Secured Credit Facility

On February 23, 2016, in connection with our acquisition of TCS, we entered into a $400,000,000 secured credit facility (the "Secured Credit Facility") with a syndicate of lenders. The Secured Credit Facility comprises a senior secured term loan A facility of $250,000,000 (the “Term Loan Facility”) and a secured revolving loan facility of up to $150,000,000, including a $25,000,000 letter of credit sublimit (the “Revolving Loan Facility”) and, together, with the Term Loan Facility, matures on February 23, 2021. The proceeds of these borrowings were primarily used to finance our acquisition of TCS, including the repayment of certain existing indebtedness of TCS. The Term Loan Facility requires mandatory quarterly repayments. During the nine months ended April 30, 2017, we repaid $7,747,000 principal amount of borrowings under the Term Loan Facility. Under the Revolving Loan Facility, we had outstanding balances ranging from $41,904,000 to $84,904,000 during the nine months ended April 30, 2017. As of April 30, 2017 and July 31, 2016, amounts outstanding under our Secured Credit Facility, net, were as follows:



	April 30, 2017		July 31, 2016
Term Loan Facility	$	164,900,000	172,647,000
Less unamortized deferred financing costs related to Term Loan Facility	4,608,000		5,515,000
Term Loan Facility, net	160,292,000		167,132,000
Revolving Loan Facility	65,604,000		83,904,000
Amount outstanding under Secured Credit Facility, net	225,896,000		251,036,000
Less current portion of long-term debt	14,387,000		11,067,000
Non-current portion of long-term debt	$	211,509,000	239,969,000

Interest expense, including amortization of deferred financing costs, recorded during the three and nine months ended April 30, 2017 related to the Secured Credit Facility was $2,641,000 and $8,524,000, respectively, and reflects a blended interest rate of approximately 4.83% and 4.80%, respectively. Interest expense, including amortization of deferred financing costs, recorded during both the three and nine months ended April 30, 2016 related to the Secured Credit Facility was $2,981,000 and reflects a blended interest rate of approximately 5.00%.

At April 30, 2017, we had $3,845,000 of standby letters of credit outstanding under our Secured Credit Facility related to our guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit.

The Revolving Loan Facility is primarily used for working capital and other general corporate purposes of the Company and its subsidiaries, including the issuance of letters of credit. Borrowings under the Secured Credit Facility, pursuant to terms defined in the Secured Credit Facility, shall be either (i) Alternate Base Rate ("ABR") borrowings, which bear interest from the applicable borrowing date at a rate per annum equal to (x) the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50% per annum and (c) the Adjusted LIBO Rate on such day (or, if such day is not a business day, the immediately preceding business day) plus 1.00% per annum (provided that if the LIBO Rate is less than 1.00%, then the LIBO Rate shall be deemed to be 1.00%), plus (y) the Applicable Rate, or (ii) Eurodollar borrowings, which bear interest from the applicable borrowing date at a rate per annum equal to (x) the Adjusted LIBO Rate for such interest period (provided that if the LIBO Rate is less than 1.00%, then the LIBO Rate shall be deemed to be 1.00%) plus (y) the Applicable Rate. The Applicable Rate is determined based on a pricing grid that is dependent upon our leverage ratio as of the end of each fiscal quarter. The Secured Credit Facility contains customary representations, warranties and affirmative covenants and customary negative covenants, subject to negotiated exceptions, on (i) liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, (vi) restricted payments, including stockholder dividends, and (vii) certain other restrictive agreements. The Secured Credit Facility also contains certain financial covenants and customary events of default (subject to grace periods, as appropriate), such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a defined change in control and the failure to observe the negative covenants and other covenants related to the operation of our business.

At April 30, 2017, our Secured Credit Facility required that we maintain compliance with various financial covenants including a maximum allowable Leverage Ratio and a minimum required Fixed Charge Coverage Ratio, as such terms were defined. The maximum allowable Leverage Ratio, in simple terms, represented the net difference of Total Indebtedness (excluding unamortized deferred financing costs) less Available Cash (up to $50,000,000) divided by our trailing twelve months ("TTM") Consolidated EBITDA. The definition of Consolidated EBITDA was similar to our Adjusted EBITDA metric (which is fully described in Note (15) - "Segment Information"); however, Adjusted EBITDA was reduced by favorable adjustments to operating income related to the settlements of certain TCS intellectual property matters (which are discussed in Note (19) - "Legal Proceedings and Other Matters"). The minimum required Fixed Charge Coverage Ratio, in simple terms, represented Consolidated EBITDA less cash paid for taxes, capital expenditures and dividends, the result of which was then divided by the sum of scheduled principal debt payments and cash paid for interest, all of the aforementioned calculated on a TTM basis. Further, if we had more than $50,000,000 of cash and cash equivalents for any financial covenant measurement period, the Fixed Charge Coverage Ratio would be calculated without a deduction for cash dividends. For the measurement period ended on April 30, 2017, based on these definitions, our Leverage Ratio was 2.56x TTM Consolidated EBITDA (as compared to a maximum allowable of 3.00x) and our Fixed Charge Coverage Ratio was 2.53x (as compared to a minimum requirement of 1.25x) and we were in full compliance with the terms and conditions of our Secured Credit Facility.

On June 6, 2017, we entered into a First Amendment of the Secured Credit Facility (the “June 2017 Amendment”) that is expected to result in increased operating and acquisition flexibility and simplify the calculations of our financial covenants. The June 2017 Amendment resulted in, among other things, that the:


(i)	Consolidated EBITDA definition will now more closely align with our Adjusted EBITDA metric by eliminating favorable adjustments to operating income related to settlements of TCS intellectual property matters;


(ii)	Leverage Ratio will now be calculated on a “gross” basis using the quotient of Total Indebtedness (excluding unamortized deferred financing costs) divided by our TTM Consolidated EBITDA. The prior Leverage Ratio was calculated on a “net” basis but did not include a reduction for any cash or cash equivalents above $50,000,000;


(iii)	Fixed Charge Coverage Ratio will now include a deduction for all cash dividends, regardless of the amount of our cash and cash equivalents and the related allowable Quarterly Dividend Amount, as defined, will now align with our current quarterly dividend target of $0.10 per common share;


(iv)	Balloon or final payment of the Term Loan Facility, which is not due until February 23, 2021, was reduced by $22,500,000 through increased borrowings from the Revolving Loan Facility, which does not expire until February 23, 2021; and


(v)	Leverage Ratios will be adjusted, in certain conditions, to provide for additional flexibility for us to make acquisitions.

In connection with the June 2017 Amendment, there were no changes to: (i) the committed borrowing capacity; (ii) the maturity date; or (iii) interest rates payable (except that the interest rate pricing grid will now be based on the new Leverage Ratio). Also, the June 2017 Amendment did not result in an extinguishment for accounting purposes (as such term is defined in ASC 470 - “Debt”). As a result, deferred financing costs (including incremental fees for the June 2017 Amendment) will continue to be amortized over the remaining maturity term of the Secured Credit Facility.

The terms and financial covenants of the June 2017 Amendment are retroactive to April 30, 2017. Based on the simplified financial covenant calculations described above, our Leverage Ratio was 3.89x TTM Consolidated EBITDA (as compared to a maximum allowable of 4.25x) and our Fixed Charge Coverage Ratio was 1.70x (as compared to a minimum requirement of 1.25x). Assuming we had reduced the borrowings outstanding under the Term Loan Facility at April 30, 2017 by $22,500,000 using our cash and cash equivalents, our Leverage Ratio, on a pro-forma basis, would have been 3.52x TTM Consolidated EBITDA for the measurement period ended on April 30, 2017. Based on the aforementioned, we were in full compliance with the retroactive terms and financial covenants in our Secured Credit Facility, as amended.

For our fourth quarter of fiscal 2017, the maximum allowable Leverage Ratio will decrease to 3.75x TTM Consolidated EBITDA. In fiscal 2018, such ratio will decrease further each quarter until reaching 3.00x TTM Consolidated EBITDA in the fourth quarter of fiscal 2018, with no further reductions thereafter. The minimum required Fixed Charge Coverage Ratio of 1.25x will not change for the remaining term of the Secured Credit Facility. Given our expected future business performance, we anticipate maintaining compliance with the terms and financial covenants in our Secured Credit Facility, as amended, for the foreseeable future.

The obligations under the Secured Credit Facility, as amended, are guaranteed by certain of our domestic subsidiaries (the “Subsidiary Guarantors”). As collateral security for amounts outstanding under our Secured Credit Facility, as amended, and the guarantees thereof, we and our Subsidiary Guarantors have granted to an administrative agent, for the benefit of the lenders, a lien on, and first priority security interest in, substantially all of our tangible and intangible assets.

Capitalized terms used but not defined herein have the meanings set forth for such terms in the Secured Credit Facility, dated as of February 23, 2016, and the First Amendment of the Secured Credit Facility, dated as of June 6, 2017, both of which have been documented and filed with the SEC.