Annual report pursuant to Section 13 and 15(d)

14. Notes Payable-Non-Related Parties

v3.6.0.2
14. Notes Payable-Non-Related Parties
12 Months Ended
Dec. 31, 2016
Pro forma financial information  
14. Notes Payable-Non-Related Parties

At December 31, 2016 and 2015, notes payable – non-related parties are comprised of the following:

 

    December 31,   December 31,
    2016   2015
Subordinated notes  $       33,588,717    $       34,160,200
Discount on subordinated notes           (1,368,629)             (1,697,091)
Deferred financing fees              (788,486)                (981,553)
Total notes payable - non-related parties           31,431,602             31,481,556
Less: current portion                         -                   (685,780)
Long-term portion  $       31,431,602    $       30,795,776
         

 

On August 28, 2015, simultaneously with the execution of the original Credit Facility with Opus Bank(see Note 13), the Company executed the Third Amended and Restated Securities Purchase Agreement and Security Agreement (the “Third Amendment”) with Praesidian.Under the Third Amendment, approximately $11.0 million of the notes held by Plexus were paid in full with borrowings under the Amended Credit Facility, and $9.0 million of the notes held by Plexus were paid using the proceeds from the sale of Series F senior notes in the aggregate principal amount of $9.0 million, bearing interest at 10.8% annually and having a maturity date of February 28, 2021. Additionally, the maturity date of the remaining notes was extended to February 28, 2021, and the continuing lenders agreed to subordinate their notes to borrowings extended under the Amended Credit Facility.

 

As a result of the retirement of the notes held by Plexus, the Company recorded a loss on extinguishment of debt of $2.7 million in the year ended December 31, 2015, substantially consisting of unamortized discount.The Company pays interest monthly at a rate of 10.8%, and recognized interest expense of approximately $4.6 million during 2015.

 

On December 8, 2015, the Company executed the Fourth Amended and Restated Securities Purchase Agreement and Security Agreement, (the “Fourth Amendment”), which amended the Third Amendment to (i) provide the consent of the continuing lenders to the acquisition of Fidelity (ii) joined Fidelity as a guarantor and credit party under the Fourth Amended SPA, and (iii) modifying or eliminating certain of the financial covenants contained in the Third Amendment, specifically the requirement to maintain a minimum unencumbered cash bank balance of $1.0 million at all times effective as of December 31, 2015.

 

On November 14, 2016, FNAC, Fusion and Fusion’s subsidiaries other than FNAC entered into the Fifth Amended and Restated Securities Purchase Agreement (the “Restated Purchase Agreement”) with Praesidian Capital Opportunity Fund III, L.P., Praesidian Capital Opportunity Fund III-A, LP and United Insurance Company of America (collectively, the “Praesidian Lenders”). The Restated Purchase Agreement amends the Fourth Amendment, pursuant to which FNAC previously sold its Series A, Series B, Series C, Series D, Series E and Series F senior notes in an aggregate principal amount of $33.6 million (the “SPA Notes”).

 

The Restated Purchase Agreement amends the Fourth Amendment by (i) providing the Praesidian Lenders’ consent to the acquisition of Apptix, (ii) joining Apptix as a guarantor and credit party under the Restated Purchase Agreement, (iii) modifying certain financial covenants contained in the Fourth Amendment such that the covenants are now substantially similar to those contained in the East West Credit Agreement, and (iv) extending the maturity date of the SPA Notes to May 12, 2022. The Praesidian Lenders also entered into a subordination agreement with the East West Lenders pursuant to which the Praesidian Lenders have subordinated their right to payment under the Restated Purchase Agreement and the SPA Notes to repayment of the Company’s obligations under the East West Credit Agreement.

 

Except as described in the preceding paragraph, the Restated Purchase Agreement contains substantially the same terms and conditions as the Fourth Amendment. For the year ended December 31, 2016, the Company was in compliance with all of the financial covenants contained in the Restated Purchase Agreement.