NOTE 5: LONG-TERM OBLIGATIONS

The following is a summary of long-term obligations outstanding:

	Final Maturity Date			December 31, 2013			December 31, 2012

				(in thousands)
Senior secured term loan	August 2020	4.75	%	$	299,250		$	—
Senior revolving loan	August 2018	n/a			—			199,000
Capital leases	April 2017	4.3	%		6,548			2,860
Note payable	October 2014	2.1	%		4,079			7,080
Acquisition-related liabilities	March 2014	n/a			2,580			3,499


Total long-term obligations, including current portion					312,457			212,439


Current maturities of long-term obligations
Senior secured term loan					(3,000	)		—
Capital leases					(3,690	)		(1,640	)
Notes payable					(4,079	)		(4,012	)
Acquisition-related liabilities					(2,580	)		(3,499	)


Total current maturities of long-term obligations					(13,349	)		(9,151	)


Total Long-term obligations				$	299,108		$	203,288

Credit Facilities

2013 Secured Credit Facility

On August 27, 2013, we entered into a $400 million senior secured credit facility consisting of a senior revolving loan in a principal amount equal to $100 million, maturing in August 2018, and a senior secured term loan in a principal amount equal to $300 million, maturing in August 2020 (the "Credit Facility"). The Credit Facility replaces the Fourth Amended and Restated Credit and Security Agreement, dated as of April 25, 2011 (the "Former Credit Facility").

During the term of the Credit Facility, Epiq has the right, subject to compliance with the covenants specified in the Credit Facility, to increase the Credit Facility to a maximum of $600 million including increasing the total borrowing capacity under the senior revolving loan up to a maximum of $200 million. The Credit Facility is secured by liens on our real property and a significant portion of our personal property.

Proceeds from the senior secured term loan were used to pay for, among other items, fees and expenses of approximately $8.1 million associated with the Credit Facility, and the repayment of the outstanding balance under the Former Credit Facility, which was then terminated. During the year ended December 31, 2013, approximately $1.0 million was included in interest expense on the accompanying Consolidated Statements of Income, related to the write-off of a portion of the unamortized deferred debt issuance costs for the Former Credit Facility.

The senior secured term loan bears interest as follows: (1) 2.75% plus prime rate subject to a 2% floor; or (2) 3.75% plus one, two, three or six month LIBOR rate subject to a 1% LIBOR floor. As of December 31, 2013, all outstanding borrowings under the term loan were based on LIBOR subject to a 1% LIBOR floor and the applicable margin was 3.75%.

Borrowings under the senior revolving loan bear interest at various rates based on our total net leverage ratio with two rate options as follows: (1) for base rate advances, borrowings bear interest at prime rate plus 200 to 300 basis points; and (2) for LIBOR rate advances, borrowings bear interest at LIBOR rate plus 300 to 400 basis points. As of December 31, 2013, there were no borrowings outstanding under the senior revolving loan.

Commencing on December 31, 2013, the term loan facility requires quarterly payments of principal, in equal quarterly installments of $0.8 million and a final installment equal to the remaining principal balance in August 2020.

In November 2013, for an upfront cash payment of $46,000, we entered into a two-year 3% interest rate cap agreement for a notional amount of $150,000,000 equal to the portion of the senior secured term loan being hedged. The interest rate cap will amortize consistent with the senior secured term loan. The interest rate cap agreement settles monthly and expires on August 31, 2015. It bears a strike rate of 3% with an underlying of the one month USD LIBOR, which is consistent with the variable rate on the Company's senior secured term loan. At the inception of the cash flow hedging relationship and as of December 31, 2013, the hedge was determined to be highly effective and is expected to continue to be highly effective in mitigating the risk of increases in the Company's expected interest expense payments related to its senior secured term loan consistent with LIBOR rising above 3%.

The Company has determined that the hedging relationship qualifies for cash flow hedge accounting; accordingly, as of December 31, 2013, all changes in the fair value of the interest rate cap were included in accumulated other comprehensive income and represented a de-minimus amount as of December 31, 2013. As the monthly interest rate caplets settle, the settlement amount is reclassified from AOCI and recorded in interest expense. This is consistent with the timing of the hedged item, the monthly interest expense settlements on the senior secured term loan. There was no intrinsic value related to the interest rate caplets which settled during the year ended December 31, 2013 and, as such, no amount was recognized in interest expense. The hedge was determined to be perfectly effective during the period from inception of the cash flow hedge through December 31, 2013 with no ineffectiveness recognized in earnings. The fair value of the interest rate cap as of December 31, 2013 was $27,000 and was included in other noncurrent assets. The amount expected to be reclassified from AOCI to earnings in the next 12 months represents the estimated fair value of the interest rate caplets that will settle during this period which is $500. We did not utilize any derivative instruments during the years ended December 31, 2012 or 2011.

We manage exposure to counter-party credit risk related to our derivative positions by entering into contracts with various major financial institutions that can be expected to fully perform under the terms of such instruments. We do not anticipate non-performance by any of the counter-parties. Our exposure to credit risk in the event of non-performance by any of the counter-parties is limited to those assets that have been recorded, but have not yet been received in cash.

In addition, the Credit Facility contains certain annual mandatory pre-payment terms based on a percentage of excess cash flow, commencing with measurement for the fiscal year ending December 31, 2014, and initial payment, if any, in fiscal year 2015. Excess cash flow, as defined in the Credit Facility includes Consolidated EBITDA adjusted for capital expenditures, interest paid, income taxes paid, principal payments, certain acquisition-related obligations and working capital changes. Such annual mandatory prepayments are only required when the net leverage ratio exceeds 2.75 to 1.00.

The Credit Facility contains a financial covenant related to a net leverage ratio (as defined in the Credit Facility) which is not permitted to exceed 4.50 to 1.00 as well as other customary covenants related to limitations on (i) creating liens, debt, guarantees or other contingent obligations, (ii) engaging in mergers, acquisitions and consolidations, (iii) paying dividends or other distributions to, and redeeming and repurchasing securities from, equity holders, (iv) prepaying, redeeming or repurchasing subordinated or junior debt, and (v) engaging in certain transactions with affiliates, in each case, subject to customary exceptions. As of December 31, 2013, we were in compliance with all covenants.

Capital Leases

We lease certain equipment under capital leases that generally require monthly payments with final maturity dates during various periods through 2017. As of December 31, 2013, our capital leases had a weighted-average interest rate of approximately 4.3%. See Note 2 for further discussion of assets acquired under capital leases.

Notes Payable

During 2011 we entered into a note payable related to a software license agreement that bears interest of approximately 2.1% for the remainder of its term and is payable quarterly through the fourth quarter of 2014.

Acquisition-related Liabilities

In 2011 and 2010, in connection with the acquisitions of Jupiter eSources LLC ("Jupiter eSources") and De Novo, we incurred liabilities related to potential contingent consideration based on future revenue growth.

Amounts recorded in connection with acquisition-related liabilities as of December 31, 2013 and 2012 are as follows:

	December 31, 2013		December 31, 2012

	(in thousands)
De Novo contingent consideration:
Current portion	$	2,580	$	—


Total De Novo contingent consideration		2,580		—


De Novo deferred acquisition price:
Current portion		—		3,499


Total De Novo deferred acquisition price		—		3,499


Total acquisition-related liabilities	$	2,580	$	3,499

Jupiter eSources

The undiscounted amount of all potential future payments that we could be required to make under the Jupiter eSources contingent consideration is between $0 and $10 million over the remaining measurement period through December 2014. During 2011, based on our probability assessments of projected revenue over the remainder of the measurement period, we determined that it was not likely that any contingent consideration for Jupiter eSources would be realized and recognized a total decrease in the fair value of $7.2 million which was reflected in "Fair value adjustment to contingent consideration" on the Consolidated Statements of Income for the year ended December 31, 2011. Our probability assessment of projected revenue over the remainder of the measurement period did not change in 2012 and 2013 and as such there is no liability recorded related to this contingent consideration as of December 31, 2013 and 2012.

In connection with the acquisition of Jupiter eSources, we withheld $8.4 million of the purchase price for potential claims for indemnification and purchase price adjustments that was subsequently paid in May 2012. The $8.4 million payment was previously misclassified as an investment activity and has been reclassified as a financing activity in the Consolidated Statement of Cash Flows for the year ended December 31, 2012.

De Novo

In connection with the acquisition of De Novo, a portion of the purchase price was deferred and was being held for potential indemnification claims. During the third quarter of 2013 we paid $3.1 million of the deferred purchase price, adjusted for indemnification claims, to the sellers. The balance remaining after payment to the sellers of $0.8 million was written off as a credit to operating expense, which is included in Other Operating Income on the Consolidated Statements of Income for the year ended December 31, 2013.

The undiscounted amount of all potential future payments that could have been required under the De Novo contingent consideration opportunity was between $0 and $29.1 million over the initial two-year measurement period which ended on December 31, 2012 and December 31, 2013, respectively. A portion of the De Novo contingent consideration was contingent upon certain of the sellers remaining employees of Epiq and is therefore recognized as compensation expense. If those sellers did not remain employees of Epiq, the portion of the contingent consideration to which they were entitled was forfeited and was not allocated to the remaining sellers. The portion of the contingent consideration that was not tied to employment was considered to be part of the total consideration paid for net assets in connection with the purchase of De Novo.

Based on operating revenue recorded for the 2013 measurement period, as defined in the purchase agreement, a portion of the De Novo contingent consideration opportunity was achieved in the fourth quarter of 2013. As a result, we recorded a total adjustment of $3.4 million to the contingent consideration obligation as of December 31, 2013 of which $2.6 million is included in "Current maturities of long-term obligations" and $0.8 million is included in "Other accrued expenses" on the accompanying Consolidated Balance Sheets as of December 31, 2013. On the accompanying Consolidated Statements of Income, $2.6 million is included in "Fair value adjustment to contingent consideration" related to non-employee sellers and $0.8 million related to sellers who are Epiq employees is included in "Selling, general and administrative expense" for the year ended December 31, 2013.

During 2012, the employment ended for one of the De Novo employees entitled to a portion of the contingent consideration. According to the terms of the purchase agreement with De Novo, the portion of the contingent consideration subject to the continued employment of this employee was forfeited in its entirety. Also during 2012, based on projected revenue over the remainder of the measurement period, we recorded a total decrease in the fair value of the contingent consideration obligation of $17.2 million for the year ended December 31, 2012 which is included in "Fair value adjustment to contingent consideration" in the Consolidated Statements of Income. See Note 13 of our Notes to Consolidated Financial Statements for further detail related to the De Novo contingent consideration and holdback amounts.

Scheduled Principal Payments

Our long-term obligations, consisting of our senior secured term loan (based upon the required quarterly payments but not considering the additional principal payments under the excess cash flow provisions notes above), acquisition-related liabilities, and capitalized leases, mature as follows for years ending December 31:

	(in thousands)

2014	$	13,349
2015		5,666
2016		3,104
2017		3,083
2018 and thereafter		287,255


Total	$	312,457