7. Debt

On June 30, 2015, the Company entered into an amendment to its Credit Agreement with its lender, Sovereign Bank for the purpose of renewing, extending and increasing the Company’s line of credit under such agreement. The Credit Agreement was renewed on June 30, 2017. In a merger effective September 11, 2017, Sovereign Bank merged with and into Veritex Bank.

Credit Agreement

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, 2018, up to the lesser of (i) $20.0 million or (ii) a sum equal to (a) 80% of the Company’s 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 value of the Company’s pledged core equipment decreases materially, the Company’s borrowing ability to fund operations or other obligations may be reduced.

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 toward the maximum amounts the Company may borrow under the Credit Agreement.

The Company paid off the remaining equipment note payable during the third quarter of 2017. The Company does not currently have any notes payable under the Credit Agreement.

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 $125,000,000. The Company was in compliance with all covenants under the Credit Agreement, including specified ratios, as of December 31, 2017.

Veritex Bank has issued three letters of credit as of December 31, 2017. The first letter of credit is in the amount of $1,767,000 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. The second letter of credit is in the amount of $583,000 to support the company’s workers’ compensation insurance and is secured by a certificate of deposit. The third letter of credit is unsecured and in the amount of $75,000 to support certain performance obligations of the Company. None of the letters of credit count as funds borrowed under the Company’s Line of Credit.

Other Indebtedness

The Company paid in full, during November 2017, one note payable to a finance company for various insurance premiums.

In addition, the Company leases certain seismic recording equipment and vehicles under leases classified as capital leases. The Company’s Consolidated Balance Sheets as of December 31, 2017 and 2016 include capital lease obligations of $7,865,000 and $419,000, respectively.

Maturities of Debt

The Company’s aggregate principal amount (in thousands) of outstanding notes payable and the interest rates and monthly payments as of December 31, 2017 and 2016 are as follows:


	December 31, 2017		December 31, 2016
Notes payable to commercial banks
Aggregate principal amount outstanding	$	—	$	1,938
Interest rates		—		3.50% - 4.50%

The Company’s aggregate maturities of obligations under capital leases (in thousands) at December 31, 2017 are as follows:

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

January 2018 - December 2018

January 2019 - December 2019

January 2020 - December 2020

January 2021 - December 2021

Obligations under capital leases