12.  LONG-TERM DEBT WITH RELATED PARTY

 

On November 23, 2012, the Company entered into a $1.8 million Term Loan Agreement, at a 6.67% annual interest rate with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company’s Chairman and Chief Executive Officer.  Mr. Tao has been a director of the Company since 2007.  The Term Loan is secured by substantially all the tangible and intangible assets of the Company, excluding its shares of common stock of Sharecare. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of the Company at the rate of $1.30 per share, which represents an approximately 33% premium to the average closing prices of the Company’s common stock for the ten days prior to entrance into the agreement and an approximately 53% premium to the closing price of the Company’s common stock on the day of entrance into the agreement.  On April 2, 2013, the Company entered into a $4.0 million Promissory Note with that same lender, at a 6.67% annual interest rate for the first year and 8.67% for the second year.  The principal and accrued interest under the Promissory Note is convertible into Common Stock of the Company at the rate of $2.00 per share, which represents an approximately 11% premium to the average closing prices of the Company’s common stock for the ten days prior to entrance into the agreement and an approximately 8% premium to the closing price of the Company’s common stock on the day of entrance into the agreement.

 

On November 12, 2013, Digipac, LLC notified the Company that it wished to convert the entire principal amounts of both the November 2012 Note and the April 2013 Note, and all accrued and unpaid interest thereon, into shares of the Company's common stock, effective as of the same day. This conversion resulted in the issuance of 3,556,672 shares of the Company's common stock to the lender, and the extinguishing of a total of $5.8 million in debt issued by the Company and approximately $281,236  in accrued and unpaid interest.

 

On November 13, 2013, the Company entered into a $2.5 million Term Loan Agreement, at 6.67% annual interest rate for the first year and 8.67% for the second year, with a lender controlled by and in part owned by Mr. Kai-Shing Tao, the Company's Chairman and Chief Executive Officer, and in part owned by Mr. Douglas Osrow, the Company's Chief Financial Officer. The Term Loan Agreement is secured pursuant to the Term Loan Agreement detailed below, as amended by Amendment No. 2 to that Term Loan Agreement, dated April 2, 2013. The principal and accrued interest under the Term Loan Agreement is convertible into Common Stock of the Company at the rate of $3.75 per share, which was the closing price of the Company's common stock for the trading session immediately prior to entrance into the agreement. The balance is due November 2015.

 

The future maturity schedule of the long-term debt with related party was as follows as of December 31, 2013: