Loan and Security Agreement

The Company maintains the 2013 Loan and Security Agreement, as amended, with ACF, the assignee of Keltic Financial (as amended, the "2013 Loan and Security Agreement"). Borrowings under the 2013 Loan and Security Agreement are to be used for working capital purposes and capital expenditures. The amount available for borrowing may be less than the $10 million under this facility at any given time due to the manner in which the maximum available amount is calculated. The Company has an available borrowing base subject to reserves established at the lender's discretion of 85% of Eligible Receivables up to $10 million under this facility. Eligible Receivables do not include Heritage Labs receivables, certain Hooper Holmes Services receivables, and other receivables deemed ineligible by ACF. As of September 30, 2014, the lender applied a discretionary reserve of $0.5 million. Available borrowing capacity, net of this discretionary reserve was $4.3 million based on Eligible Receivables as of September 30, 2014. As of September 30, 2014, there were no borrowings outstanding under the 2013 Loan and Security Agreement.

On July 9, 2014, the Company and ACF entered into the Second Amendment to the 2013 Loan and Security Agreement (the "Second Amendment"). The Second Amendment amends the terms and conditions of the 2013 Loan and Security Agreement dated as of February 28, 2013, and as amended on March 28, 2013. The following summarizes certain terms of the Second Amendment:


•	The negative covenant regarding the Company's EBITDA has been amended and restated in its entirety to provide that the Company agrees that EBITDA, as of and for each twelve consecutive calendar month period ending on the last day of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2015, shall not be less than $100,000.

•

The Borrowing Base (as defined in the 2013 Loan and Security Agreement) has been amended to include an amount of Unbilled Eligible Receivables (as defined in the 2013 Loan and Security Agreement) not to exceed the least of (i) fifty percent of the aggregate amount of Unbilled Eligible Receivables; (ii) $2,500,000; and (iii) fifty percent of the Borrowing Base as most recently previously calculated. Inclusion of Unbilled Eligible Receivables is expected to increase the Company's borrowing capacity.


•	The definition of EBITDA has been amended and will (i) be calculated as net income before interest expense, taxes, depreciation and amortization, and (ii) include any gains or losses resulting from the sale of any owned real estate or from the sale of all or substantially all of the assets constituting the Company's Heritage Labs and Hooper Holmes Services businesses.

Interest on revolving credit loans is calculated based on the greatest of (i) the annualized prime rate plus 2.75%, (ii) the 90 day LIBOR rate plus 5.25%, and (iii) 6% per annum. The interest rate on the 2013 Loan and Security Agreement was 6.00% as of September 30, 2014. The Company is obligated to pay, on a monthly basis in arrears, an annual facility fee equal to 1% of the revolving credit limit of $10 million. During the three and nine month periods ended September 30, 2014, in connection with the 2013 Loan and Security Agreement, the Company incurred $0.05 million and $0.1 million, respectively, in facility fees. During the three and nine month periods ended September 30, 2013, the Company incurred facility fees of $0.04 million and $0.1 million, respectively. There were no additional financing fees deferred during the three and nine month periods September 30, 2014 in connection with the Second Amendment to the 2013 Loan and Security Agreement.

The revolving credit loans are payable in full, together with all accrued interest and fees, on February 28, 2016. The 2013 Loan and Security Agreement provides for the prepayment of the entire outstanding balance of the revolving credit loans. The Company would be required to pay an early termination fee equal to 3% of the revolving credit limit if the termination occurs prior to February 28, 2015, and 2% if the termination occurs after February 28, 2015 but prior to February 28, 2016.

As security for payment and other obligations under the 2013 Loan and Security Agreement, ACF holds a security interest in all of the Companys', and its subsidiary guarantors', existing and after-acquired property, including receivables (which are subject to a lockbox account arrangement), inventory and equipment. The aforementioned security interest is collectively referred to herein as the “collateral”. The 2013 Loan and Security Agreement contains various covenants, including financial covenants which require the Company to achieve a minimum EBITDA amount (earnings before interest expense, income taxes, depreciation and amortization) beginning with the twelve months ending March 31, 2015 as the first measurement date. The Company continues to have limitations on the maximum amount of capital expenditures for each fiscal year. The Company is in compliance with the covenants under the 2013 Loan and Security Agreement as of September 30, 2014.