Debt

Long-term debt consists of the following (in thousands):



	September 30, 2013			December 31, 2012
Comerica Revolver	$	—		$	780
Comerica Term Loan	2,000			2,000
Escalate Term Loan (A)	5,881			5,920
Stockholder Representative Note	2,088			2,328
	9,969			11,028
Less current maturities	(917		)	(1,397		)
	$	9,052		$	9,631

(A) Total proceeds less debt discount as discussed below

On October 17, 2013, the Company entered into the Main Street Loan Agreement by and among the Company and its subsidiaries, and Main Street Capital Corporation, as lender and as administrative agent and collateral agent for itself and the other lenders from time to time party thereto. The Main Street Loan Agreement provides for an $11,000,000 senior secured term loan facility and a $2,000,000 senior secured revolving loan facility. At closing, the Company borrowed $9,000,000 under the term loan and approximately $193,000 on the revolving loan facility. The proceeds of the $9,000,000 term loan were used to repay the existing $6,500,000 Escalate Term Loan and $2,000,000 Comerica Term Loan, in addition to facility fees and expenses.

All borrowings under the Main Street Loan Agreement mature on October 17, 2018, unless sooner terminated as provided in the Loan Agreement. The Main Street Loan Agreement provides that term loan borrowings bear interest at 12% and revolving loan borrowings bear interest at 8%. Interest payments on the outstanding borrowings under the term loan and revolving loan are due monthly. The Company is required to make quarterly principal payments on the term loan as follows: (i) starting on February 15, 2014 to April 15, 2015 in an amount equal to 33% of Excess Cash Flow generated by the Company (as defined in the Loan Agreement) during the trailing fiscal quarter and (ii) from August 15, 2015 to August 15, 2018 in an amount equal to 50% of Excess Cash Flow generated by the Company during the trailing fiscal quarter. Monthly interest payments on the $9,000,000 term loan over a twelve month period, assuming no principal payments are made during such period, would approximate an aggregate amount of $1,080,000. The Company may prepay borrowings under the Main Street Loan Agreement at any time without premium or penalty, subject to certain notice and minimum prepayment requirements.

The obligations of the Company under the Main Street Loan Agreement are secured by substantially all of the assets of the Company, including all intellectual property, equity interests in subsidiaries, equipment and other personal property. The Main Street Loan Agreement contains standard representations, warranties and covenants for a transaction of its nature, including, among other things, covenants relating to (i) financial reporting and notification, (ii) payment of obligations, (iii) compliance with applicable laws and (iv) notification of certain events. The Main Street Loan Agreement also contains various covenants and restrictive provisions which may, among other things, limit the Company's ability to sell assets, incur additional indebtedness, make investments or loans and create liens. The Main Street Loan Agreement also contains financial covenants, including a fixed charge coverage ratio covenant and a debt to Adjusted EBITDA ratio covenant. The Main Street Loan Agreement contains events of default customary for similar financings with corresponding grace periods, including failure to pay any principal or interest when due, failure to perform or observe covenants, breaches of representations and warranties, certain cross defaults, certain bankruptcy related events, monetary judgments defaults and a change in control. Upon the occurrence of an event of default, the outstanding obligations under the Main Street Loan Agreement may be accelerated and become immediately due and payable.

On October 1, 2012, the Company entered into a Loan and Security Agreement (the "Comerica Loan Agreement") with Comerica Bank, providing the Company with a $2,000,000 term loan (the "Comerica Term Loan") and the Comerica Revolver, pursuant to which the Company could borrow, for working capital needs, an amount up to the lesser of (i) 80% of eligible accounts receivable and (ii) $3,000,000 (collectively, the "Comerica Loans"). The Comerica Loan Agreement was secured by substantially all of the assets of the Company and secured guarantees executed by GP Communications, LLC and Affinity. The Comerica Loan Agreement contained certain restrictive covenants including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Comerica Loans were subject to certain financial covenants, including without limitation, financial covenants that required the Company to maintain a total funded debt to Adjusted EBITDA ratio, to maintain a senior funded debt to Adjusted EBITDA ratio and to maintain a fixed charge coverage ratio. "Management's Discussion and Analysis of Financial Conditions and Results of Operations" under Item 2 of this Quarterly Report on Form 10-Q contains a description of Adjusted EBITDA. The Comerica Loan Agreement also provided for events of default, with corresponding grace periods, including failure to pay principal or interest when due, failure to pay other obligations within ten days after becoming due, failure to comply with covenants, breaches of representations and warranties, default under certain other indebtedness, certain insolvency events affecting the Company, the occurrence of certain material judgments or if any guaranty of the Company's obligations ceases to be in full force and effect. On March 28, 2013, the Company and Comerica mutually agreed to amend the Comerica Loan Agreement (the "Comerica Amendment"). The Comerica Amendment established revised definitions and ratios relating to the three financial covenants discussed above to reflect the Company's projections of EBITDA and liquidity. The Comerica Amendment also provided that the Company maintain a minimum cash balance of $400,000 in our accounts at Comerica Bank and limit extraordinary expenses in connection with acquisitions.

The Comerica Revolver bears interest on outstanding borrowings at a rate equal to the Prime Rate (as defined in the Comerica Loan Agreement, or 3.25% as of September 30, 2013) plus 2.00%. The Comerica Amendment reduced funds available to the Company under the Comerica Revolver so that advances under the Comerica Revolver cannot exceed the lesser of (i) $3,000,000 and (ii) 80% of eligible accounts receivable, less in each case any amount outstanding under the Comerica Term Loan up to $1,500,000. As of September 30, 2013, we had no outstanding borrowings under the Comerica Revolver and we had unused borrowing availability of approximately $1,500,000. The maturity rate of the Comerica Revolver was April 1, 2014.

The Comerica Term Loan bears interest at a rate equal to the Prime Rate (3.25% as of September 30, 2013) plus 3.00%. As of September 30, 2013, the outstanding balance under the Comerica Term Loan was $2,000,000. The outstanding balance of the Comerica Term Loan on October 1, 2013 was payable in 24 equal monthly installments of principal, plus all accrued interest, beginning on November 1, 2013. The maturity date of the Comerica Term Loan was November 1, 2015. On October 17, 2013, the Comerica Loans were repaid in full in connection with entry into the Main Street Loan Agreement.

On October 1, 2012, in connection with the Affinity acquisition, the Company entered into a Loan and Security Agreement (the “Escalate Loan Agreement”) with Escalate Capital Partners SBIC I, L.P. ("Escalate"), providing the Company with a $6,500,000 term loan (the “Escalate Term Loan”) for a term of 60 months. The Escalate Term Loan bears interest at a fixed rate of 12.0% per annum, with interest-only payable monthly for the first 24 months. The outstanding balance of the Escalate Term Loan was payable in 36 equal monthly installments of principal, plus all accrued interest, beginning on October 31, 2014. The Escalate Term Loan was secured by substantially all of the assets of the Company and secured guarantees executed by GP Communications and Affinity, and was subordinated to the Comerica Loans. The Escalate Loan Agreement contained certain restrictive covenants, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Escalate Loan Agreement also provided for events of default, with corresponding grace periods, including failure to pay principal when due, failure to pay interest within three business days after becoming due, failure to pay other obligations within ten days after becoming due, failure to comply with covenants, breaches of representations and warranties, default under certain other indebtedness, certain insolvency events affecting the Company and its subsidiaries or the occurrence of certain material judgments. The Escalate Loan Agreement also provided for certain management rights for Escalate, including (i) the ability for Escalate to consult with and advise management of the Company on significant business issues, including management’s proposed annual operating plans and (ii) the ability for Escalate to examine the books and records of the Company and inspect the Company’s facilities during normal business hours with reasonable notice. In connection with the Escalate Term Loan, the Company agreed to pay Escalate a $300,000 fee (the "$300,000 Escalate Fee") upon the earlier to occur of: (i) the maturity date of October 1, 2017 or (ii) repayment in full of the obligations. This $300,000 fee is recorded in accrued expenses as of September 30, 2013 and $240,000 is included in unamortized financing costs as of September 30, 2013. In connection with the Escalate Term Loan, the Company issued to Escalate 295,000 shares of Common Stock (the “Escalate Shares”) at a purchase price of $0.01 per share on October 1, 2012. Escalate received standard piggyback and demand registration rights with respect to the Escalate Shares. The shares were valued at $611,000 using the October 1, 2012, stock price of $2.08 less the purchase price were reflected as a debt discount to the Escalate Term Loan. The Comerica Amendment discussed above required the consent of Escalate. In consideration of Escalate's consent to the Comerica Amendment, the Company issued 100,000 shares of its Common Stock to Escalate. The shares were valued at $147,000 using the March 28, 2013 stock price of $1.47 and were reflected as a debt discount to the Escalate Term Loan. The total debt discount was $619,000 as of September 30, 2013 and was being amortized using the straight line method over the term of the loan through the maturity date. On October 17, 2013, the Escalate Term Loan and $300,000 Escalate Fee were paid in full in connection with entry into the Main Street Loan Agreement.

On October 1, 2012, in connection with the Affinity acquisition, the Company issued a promissory note (the “Note”), in favor of the prior stockholders of Affinity (the "Stockholder Representative"), in original principal amount of $2.33 million, due and payable on December 31, 2014. The principal amount of the Note accrues interest at a rate of 8.0% per annum, and such interest shall be payable in arrears in quarterly payments, which commenced on April 1, 2013. The Company shall make monthly principal payments in the amount of $50,000 in the event the Company's trailing three month Adjusted EBITDA exceeds $1,500,000. The Company is required make additional payments on the principal amount on each of December 31, 2013, June 30, 2014 and December 31, 2014 in an amount equal to 40% of the Company’s trailing six month Adjusted EBITDA less $3,000,000. As of September 30, 2013, the Company has not made any principal payments on the Note. During the nine months ended September 30, 2013, the Note was reduced by $240,000 in accordance with the terms of the Note in connection with severance obligations the Company incurred related to the acquisition of Affinity resulting in an equal and offsetting reduction in goodwill. Approximately $174,000 of these severance obligations remain payable and are recorded in accrued expenses in the accompanying condensed consolidated balance sheet as of September 30, 2013.

Unamortized financing costs related to the Comerica Loans and Escalate Term Loan of $710,000 and $651,000 are included in other assets in the accompanying condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012, respectively. The financing costs are amortized using the effective interest method over the term of each loan through each maturity date. During the nine and three months ended September 30, 2013 there was $242,000 and $121,000 respectively, of amortization of financing costs, and $108,000 and $39,000 respectively, of amortization of debt discount. During the nine and three months ended September 30, 2012 there was $33,000 and $4,000 respectively, of amortization of financing costs, and no amortization of debt discount. As a result of the October 2013 refinancing and payoff of the Comerica Loans and Escalate Term Loan, the Company will charge to interest and other expense in the three months ended December 31, 2013: (i) the unamortized portion of the debt financing costs from the Comerica Loans and Escalate Term Loan, which totaled $710,000 as of September 30, 2013 and (ii) the unamortized portion of the debt discount from the Escalate Term Loan, which was $619,000 as of September 30, 2013.