9. Long-Term Debt

Term Loans

2014 Term Loan Agreement

In April 2014, the Company entered into a term loan agreement under which it may borrow up to $45.0 million, or up to an aggregate of approximately $51.0 million if the Company elects to exercise in full an option to defer payment of a portion of the interest that would accrue on the borrowing under the term loan agreement. Upon initial closing, the Company borrowed $20.0 million, the proceeds of which were primarily used to repay the outstanding balance under a previous credit facility plus a related $1.0 million end of term payment, a $0.3 million make-whole premium, and interest accrued. The Company incurred and recorded a total charge to interest expense of $1.4 million related to the repayment of the former credit facility including a loss on extinguishment of debt of $0.6 million.

In October 2014, the Company borrowed an additional $10.0 million under the term loan agreement. The Company may borrow up to an additional $15.0 million under the agreement no later than May 2015, subject to a revenue requirement. All borrowings under the term loan agreement accrue interest at 12.5% annually, payable quarterly, of which 3.5% can be deferred during the first four years of the term at the Company’s option and paid together with the principal. The Company exercised its option to defer payment of the 3.5% accrued interest for the six months ended December 31, 2014. The Company is required to pay only interest for the first five years of the term. Principal payments are due in four equal installments during the sixth year of the term. The Company has the option to prepay the term loans, in whole or in part, at any time subject to payment of a redemption fee of up to 4%, which declines over the term. The term loan agreement contains customary conditions to borrowings, events of default and negative covenants, including covenants that could limit the Company’s ability to, among other things, incur additional indebtedness, liens or other encumbrances, make dividends or other distributions; buy, sell or transfer assets; engage in any new line of business; and enter into certain transactions with affiliates. The term loan agreement also includes a $2.0 million minimum liquidity covenant and revenue-based financial covenants, which shall initially be $40.0 million for 2014 with annual increases of $15.0 million for each subsequent fiscal year thereafter. If the Company’s actual revenues are below the minimum annual revenue requirement for any given year, the Company may avoid a related default by generating proceeds from an equity or subordinated debt issuance equal to the shortfall between its actual revenues and the minimum revenue requirement. The Company was in compliance with its covenants as of December 31, 2014. The Company’s obligations under the term loan agreement are collateralized by substantially all of its assets.

2012 Credit Facility

In 2012, the Company entered into a credit facility and incurred $13.0 million and $5.0 million in term loan borrowings during the years ended December 31, 2012 and 2013, respectively. In connection with the term loan borrowings during 2012, the Company issued warrants to purchase an aggregate of 76,940 shares of Series D and 20,837 shares of Series E preferred stock at exercise prices of $8.45 and $14.40 per share, respectively. In connection with the term loan borrowings during 2013, the Company issued warrants to purchase an aggregate of 10,418 shares of Series E preferred stock. The issued warrants were valued at the date of issuance using the Black-Scholes option pricing model with the following assumptions: fair value of preferred stock equal to exercise price of warrant, volatility of 57.0 to 61.0% and a risk free interest rate of 1.63 to 2.20%. The warrants were treated as debt discount and were amortized over the term of the debt. In connection with the Company’s initial public offering, these warrants became exercisable for shares of the Company’s common stock.

Capital Leases

In July 2014, the Company entered into an equipment lease of hardware, software and capitalized installation costs over a lease term of three years expiring June 2017. The amount financed totaled approximately $260,000 and is being repaid in 36 equal monthly installments. Ownership of the property transfers to the Company at the end of the term.

In August 2013, the Company entered into an equipment lease of hardware, software and capitalized installation costs over a lease term of three years expiring July 2016. The amount financed totaled approximately $410,000 and is being repaid in 36 equal monthly installments. Ownership of the property transfers to the Company at the end of the term.

Depreciation expense was recorded for each of these leases.

Borrowings consisted of the following at December 31:


	2014			2013
	(In thousands)
Term loans payable	$	30,420		$	18,348
Capital leases		506			410
Landlord payable		—			49

		30,926			18,807
Less: Unamortized debt discount		—			(514	)
Current portion		(251	)		(6,136	)

Non-current portion	$	30,675		$	12,157

Scheduled future payments for principal obligations under outstanding debt facilities were as follows at December 31:


	2014
	(In thousands)
2015	$	251
2016		207
2017		48
2018		—
2019		22,815
Thereafter		7,605

	$	30,926