7. Debt

Senior Secured Term Loan

In April 2013, as amended in June 2014, the Company entered into a senior secured term loan arrangement (the "Secured Loan Arrangement") with ROS Acquisition LP ("ROS"). The Secured Loan Arrangement consisted of $40.0 million of borrowing capacity ("Credit Agreement"), a warrant to purchase shares of Common Stock, and an agreement to pay royalties on Company revenues ("Royalty Agreement"). The Company borrowed $20.0 million on the effective date of the Credit Agreement. The Credit Agreement interest rate is equal to the greater of (a) LIBOR or (b) 1% per annum plus the applicable margin of 8% per annum or 9% floor on the outstanding balance of the term loan. The Royalty Agreement obligates the Company to make royalty payments of 1% applied to total Company fiscal year revenues of up to $50.0 million and 1.5% applied to fiscal year incremental revenues above $50.0 million. For the six months ended June 30, 2015, the Company incurred approximately $0.9 million and $1.1 million in interest expenses under the Credit Agreement and royalty expenses under the Royalty Agreement, respectively, which are due and payable quarterly. For the six months ended June 30, 2014, the Company incurred approximately $0.9 million and $0.7 million in interest expenses under the Credit Agreement and royalty expenses under the Royalty Agreement, respectively. The interest on the loan is set forth in the financial statements as interest expense below loss from operations. The effective yield was approximately 20.5% for the six months ended June 30, 2015. Under the terms of the Secured Loan Arrangement, the Company issued ROS a warrant to purchase 376,691 shares of common stock with an exercise price of $2.3229 per share. The Credit Agreement principal is due and payable on April 18, 2019. The Company may at its option, prepay the term loan borrowings by paying the lender a prepayment premium equivalent to 10% of the outstanding principal. Prepayment of the amount due under the Credit Agreement does not eliminate the royalty payment obligation, which expires no later than April 18, 2023. The Company may at its option, terminate the royalty obligation for a fixed dollar amount with cumulative royalty payments applied against the royalty obligation.

ROS Acquisition LP maintains a security interest in substantially all of the Company's tangible and intangible assets, including intellectual property, to secure any outstanding amounts under the Credit Agreement. The Credit Agreement contains customary events of default, conditions to borrowing and covenants, including restrictions on the ability to dispose of assets, make acquisitions, incur debt, incur liens and make distributions to stockholders, including dividends. The Credit Agreement also includes a financial covenant that requires the maintenance of minimum liquidity of $5.0 million and minimum revenue thresholds. During the continuance of an event of a default, ROS Acquisition LP may accelerate amounts outstanding, terminate the credit facility and foreclose on all collateral. As of June 30, 2015, the Company is in compliance with all covenants under the terms of the Secured Loan Arrangement with ROS Acquisition LP.

Equipment Financing Facility

In April 2013, the Company entered into an equipment financing facility with a financial institution. Under the terms of the agreement, the Company may borrow up to $5.0 million to fund equipment purchases. The financial institution maintains an interest in the underlying equipment until the loan is paid in full. The loan bears interest at the financial institution's prime reference rate plus 4.10% (the prime reference rate is defined as the 30-day LIBOR rate plus 2.50%), which was 7.35% upon closing of the agreement. The equipment financing arrangement is payable in twenty-seven equal installments through September 30, 2015 and has a covenant that requires the Company to maintain a $5.0 million cash balance at all times.

In December 2014, the Company amended its Equipment Financing Facility with the financial institution. Under the terms of the Amendment, the Company borrowed $5.9 million to fund equipment. The Company pays interest on the unpaid principal at the financial institution's prime rate plus 3.10%, which equals 6.35%. The loan will mature on May 31, 2017. The Company is required to make 30 payments of principal and interest through the maturity of the loan in May 2017. In addition, the loan is subject to a prepayment penalty of 1% if paid before December 18, 2016.

Future minimum principal on long-term debt as of June 30, 2015 are as follows:


		Principal
		(in thousands)
Years ending December 31:
2015 (six months)	$	1,170
2016		2,340
2017		1,170
2018		—
2019		20,000
Total	$	24,680