4. Secured Line of Credit

 

Effective November 2, 2015, the Company and certain of its subsidiaries (collectively, the “Borrowers”) entered into a loan and security agreement (the “Loan Agreement”) with Silicon Valley Bank (the “Bank”), pursuant to which the Bank agreed to make a revolving credit facility available to the Borrowers in the principal amount of up to $7.5 million (the “Revolving Facility”).  The Revolving Facility had an effective date (the “Effective Date”) of October 13, 2015, and originally matured on October 13, 2017.  On November 6, 2017, the Borrowers entered into an amended and restated loan and security agreement (the “Restated Loan Agreement”) with an effective date of October 13, 2017 (the “Renewal Date”) which renews and extends the maturity date of the Revolving Facility to March 31, 2019 and makes certain other minor revisions to the Loan Agreement. The Restated Loan Agreement made no material changes in terms other than to change adjusted EBITDA covenant levels and the interest on advances under the Revolving Facility (the “Advances”) initially accrued on the unpaid principal balance of such Advances at a floating per annum rate equal to the greater of 4.50% or either 1.75% above the prime rate or 2.75% above the prime rate, depending on whether certain conditions are satisfied. During an event of default, the rate of interest would increase to 5% above the otherwise applicable rate, until such event of default is cured or waived. All accrued and unpaid interest is payable monthly on the last calendar day of each month. Availability under the Revolving Facility is tied to a borrowing base formula. In connection with the closing of the Restated Loan Agreement, the Borrowers paid the Bank a commitment fee of $38 thousand, and the Borrowers will pay the Bank an additional commitment fee of $18 thousand on the first anniversary of the Renewal Date.

 

The Restated Loan Agreement contains customary affirmative covenants regarding the operations of Borrowers’ business and customary negative covenants that, among other things, limit the ability of the Borrowers to incur additional indebtedness, grant certain liens, make certain investments, merge or consolidate, make certain restricted payments, including dividends, and engage in certain asset dispositions, including a sale of all or substantially all of their property. In addition, the Borrowers must maintain, on a consolidated basis, certain minimum amounts of adjusted EBITDA, as measured at the end of each month. The Restated Loan Agreement contains customary events of default including, among others, Borrowers’ breach of payment obligations or covenants, defaults in payment of other outstanding debt, material misrepresentations, a material adverse change and bankruptcy and insolvency events of default. The Bank’s remedies upon the occurrence of an event of default include, among others, the right to accelerate the debt and the right to foreclose on the collateral securing the Revolving Facility. The Revolving Facility is secured by a first priority perfected security interest in substantially all of the assets of the Borrowers. The Company was in compliance with such covenants at December 31, 2017.

 

At December 31, 2017, the Company had $1.3 million in borrowings and $2.5 million in unused availability under the Revolving Facility. At December 31, 2016, the Company had $1.3 million in borrowings and $1.0 million in unused availability under the Revolving Facility. Borrowings under the Revolving Facility are available for the Company’s working capital and general business requirements, as may be needed from time to time.