4.       Debt

(a) Revolving credit facility 

On September 22, 2011, the Company signed a Revolving Credit and Security Agreement with PNC Bank, National Association and its Canadian branch (collectively, “PNC”). This revolving credit facility, in both the United States and Canada (collectively, the “PNC Facility”), has a term of three years expiring in September 2014. Advances made under the revolving credit facility bear interest at the base commercial lending rate of PNC in the respective country plus 0.75 percent. The base commercial lending rate of each respective country of borrowing should approximate prime rate. The previous revolving loan agreement with Wells Fargo Capital Finance Corporation (“Wells Fargo”) was repaid on September 22, 2011.

At September 29, 2013 there was a Canadian dollar denominated credit balance of $378. At December 30, 2012, there was a Canadian dollar denominated debt balance of $1,245.

The maximum amount of funds available under the PNC Facility is $45 million. Availability under the revolving credit facility is subject to certain conditions, including borrowing base conditions based on the eligible inventory and accounts receivable, and certain conditions which are not objectively determinable. The Company is required to use a “lock-box” arrangement for the PNC Facility, whereby remittances from customers are swept daily to reduce the borrowings under the revolving credit facility.

The PNC Facility is jointly and severally guaranteed by the Company and secured by the assets and capital stock of each of the Company’s subsidiaries and its future subsidiaries.

The PNC agreement contains certain financial and non-financial covenants (note 4(c)).

(b) Term facility

The Company had a term debt facility with Export Development Canada that expired in October, 2013 (“EDC”, and the “EDC Facility”). The last remaining principal payment of the term loan to EDC of $1,158 was paid on October 1, 2013. The EDC Facility bore interest at LIBOR plus 2.5% to 3.5% depending on the achievement of financial performance levels as specified in the amended debt agreement.

The EDC Facility was jointly and severally guaranteed by the Company and secured by the assets and capital stock of each of the Company’s subsidiaries and its future subsidiaries.

(c) Covenants

The PNC agreement contains certain financial and non-financial covenants, including certain cross-default provisions.

The Company is in compliance with the financial covenants included in the PNC Facility as at September 29, 2013 and management believes that the Company will be in compliance with these covenants for the foreseeable future.

Under the amended PNC Facility, the financial covenants require the Company to maintain minimum amounts of earnings before interest, taxes and depreciation and amortization, limit unfunded capital expenditures and a minimum fixed charge coverage ratio (all as defined in the PNC agreement). The fixed charge coverage ratio will commence in the fiscal quarter ending June 30, 2014. Market conditions have been difficult to predict and there is no assurance that the Company will achieve its forecasts. A failure to comply with covenants could result in an event of default. If an event of default occurs and is not cured or waived, it could result in all amounts outstanding, together with accrued interest, becoming immediately due and payable.