Long-Term Debt

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, including 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 the Company’s former credit facility plus a related $1.0 million end of term payment, a $0.3 million make-whole premium, and deferred interest. 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.

In October 2015, the Company amended the term loan agreement to, among other provisions, increase the maximum borrowing capacity to $60.0 million (excluding deferred interest), reduce the applicable interest rate from 12.5% to 12.0%, extend the interest-only period through March 2021, and extend the final maturity to March 2022. Under the amended agreement, borrowings accrue interest at 12.0% annually, payable quarterly, of which 3.0% can be deferred during the first six years of the term at the Company’s option and paid together with the principal at maturity. The Company has elected to exercise the option to defer a portion of the interest and has recorded $4.3 million of deferred interest through December 31, 2017. In December 2015, the Company borrowed an additional $10.0 million under the terms of the amended agreement. In June 2016, the Company borrowed an additional $5.0 million. At December 31, 2016, the Company's option to borrow $15.0 million more under the amended term loan agreement expired. Total borrowings and deferred interest under the amended term loan agreement were $49.3 million and $47.8 million as of December 31, 2017 and 2016, respectively.

Under the amended term loan agreement, the Company may pay interest-only for the first seven years of the term and principal payments are due in four equal installments during the eighth year of the term. The Company has the option to prepay the term loan, in whole or part, at any time subject to payment of a redemption fee of up to 4%, which declines 1% annually, with no redemption fee payable if prepayment occurs after the fourth year of the loan. In addition, a facility fee equal to 2.0% of the amount borrowed plus any accrued interest is payable at the end of the term or when the loan is repaid in full. A long-term liability of $1.1 million is being accreted using the effective interest method for the facility fee over the term of the loan agreement. Obligations under the term loan agreement are collateralized by substantially all of the Company’s assets.

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 was $85.0 million for 2017 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, it 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 financial covenants as of December 31, 2017.

The Company incurred $6.2 million, $5.7 million and $4.0 million of interest expense under the term loan agreement for the years ended December 31, 2017, 2016 and 2015, respectively.

Lease Financing Obligations

The Company entered into agreements to lease certain hardware, software and capitalized installation costs, the longest of which expired in June 2017. Ownership of the leased property transferred to the Company at the end of the lease term. The fair value at lease inception was recorded in property, plant and equipment and depreciated over the shorter of the useful life of the assets or the lease term. A total cost of $0.7 million for leased property is included in property and equipment at December 31, 2017 and 2016, with accumulated depreciation of $0.7 million and $0.5 million at December 31, 2017 and 2016, respectively.

Long-term debt and lease financing obligations consisted of the following at December 31 (in thousands):



	2017			2016
Term loans payable	$	49,315		$	47,844
Lease financing obligations	—			58
Total long-term debt and lease financing obligations	49,315			47,902
Unamortized debt issuance costs	(384		)	(478		)
Current portion of lease financing obligations	—			(58		)
Long-term debt and lease financing obligations, net of debt issuance costs and current portion	$	48,931		$	47,366

Scheduled future payments of principal for outstanding debt and lease financing obligations were as follows at December 31:



2018	$	—
2019	—
2020	—
2021	36,987
2022	12,328
	$	49,315