Effective July 1, 2012, our maximum available financing under the IBM Credit facility will reduce from $25.0 million to $20.0 million based on our expected future working capital needs.
Additionally, the IBM Credit facility does not have a stated maturity and both parties have the ability to exit the facility following a 90-day notice. The IBM Belgium facility expires in June 2012. The Company also has direct vendor credit terms
with Ricoh to finance Supplies Distributors’ European subsidiary’s inventory purchases.
Supplies Distributors also
has a loan and security agreement with Wells Fargo Bank, National Association (“Wells Fargo”) to provide financing for up to $25 million of eligible accounts receivables in the United States and Canada. The Wells Fargo facility expires on
the earlier of March 2014 or the date on which the parties to the IPS master distributor agreement no longer operate under the terms of such agreement and/or IPS no longer supplies products pursuant to such agreement.
Supplies Distributors’ European subsidiary has a factoring agreement with BNP Paribas Fortis Factor to provide factoring for up to
7.5 million euros (approximately $10.0 million as of March 31, 2012) of eligible accounts receivables through March 2014.
These credit facilities contain cross default provisions, various restrictions upon the ability of Supplies Distributors and its subsidiaries to, among other things, merge, consolidate, sell assets, incur
indebtedness, make loans, investments and payments to related parties (including other direct or indirect Company subsidiaries), provide guarantees, make investments and loans, pledge assets, make changes to capital stock ownership structure and pay
dividends, as well as financial covenants, such as cash flow from operations, annualized revenue to working capital, net profit after tax to revenue, minimum net worth and total liabilities to tangible net worth, as defined, and are secured by all
of the assets of Supplies Distributors, as well as a collateralized guarantees by their respective parent companies including Supplies Distributors and/or PFS and a Company parent guarantee. Additionally, we are required to maintain a subordinated
loan to Supplies Distributors of no less than $3.5 million, not maintain restricted cash of more than $5.0 million, are restricted with regard to transactions with related parties, indebtedness and changes to capital stock ownership structure and a
minimum shareholders’ equity of at least $18.0 million. Furthermore, we are obligated to repay any over-advance made to Supplies Distributors or its subsidiaries under these facilities if they are unable to do so. We have also provided a
guarantee of substantially all of the obligations of Supplies Distributors and its subsidiaries to IBM and IPS.
PFS
Financing
PFS has a Loan and Security Agreement (“Comerica Agreement”) with Comerica Bank, which provides
for up to $12.5 million ($10.0 million during certain non-seasonal peak-months) of eligible accounts receivable financing through September 30, 2012. We currently expect to renew this facility prior to its maturity. The Comerica Agreement also
allows for up to $2.5 million of eligible equipment financing (“Equipment Advances”). Outstanding Equipment Advances have a final maturity date of April 15, 2015. We entered into this Comerica Agreement to supplement our existing cash
position and provide funding for our current and future operations, including our targeted growth. The Comerica Agreement contains cross default provisions, various restrictions upon our ability to, among other things, merge, consolidate, sell
assets, incur indebtedness, make loans and payments to subsidiaries, affiliates and related parties (including other direct or indirect Company subsidiaries), make capital expenditures, make investments and loans, pledge assets, make changes to
capital stock ownership structure, as well as financial covenants of a minimum tangible net worth of $20.0 million, as defined, a minimum earnings before interest and taxes, plus depreciation, amortization and non-cash compensation accruals, if any,
as defined, and a minimum liquidity ratio, as defined. The Comerica Agreement also limits PFS’ ability to increase the subordinated loan to Supplies Distributors to more than $5.0 million and permits PFS to advance incremental amounts subject
to certain cash inflows to PFS, as defined, to certain of its subsidiaries and/or affiliates. The Comerica Agreement is secured by all of the assets of PFS, as well as a Company parent guarantee.
Retail Connect Financing
Retail Connect has an asset-based line of credit facility for up to $3.0 million of eligible financing with Wells Fargo, which is collateralized by substantially all of Retail Connect’s assets and
expires in May 2013. Borrowings under the facility and letter of credit availability are limited to a percentage of accounts
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