Debt

Debt consists of the following (in thousands):

	June 30, 2017			December 31, 2016
Loan	$	85,000		$	3.532
Less deferred loan costs and discount		(9,869	)		(803	)
Total Loan, net		75,131			2,729
Notes and deferred payments to sellers, Tealstone acquisition		11,909			-
Notes payable for transportation and construction equipment and other		2,124			2,665
		89,164			5,394

Current maturities of long-term debt		1,039			4,648
Less current deferred loan costs		-			(803	)
Less current maturities of long-term debt, net		(1,039	)		(3,845	)
Total long-term debt	$	88,125		$	1,549

April 3, 2017,

the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into a Loan and Security Agreement with Wilmington Trust, National Association, as agent, and the lenders party thereto (the “Loan Agreement”), providing for a term loan of

$85,000,000

(the “Loan”) with a maturity date of

April 4, 2022,

which replaced the then existing debt facility. The Loan is secured by substantially all of the assets of the Company and its subsidiaries.

Interest on the Loan is equal to the

one

two

three

- or

six

-month London interbank rate, or LIBOR, plus

8.75%

per annum on the unpaid principal amount of the Loan, subject to adjustment under certain circumstances. Interest on the Loan is generally payable monthly. There are

amortized principal payments; however, the Company is required to prepay the Loan, and in certain cases pay a prepayment premium thereon, with proceeds received from the issuances of debt or equity, transfers, events of loss and extraordinary receipts. The Company is required to make an offer quarterly to the lenders to prepay the Loan in an amount equal to

75%

of its excess cash flow, plus accrued and unpaid interest thereon and a prepayment premium.

The Loan Agreement contains various covenants that limit, among other things, the Company’s ability and certain of its subsidiaries’ ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell assets, make certain loans, enter into acquisitions, incur capital expenditures, make investments, and pay dividends. In addition, the Company is required to maintain the following principal financial covenants:

a ratio of secured indebtedness to EBITDA of

not

more than

3.10

1.00

beginning with the

four

consecutive quarters ending

June 30, 2017,

reducing to

1.80

1.00

by the

four

consecutive quarters ending

September 30, 2019;

daily cash collateral of

not

less than

$10,000,000

commencing on

June 30, 2017,

increasing to

$15,000,000

October 1, 2017,

and potentially further increasing to

$18,000,000

beginning on

April 4, 2018;

a rolling

four

quarter gross margin in contract backlog of

not

less than

$60,000,000

commencing

June 30, 2017,

increasing to

$70,000,000

March 31, 2019;

the incurrence of net capital expenditures during each

four

consecutive fiscal quarters shall

not

exceed

$15,000,000;

bonding capacity shall be maintained at all times in an amount

not

less than

$1,000,000,000;

and

the EBITDA of Tealstone Residential Concrete, Inc. shall

not

be less than

$12,000,000

during each

four

consecutive fiscal quarters, commencing

June 30, 2017.

The Company is in compliance with these covenants at

June 30, 2017.

The Loan Agreement also includes customary events of default, including events of default relating to non-payment of principal or interest, inaccuracy of representations and warranties, breaches of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents

not

being valid, calls under the Company’s bonds, failure of specified individuals to remain employed by the Company, and a change of control. If an event of default occurs, the lenders will be able to accelerate the maturity of the Loan Agreement and exercise other rights and remedies.

Deferred loan costs and discounts totaled

$10.4

million, which included attorney fees, investment bank fees as well as amounts paid to the lenders and which were discounted from the loan amount. Warrants valued at

$3.5

million were included as well. Refer to Note

for additional information on the warrants. The total amount will be amortized on a straight-line basis, which approximates the effective interest method, over the

five

-year life of the Loan. Amortization expense of

$0.5

million has been included in interest expense for the

three

and

six

months ended

June 30, 2017.

As part of the extinguishment of our prior credit facility,

$0.8

million in debt extinguishment costs was expensed and included as a “loss on extinguishment of debt” on our statement of operations for the

three

and

six

months ended

June 30, 2017.

Fair Value

The Company’s debt is recorded at its carrying amount in the condensed consolidated balance sheets. As of

June 30, 2017

and

December 31, 2016,

the carrying values of our debt outstanding approximated the fair values and were

$85.0

million and

$3.5

million, respectively for the Term Loan. There was

revolver as of

June 30, 2017

and

amounts outstanding on the prior revolver as of

December 31, 2016.

Notes and Deferred Payments to Sellers

As part of the Tealstone Acquisition, the Company issued

$5,000,000

of promissory notes to the sellers and

$2,500,000,

and

$7,500,000

of deferred cash payments. Based on a preliminary

12%

discount rate, the Company recorded

$11.6

million as notes and deferred payments to sellers in long-term debt on our condensed consolidated balance sheet at the acquisition closing date. Accreted interest for the period was

$0.3

million for the

three

and

six

months ended

June 30, 2017,

and was recorded as interest expense.

Notes Payable for Transportation and Construction Equipment

The Company has purchased and financed various transportation and construction equipment to enhance the Company’s fleet of equipment. The total long-term notes payable related to the purchase of financed equipment was

$2.1

million and

$2.7

million at

June 30, 2017

and

December 31, 2016,

respectively. The purchases have payment terms ranging from

years and the associated interest rates range from

3.15%

6.92%

The fair value of these notes payable approximates their book value.

Interest Expense

Interest expense related to our Loan and prior credit facility and other debt for the

three

and

six

months ended

June 30, 2017

was

$3.0

million and

$3.1

million, respectively and

$0.8

million and

$1.7

million for the

three

and

six

months ended

June 30, 2016,

respectively. The increase in interest cost for both periods is due to our new Loan that has a higher amount of principal outstanding