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Note 5 - Loan Payable
 6 Months Ended
Jun. 30, 2011
Debt Disclosure [Text Block]
5. LOAN PAYABLE:

The Company has credit agreements with the Bank of Montreal that provides it access to the following facilities:

 
1.
a non-revolving, reducing demand loan facility that was used to fund the acquisition of Innerwise, Inc. during 2007, under which $0.3 million was owing as of June 30, 2011. This facility is repayable in equal monthly installments of $159,520 plus interest. The Company can elect to pay interest either at the Bank of Montreal (“BMO”) U.S. Base Rate plus 1.30% or at LIBOR plus 3.25%. The Company has elected to pay interest based on LIBOR plus 3.25%. All interest is payable monthly in arrears as incurred. This facility requires that the Company make annual cash sweep payments to the Bank based on certain metrics in the Company’s audited financial statements, as described in more detail below. The remaining balance under this facility will be fully repaid by September 2011;

 
2.
a non-revolving, reducing demand loan facility for $2.0 million which can be used to finance the repurchase of the Company’s common shares. As of June 30, 2011, the Company had no borrowings under this credit facility. Any advances under this facility are repayable in equal monthly installments over 60 months plus interest. This facility is subject, following the first draw, to an undrawn aggregate standby fee of 0.20% which is payable quarterly in arrears. The Company can elect to pay interest either at the Bank of Montreal (“BMO”) U.S. Base Rate plus 1.30% or at LIBOR plus 3.25%. All interest is payable monthly in arrears as incurred. This facility requires that the Company make annual cash sweep payments to the Bank based on certain metrics in the Company’s audited financial statements, as described in more detail below;
 

 
3.
an operating demand loan for $1.0 million to fund operational requirements. As of June 30, 2011, the Company had no borrowings under this credit facility. The Company has agreed to pay any outstanding principal amounts advanced under this facility, plus interest at a rate of BMO U.S. Base Rate plus 1.30%. Interest is payable monthly in arrears. Any borrowings under the facility are expected to fluctuate widely, with periodic clean-up at a minimum on an annual basis. The Company has also agreed to pay to the Bank a monthly monitoring fee of $500. The Operating Demand Loan Facility is payable on demand at any time, at the sole discretion of the Bank, with or without cause; and

 
4.
a Treasury Risk Management Facility for $3.5 million to be used as a line to fund any settlement risk exposure that may arise from foreign exchange contracts the Company enters into from time to time to mitigate the exchange rate risk on portions of its Canadian dollar exposure. At June 30, 2011, the Company had forward exchange contracts to trade $12.6 million U.S. dollars in exchange for Canadian dollars.

Pursuant to the credit agreements, the Company has agreed to comply with certain customary non-financial covenants regarding maintenance of insurance; payment of taxes; disposition of major assets; compliance with statutes and with environmental standards; reporting requirements; timely provision of notices of default; absence of material judgments; access to books and records; prohibition on assumption of additional debt or guarantee obligations by the Company, subject to certain exceptions for capital expenditures; and prohibition on the payment of dividends.

The non-revolving reducing demand loan facilities also require that the Company complies with the following financial covenants: (i) Maximum Senior Funded Debt to EBITDA of 2.00:1; (ii) Maximum Total Funded Debt to EBITDA of 2.50:1; and (iii) Minimum Fixed Charge Coverage of 1.25:1. Further, the Company’s Maximum Annual Capital Expenditures cannot exceed $3.6 million per year, which such limit will be reviewed on an annual basis. As of and for the period ended June 30, 2011, the Company was in compliance with these covenants.

In addition the Company’s credit facility also requires it to make annual cash sweep payments on its non-revolving, reducing demand loans if certain excess cash thresholds are achieved. As of June 30, 2011, the estimated cash sweep payment for the year ended December 31, 2010, which was payable during the three months ended June 30, 2011, would have been sufficient to fully repay all amounts outstanding under the credit facility, and this cash sweep payment was waived by the Bank. On July 27, 2011 our credit agreements with the Bank of Montreal were amended as more fully described under Note 14; Subsequent Events and $2.5 million was drawn under the amended non-revolving, reducing demand loan facility to fund the acquisition of EPAG Domainservices GmbH on August 1, 2011.

Principal loan repayments over the next five years are as follows:

2011
 
$348,762