenants, we are required to meet a minimum trailing twelve month EBITDA, as defined in the Loan Agreement, to fixed charges ratio and a minimum quarterly tangible net worth level as defined in the Second Amendment. On December 31, 2015, we were in compliance with all financial covenants as detailed below:



Quarterly Financial Covenants	Requirement	Actual
EBITDA to fixed charges ratio	1.10 : 1.00	3.12 : 1.00
Minimum tangible net worth	$45.0 million	$54.0 million