Long-Term Debt

At December 31, 2013 and 2012, long-term debt consists of the following:



	December 31,
	2013			2012
Term loan, interest 2.72% at December 31, 2012	$	—		$	23,125,000
Revolving credit facility, interest 3.27% and 2.72% at December 31, 2013 and 2012, respectively	8,400,000			10,000,000
Capital lease obligations and note payable	176,319			733,657
Total debt	8,576,319			33,858,657
Less current portion	(8,483,088		)	(33,682,348		)
Long-term debt	$	93,231		$	176,309

Long-term debt includes capital lease obligations that are subordinate to the Company’s senior secured facility. As of December 31, 2013, the aggregate scheduled maturities of debt are as follows:



Through Year Ending December 31:	Revolver		Capital Leases and Note Payable
2014	$	8,400,000	$	83,088
2015	—		65,409
2016	—		27,822
2017	—		—
2018	—		—
Total	$	8,400,000	$	176,319

Loan Agreement

On January 9, 2013, the Company terminated its commitments under the July 2012 Credit Agreement (defined below) and entered into a Loan and Security Agreement, (Loan Agreement), by and among the Company and certain of its domestic subsidiaries, as borrowers, and Bank of America, N.A., as agent.

The Loan Agreement provides for: a three-year senior secured asset-based revolving credit facility in the aggregate principal amount of up to $65,000,000 (as described below), which includes a subfacility for swingline loans up to an amount equal to 10% of the aggregate Revolver Commitments, and a $20,000,000 subfacility for standby letters of credit. Swingline loans and letters of credit issued under the Loan Agreement reduce available revolving credit commitments on a dollar-for-dollar basis. Subject to certain conditions, the Company is permitted, at any time prior to the maturity date for the revolving credit facility, to increase the total revolving credit commitments in an aggregate principal amount of up to $20,000,000, with additional commitments from Lenders or new commitments from financial institutions, subject to certain conditions as described in the Loan Agreement. Pursuant to the Loan Agreement, the aggregate amount of advances under the Line of Credit (Borrowing Base) cannot exceed the lesser of (a) (i) $65,000,000, or (ii) 85% of eligible billed accounts receivable as defined in the Loan Agreement; plus (b) the lesser of (i) 85% of eligible unbilled accounts receivable and (ii) $12,000,000; minus (c) reserves as defined by the Loan Agreement, which include one week’s worth of W-2 payroll and fees payable to independent contractors. As of December 31, 2013, the gross availability under the Loan Agreement was approximately $39,482,000 based on the Company's November accounts receivable. The Company had $11,399,000 letters of credit outstanding and $8,400,000 drawn under its revolving credit, leaving $19,683,000 available as of December 31, 2013. The letters of credit relate to the Company's workers' compensation and professional liability policies. See Note 2 - Summary of Significant Accounting Policies.

The initial proceeds from the revolving credit facility were used to finance the repayment of existing indebtedness of the Company under its prior credit agreement and the payment of fees and expenses. The repayment of the term loan portion of the Company’s debt outstanding in the first quarter of 2013 was treated as extinguishment of debt, and, as a result, the Company recognized a loss on extinguishment in the first quarter of 2013, related to the write-off of unamortized net debt issuance costs of approximately $295,000. The repayment of the revolver portion of the Company’s debt outstanding in the first quarter of 2013 was treated partially as extinguishment and partially as a modification. The fees related to the modified portion of approximately $86,000 relate to the continuation of credit provided by Bank of America, N.A. in its Loan Agreement. The Company wrote-off the remaining unamortized net debt issuance costs of approximately $1,124,000 in the first quarter of 2013.

The revolving credit facility is used to provide ongoing working capital and for other general corporate purposes of the Company and its subsidiaries. As of December 31, 2013, the interest rate spreads and fees under the Loan Agreement are based on LIBOR plus 1.5% or Base Rate plus 0.50%. The LIBOR and Base Rate margins are subject to performance pricing adjustments, pursuant to a pricing matrix based on the Company’s excess availability under the revolving credit facility, and would increase by 200 basis points if an event of default exists. The Company is required to pay a monthly commitment fee on the average daily unused portion of the revolving loan facility, which, as of December 31, 2013, was 0.375%.

The Loan Agreement contains customary representations, warranties, and affirmative covenants. The Loan Agreement also contains customary negative covenants; including covenants with respect to, among other things, (i) indebtedness, (ii) liens, (iii) investments, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, (vi) dividend, distributions and other restricted payments, (vii) transactions with affiliates and (viii) restrictive agreements. In addition, if the Company’s excess availability under the revolving credit facility is less than the greater of (i) 12.5% of the Loan Cap, as defined, and (ii) $6,250,000, the Company is required to meet a minimum fixed charge coverage ratio of 1.0, as defined in the Loan Agreement. The Loan Agreement also contains customary events of default, 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 covenants or conditions under the credit facility documents.

The Company’s obligations under the Loan Agreement are guaranteed by all material domestic subsidiaries of the Company that are not co-borrowers (Subsidiary Guarantors). As collateral security for their obligations under the Loan Agreement and guarantees thereof, the Company and the Subsidiary Guarantors have granted to Bank of America, N.A., a security interest in substantially all of their tangible and intangible assets.

July 2012 Credit Agreement

The Company entered into a senior secured credit agreement on July 10, 2012 (July 2012 Credit Agreement), by and among the Company, as borrower, a syndicate of lenders, Wells Fargo Bank, National Association, as administrative agent, swingline lender and issuing lender, Bank of America, N.A., as syndication agent, and U.S. Bank National Association, as documentation agent. The July 2012 Credit Agreement provided for: (i) a five-year senior secured term loan facility in the aggregate principal amount of $25,000,000, and (ii) a five-year senior secured revolving credit facility in the aggregate principal amount of up to $50,000,000, which included a $10,000,000 subfacility for swingline loans, and a $20,000,000 subfacility for standby letters of credit. Swingline loans and letters of credit issued under the July 2012 Credit Agreement reduced available revolving credit commitments on a dollar-for-dollar basis. Subject to certain conditions under the Credit Agreement, the Company was permitted, at any time prior to the maturity date for the revolving credit facility, to increase its total revolving credit commitments in an aggregate principal amount of up to $25,000,000.

Upon closing of the July 2012 Credit Agreement, the Company borrowed $25,000,000 in term loan and $11,000,000 from the revolving credit facility. The proceeds were used to repay the indebtedness on its prior credit agreement and for the payment of fees and expenses. During 2012, approximately $962,000 of financing fees were deferred and included in debt issuance costs on the accompanying consolidated balance sheets. The deferred costs related to the revolving credit facility have been amortized on a straight-line basis, and the deferred costs related to the term loan facility have been amortized using the effective interest method, both over the life of the July 2012 Credit Agreement. In addition, approximately $279,000 of third party debt financing costs relating to the July 2012 Credit Agreement were expensed as incurred and are included in interest expense on the Company’s consolidated statement of operations as required by the Debt Topic of the FASB ASC.

The revolving credit facility was to be used to provide ongoing working capital and for other general corporate purposes of the Company and its subsidiaries. Through December 31, 2012, interest on the term loan and revolving credit portion of the July 2012 Credit Agreement was based on LIBOR plus a margin of 2.50% or Base Rate (as defined by the July 2012 Credit Agreement, as modified) plus a margin of 1.50%. In addition, the Company was required to pay a quarterly commitment fee on its average daily unused portion of the revolving loan facility of 0.50%. The interest rate spreads and fees fluctuated during the term of the July 2012 Credit Agreement based on the consolidated total leverage ratio at each calculation date, as defined.

Modification of July 2012 Credit Agreement

On September 28, 2012, the Company entered into a First Modification Agreement with the lenders of its July 2012 Credit Agreement, which, for the third quarter ending September 30, 2012, modified the maximum consolidated total leverage ratio to 2.75 to 1.00 and modified the minimum consolidated fixed charge coverage ratio to 1.25 to 1.00. In addition, the aggregate amount of new revolving credit loans and swingline loans made to the Company could not exceed $3,000,000 (above the $10,000,000 outstanding) at any time, and new Letters of Credit issued on behalf of the Company could not exceed $1,000,000 (above the $12,432,000 outstanding), during the period commencing on September 28, 2012 and ending upon the delivery by the Company of an Officer’s Compliance Certificate to the lender’s administrative agent for the fiscal year ending December 31, 2012 (which would have occurred in March 2013). Further, during the modification period, the Company was also prohibited from making investments and purchasing, redeeming, retiring or otherwise acquiring any shares of its capital stock as otherwise permitted under the credit agreement.

Due to Company’s change in lenders’ participations as a result of the July 2012 Credit Agreement and subsequent modification agreement, the Company wrote off debt issuance costs of approximately $82,000 as loss on modification of debt on the accompanying consolidated statements of operations for the year ended December 31, 2012.

Covenants of July 2012 Credit Agreement

As of December 31, 2012, the Company would not have complied with the financial covenants in its July Credit Agreement, specifically, its Maximum Leverage Ratio or its Minimum Fixed Charge Coverage Ratio. Generally accepted accounting principles require that long-term debt be classified as a current liability when a covenant violation that gives the lender the right to call the debt has occurred at the balance sheet date. As a result, amounts outstanding under the credit agreement are included in current liabilities in the accompanying December 31, 2012 consolidated balance sheets.