7. Debt

On June 30, 2015, we entered into an amendment to the Company’s Credit Agreement with its lender, Sovereign Bank for the purpose of renewing, extending and increasing the Company’s line of credit under such agreement.

Credit Agreement

The Company’s Credit Agreement includes term loan and revolving loan features, and also allows for the issuance of letters of credit and other promissory notes. The Company can borrow up to a maximum of $20.0 million pursuant to the Credit Agreement, subject to the terms and limitations discussed below.

The Credit Agreement provides for a revolving loan feature, or Line of Credit, that permits the Company to borrow, repay and re-borrow, from time to time until June 30, 2017, up to the lesser of (i) $20.0 million or (ii) a sum equal to (a) 80% of our eligible accounts receivable (less the outstanding principal balance of term loans and letters of credit under the Credit Agreement) and (b) the lesser of (i) 50% of the value of certain of the Company’s core equipment or (ii) $12,500,000. The Company has not utilized the Line of Credit since its inception. Because the Company’s ability to borrow funds under the Line of Credit is tied to the amount of the Company’s eligible accounts receivable and value of certain of its core equipment, if the Company’s accounts receivable decrease materially for any reason, including delays, reductions or cancellations by clients or decreased demand for the Company’s services, or the Company’s value of its pledged core equipment decreases materially, the Company’s ability to borrow to fund operations or other obligations may be limited.

The Credit Agreement also provides for a term loan feature. The Company has no outstanding notes payable under the term loan feature of the Credit Agreement, and any notes outstanding under this feature would count towards the maximum amounts the Company may borrow under the Credit Agreement.

The Company has three outstanding notes payable under the Credit Agreement that are not under the term loan feature (and therefore do not count towards the maximum amounts that the Company may borrow) which were incurred to purchase (and/or are secured by) equipment, representing a remaining aggregate principal amount of $1,938,000 as of December 31, 2016.

The Company’s obligations under the Line of Credit are secured by a security interest in the Company’s accounts receivable and certain of the Company’s core equipment, and the term loans are also secured by certain of the Company’s core equipment. Interest on amounts outstanding under the Credit Agreement accrues at the lesser of 4.5% or the prime rate (as quoted in the Wall Street Journal), subject to an interest rate floor of 2.5%. The Credit Agreement contains customary covenants for credit facilities of this type, including limitations on disposition of assets, mergers and other fundamental changes. The Company is also obligated to meet certain financial covenants, including (i) a ratio of (x) total liabilities minus subordinated debt to (y) tangible net worth plus subordinated debt not to exceed 1.00:1.00, (ii) a ratio of current assets to current liabilities of at least 1.50:1.00 and (iii) required tangible net worth of not less than $150,000,000. The Company was in compliance with all covenants under the Credit Agreement, including specified ratios, as of December 31, 2016.

Sovereign Bank has also issued a letter of credit in the amount of $1,767,000 in favor of AIG Assurance Company in order to support payment of certain insurance obligations of the Company. The principal amount of this letter of credit is collateralized by certain of the Company’s core equipment and does not count as funds borrowed under the Company’s Line of Credit.

Other Indebtedness

The Company paid in full, during August 2016, one note payable to a finance company for various insurance premiums. This note had a remaining principal balance of $838,000 at December 31, 2015.

In addition, the Company leases certain vehicles under leases classified as capital leases. The Company’s balance sheets as of December 31, 2016 and 2015 includes capital lease obligations of $419,000 and $1,199,000, respectively.

Maturities of Debt

The following tables set forth the Company’s aggregate principal amount of outstanding notes payable and the interest rates and monthly payments as of December 31, 2016 and 2015.


	Year Ended December 31,
	2016		2015
Notes payable to commercial banks
Aggregate principal amount outstanding	$	1,938,000	$	8,654,000
Interest rates		3.5% - 4.5%		3.5% - 4.5%


	Year Ended December 31,
	2016			2015
Notes payable to finance company for insurance
Aggregate principal amount outstanding	$	—	$	838,000
Interest rates		—		2.35%

The aggregate maturities of the notes payable at December 31, 2016 are as follows:


January 2017 - December 2017					$	1,938,000

The Company leases vehicles and certain specialized seismic equipment under leases classified as capital leases.

The aggregate maturities of obligations under capital leases at December 31, 2016 are as follows:


January 2017 - December 2017					$	419,000

Interest rates on these leases ranged from 3.16% to 6.72%.