Debt

Long-term debt, net of discount, consisted of the following (in thousands):



	December 26, 2014			December 27, 2013
Term A Loan	$	95,126		$	83,155
Term B Loan	50,632			31,082
Senior convertible notes	—			22,315
Less: Term loans discount	(18,710		)	(24,207		)
	127,048			112,345
Less: current portion of long-term debt	—			(22,315		)
	$	127,048		$	90,030

The interest rate on the Term A Loan is 12.0% per annum, and the interest rate on the Term B Loan is 10.0% per annum. Interest on each term loan may, at our election, be paid in cash or paid in kind ("PIK") (in the form of additional principal) through November 2015. Interest is due on the last business day of the calendar quarter. During the year ended December 26, 2014, the principal balance on the term loans increased by $14.9 million due to PIK interest elections made during the fiscal year. The PIK interest election for the fourth quarters of 2014 and 2013 were made subsequent to fiscal-year end; therefore, at December 26, 2014 and December 27, 2013, interest accrued of $4.0 million and $3.2 million, respectively, was classified within other long-term liabilities in our Consolidated Balance Sheets.

The Term A and B Loans mature on November 20, 2017 and are secured by a first lien on the collateral, which includes the shares and assets of certain domestic and international subsidiaries. The term loans are non-amortizing and may be prepaid without any penalty. While the Term B Loans are not junior in relative lien priority to the Term A Loan, the Term B Loan may not be repaid until the Term A Loan is paid in full.

On February 21, 2014, we amended the credit agreement with Oaktree Capital Management L.P. and affiliates (collectively, “Oaktree”), including modifications to the financial covenants. Pursuant to the amendment, we are now no longer subject to the minimum liquidity and the total net debt leverage ratio covenants through the maturity date. The amendment also extended the waiver of any default with respect to the judgments (described in Note 10, Commitments and contingencies) in the Halo Electronics case and the Turkish legal matter through the maturity date, subject to the continued satisfaction of certain conditions specified in the amendment.

In addition, the secured leverage ratio covenants were modified. The secured leverage ratio is calculated as the ratio of consolidated secured debt, which includes the term loans, and our rolling four quarters' EBITDA (as defined in the credit agreement). Under the credit agreement, as amended in February 2014, the secured leverage ratio requirements, as defined in the agreement, are set forth in the table below:



Test Period End Date(s)	Secured Leverage Ratio
March 31, 2014 through December 31, 2014	11.00 to 1.00
March 31, 2015 through December 31, 2015	9.50 to 1.00
March 31, 2016 through December 31, 2016	8.00 to 1.00
March 31, 2017 through December 31, 2017	5.00 to 1.00

In consideration for the covenant modification, we paid Oaktree a fee of 1.5% of its term loan principal, or approximately $1.8 million, which was added to the principal of its outstanding Term A Loan and Term B Loan on a pro rata basis. These costs have been capitalized and will be amortized over the remaining term of these loans using the effective interest rate method.

In connection with the execution of the Merger Agreement, we obtained the written consent (the “Consent”) of the required lenders (“Lenders”) under the credit agreement. Pursuant to the Consent, the Lenders agreed to waive our compliance with the secured leverage ratio requirements with respect to the 2015 test period end dates.

In addition, our capital expenditures are limited to $12.0 million in fiscal 2014 and $14.0 million in fiscal 2015 and in each fiscal year thereafter. As of December 26, 2014, we were in compliance with these financial covenants.

On February 21, 2014, we entered into agreements with the holders of approximately $20.7 million of the $22.3 million of our senior convertible notes to exchange their notes for new Term B Loans, shares of our common stock, and cash (collectively “the Exchange Transaction”). In aggregate, the Exchange Transaction resulted in the issuance of $14.9 million of new Term B Loans, 1.1 million shares of our common stock, and $2.4 million of cash in exchange for approximately $20.7 million of the $22.3 million of outstanding senior convertible notes. The new Term B Loans have the same terms as the Term B Loan issued to Oaktree in November 2012.

On May 1, 2014, we repaid the $1.6 million of outstanding principal on our remaining senior convertible notes. The repayment was triggered by a "change in control" due to conversion of the Series A preferred stock and the resulting issuance of 8.2 million shares of common stock to Oaktree. Oaktree beneficially owns a majority of the outstanding shares of our common stock.

As of December 26, 2014 and December 27, 2013, the term loans had a carrying value of $127.0 million and $90.0 million, respectively, reconciled as follows:



	Term A		Term B		Total
Carrying value, December 28, 2012	53,928		20,510		74,438
Accretion of discount	3,498		1,373		4,871
PIK Interest	8,154		2,567		10,721
Carrying value, December 27, 2013	65,580		24,450		90,030
Accretion of discount	3,968		1,528		5,496
Exchange transaction issuances	1,286		15,360		16,646
PIK Interest	10,685		4,191		14,876
Carrying value, December 26, 2014	$	81,519	$	45,529	$	127,048

Debt discount

Upon closing of the Oaktree term loans on November 20, 2012, we issued to Oaktree 3.7 million shares of our common stock and a warrant to purchase 19.9% of the common stock of a wholly-owned subsidiary of the Company. The common stock and warrant were recorded as a discount of $29.6 million on the Oaktree loans, which is being accreted over the term of the loans using the effective interest rate method. During the year ended December 26, 2014, $5.5 million of additional interest expense has been recorded reflecting this accretion.

Debt issuance and extinguishment costs

During the year ended December 26, 2014, we incurred approximately $1.5 million of debt issuance costs in connection with the issuance of the new Term B Loans, which have been capitalized as a deferred loan cost and will be amortized to interest expense over the term of the loans using the effective interest method.

As of December 26, 2014 and December 27, 2013, we have $10.0 million and $9.3 million, respectively, of unamortized deferred loan costs. The short-term portion of these unamortized deferred loan costs are classified in prepaid expenses and other current assets and the long-term portion is classified in deferred loan costs and other assets in our Consolidated Balance Sheets.

During the year ended December 26, 2014, interest expense included debt extinguishment costs of $1.0 million, which included a $0.2 million write-off of unamortized debt issuance costs and $0.8 million of legal fees primarily attributed to the extinguishment of the senior convertible notes. During the year ended December 27, 2013, interest expense included $1.2 million of debt extinguishment costs for lender fees incurred in connection with post-closing obligations under the Oaktree credit agreement.

Debt maturities

Long-term debt of $145.8 million at December 26, 2014, excluding future PIK elections made on our term loans, mature on November 20, 2017.