Borrowing Arrangements

Revolving Credit Agreement

November 20, 2015,

we entered into a Revolving Credit Agreement with a syndicate of banks for a line of credit of

$125.0

million. The agent for the banks is Bank of the West.

The obligations are guaranteed by

four

of our subsidiaries.

The loan is collateralized pursuant to a Contingent Collateral Agreement, under which the assets of the parent company and the

four

subsidiaries could be subject to security interests for the benefit of the banks in the event of a loan default.

The credit agreement provides different interest rate alternatives under which we

may

borrow funds. We

may

elect to borrow based on LIBOR plus a margin or an alternative base rate plus a margin. The margin can range from

0.75%

2.5%,

depending on interest rate alternatives and on our leverage of liabilities to effective tangible net worth. An unused commitment fee is also payable. It ranges from

0.25%

0.625%,

depending on leverage. The applicable interest rate was

2.85%

as of

March 31, 2017.

The terms of the facility impose restrictions on our ability to undertake certain transactions, to create liens on assets and to incur subsidiary indebtedness. In addition, the credit agreement is subject to a set of financial covenants, including minimum effective tangible net worth, the ratio of cash, cash equivalents and accounts receivable to current liabilities, profitability, a leverage ratio and a minimum amount of U.S. domestic cash on hand. At

March 31, 2016

we complied with these financial covenants, except the leverage ratio. The banks waived a default under the Revolving Credit Agreement caused by the leverage ratio, which compared total funded indebtedness as of

March 31, 2016

to EBITDA for the

four

fiscal quarters ended

March 31, 2016.

The leverage ratio minimally exceeded the contractually agreed ratio of

2:1.

The waiver by the banks was a

one

-time waiver and was

not

deemed to be an amendment, waiver, consent, release or modification of any other term or condition of the Revolving Credit Agreement.

December 2016,

we entered into an amendment to the Revolving Credit Agreement with the lenders under which the contractual term of the revolving loan was extended to

November 20, 2019

The leverage ratio was increased to

2.50

1.00

from

2.00

1.00.

other terms of the Revolving Credit Agreement were affected by the amendment. At

March 31, 2017,

we complied with all of the financial covenants.

In relation to the execution of the amendment to the Revolving Credit Agreement, we incurred loan costs of

$281,000

that were deferred and reduced our “Long term loans, net of current portion” on our audited consolidated balance sheets. Those costs, together with the unamortized loan costs of the Revolving Credit Agreement entered on

November 20, 2015

are being amortized over the new life of the credit agreement. The unamortized balance at

March 31, 2017

and

March 31, 2016

was

$399,000

and

$304,000,

respectively.

March 31, 2017

and

March 31, 2016,

the outstanding principal balances under the credit agreement were

$72.6

million and

$80.0

million, respectively.

The Revolving Credit Agreement also includes a

$10.0

million letter of credit subfacility. Borrowing under this subfacility is limited to the extent of availability under the

$125.0

million revolving line of credit.

IKB Deutsche Industriebank

April 2015,

we entered into a loan with IKB. Under the agreement, we borrowed

€6.5

million, or about

$7.2

million at the time. The loan has a term ending

March 31, 2022

and bears a fixed annual interest rate of

1.75%.

Each fiscal quarter, a principal payment of

€232,000,

or about

$248,000,

and a payment of accrued interest are required. Financial covenants for a ratio of indebtedness to cash flow, a ratio of equity to total assets and a minimum stockholders’ equity for the German subsidiary must be satisfied for the loan to remain in good standing. Compliance with these covenants is required annually at

March 31.

We complied with all of these financial covenants at

March 31, 2017.

The loan

may

be prepaid in whole or in part with a modest penalty. The loan is also collateralized by a security interest in the facility in Lampertheim, Germany, and a security deposit of

€1.0

million. The security deposit will mature on

December 29, 2017,

so long as compliance occurs through that date. At

March 31, 2017,

the outstanding principal balance was

€4.6

million, or

$5.0

million at that time.

Loans Assumed from Business Acquisitions

Our outstanding balances

relating to loans assumed upon

business acquisitions at

March 31, 2017

and

March 31, 2016

were

$288,000

and

$1.1

million, respectively.

Aggregate Debt Maturities

Aggregate debt maturities at

March

31,

2017

were as follows (in thousands):

Fiscal Year Payable	Amount
2018	$	1,058
2019		1,047
2020		73,648
2021		1,048
2022		1,048
Thereafter		-
Total		77,849
Less: current portion		1,058
Long-term portion (1)	$	76,791

(

) Includes approximately

$399,000

of unamortized debt issuance cost.