7. DEBT ARRANGEMENTS

Long-term debt consisted of the following at September 30:

	2011		2010

Mortgage note payable to a bank, payable in monthly principal and interest installments of $40. Interest is fixed at 7.1% through June 30, 2010, and thereafter fixed at 4.1%. Collateralized by underlying property. Due November, 2012.	$	3,573	$	3,896

Mortgage note payable to a bank, payable in monthly principal and interest installments of $19. The interest rate is 6.1%. Collateralized by underlying property. Due February, 2011. (a)		—		1,346

Mortgage note payable to a bank, payable in monthly principal and interest installments of $17. Interest is fixed at 7.1% through June 30, 2010, and thereafter fixed at 4.1%. Collateralized by underlying property. Due November, 2012.		1,674		1,809

Note payable to a bank, payable in monthly principal installments of $9 plus interest. The interest rate is 6.1%. Collateralized by West Lafayette and Evansville properties. Due December, 2010. (a)		—		1,096

Replacement note payable to a bank, payable in monthly principal installments of $14 plus interest. The interest rate is 7.5%. Collateralized by West Lafayette and Evansville properties. Due November, 2012. (a)		1,245		—

Note payable to Algo Holdings, payable in monthly installments of $10. There is no interest on this note if paid within terms. Due May 1, 2012. See Note 12.		85		185
	$	6,577	$	8,332

Less current portion		735		1,855

	$	5,842	$	6,477

The following table summarizes our principal payment obligations for the years ending September 30:

2012	$	735
2013		5,842
	$	6,577

Cash interest payments of $647 and $1,067 were made in 2011 and 2010, respectively.

Mortgages and note payable

We have notes payable to Regions Bank (“Regions”) aggregating approximately $6,500.

Regions notes payable currently include two outstanding mortgages on our facilities in West Lafayette and Evansville, Indiana, which total $5,247. The mortgages mature in November 2012 with an interest rate fixed at 4.1% and monthly principal payments of approximately $38 plus interest.

(a) On November 29, 2010, we executed amendments on two loans with Regions. Regions agreed to accept a $500 principal payment on the note payable maturing on December 18, 2010 and a $500 principal payment on one mortgage maturing on February 11, 2011. The principal payments were made on December 17, 2010 and February 11, 2011, respectively. Upon receipt of these two payments, Regions incorporated the two loans into a replacement note payable for $1,341 maturing on November 1, 2012. The replacement note payable bears interest at a per annum rate equal to the 30-day LIBOR plus 300 basis points (minimum of 4.5%) with monthly principal payments of approximately $14 plus interest. The replacement note payable is secured by real estate at our West Lafayette and Evansville, Indiana locations. At September 30, 2011, the replacement note payable had a balance of $1,245.

As part of the amendment, Regions also agreed to amend the loan covenants for the related debt to be more favorable to us. Regions requires us to maintain certain ratios including a fixed charge coverage ratio and total liabilities to tangible net worth ratio. The fixed charge coverage ratio calculation has been adjusted with a ratio required of not less than 1.25 to 1.00. Also, the total liabilities to tangible net worth ratio has been adjusted to not greater than 2.10 to 1.00. Provided we comply with the revised covenant ratios, which are common to such agreements, the amendment removes limitations on the Company’s purchase of fixed assets. At September 30, 2011, we were in compliance with these ratios. Based on projections for fiscal 2012, we expect to be in breach of the Regions fixed charge covenant for our first fiscal quarter due to lower than expected income, which we do not expect to continue into the remainder of fiscal 2012. On December 20, 2011, Regions waived compliance with this covenant for the period ending December 31, 2011. As a result of our first fiscal quarter results, we will likely be out of compliance with the fixed charge coverage for the second fiscal quarter ending March 31, 2012, as our covenants are calculated on a fiscal year cumulative basis, when we will again need to obtain a waiver from Regions. Failure to obtain such waiver could accelerate the maturity of the loans and cause a cross default with our other lender.

The Regions loans contain both cross-default provisions with each other and with the revolving line of credit with Entrepreneur Growth Capital described below.

The mortgages and replacement note payable with Regions mature in the first quarter of fiscal 2013. We intend to refinance the amounts in lieu of making balloon payments for the remaining principal balances. We may be unsuccessful in renegotiating the terms of the debt or they may be unfavorable to us. For these reasons, if we are unsuccessful at refinancing our long-term debt, our operating results and financial condition could be adversely affected.

Revolving Line of Credit

On January 13, 2010, we entered into a new $3,000 revolving line of credit agreement (“Credit Agreement”) with Entrepreneur Growth Capital LLC (“EGC”), which we use for working capital and other purposes, to replace the PNC Bank line of credit that expired on January 15, 2010. The initial term of the Credit Agreement was set to expire on January 31, 2011. If we prepay prior to the expiration of the initial term (or any renewal term), then we are subject to an early termination fee equal to the minimum interest charges of $15 for each of the months remaining until expiration.

Borrowings bear interest at an annual rate equal to Citibank’s Prime Rate plus five percent (5%), or 8.25% as of September 30, 2011, with minimum monthly interest of $15. Interest is paid monthly. The line of credit also carries an annual facilities fee of 2% and a 0.2% collateral monitoring fee. Borrowings under the Credit Agreement are secured by a blanket lien on our personal property, including certain eligible accounts receivable, inventory, and intellectual property assets, and a second mortgage on our West Lafayette and Evansville real estate and all common stock of our U.S. subsidiaries and 65% of the common stock of our non-United States subsidiary. Borrowings are calculated based on 75% of eligible accounts receivable. Under the Credit Agreement, the Company has agreed to restrict advances to subsidiaries, limit additional indebtedness and capital expenditures and comply with certain financial covenants outlined in the Credit Agreement. On December 23, 2010, we negotiated an amendment to this Credit Agreement. As part of the amendment, the maturity date was extended to January 31, 2013. The Amendment reduced the minimum tangible net worth covenant requirement from $9,000 to $8,500 and waived all non-compliances with this covenant through the date of the Amendment. The Credit Agreement also contains cross-default provisions with the Regions loans and any future EGC loans. At September 30, 2011, we were in compliance with the minimum tangible net worth covenant requirement.

At September 30, 2011, we had available borrowing capacity of $2,462 on this line, of which $1,346 was outstanding.