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Debt | 9 Months Ended
--- | ---
Sep. 30, 2020
Debt Disclosure [Abstract] |
Debt | 6. Debt The Company’s net carrying amount of debt was comprised of the following:
|  | September 30, |  | December 31, |
($ in thousands) |  | 2020 |  | 2019 |
Xcel Term Loan |  | $ | 17,500 |  | $ | 19,000 |
Unamortized deferred finance costs related to term loan |  |  | (127) |  |  | (179) |
Total |  |  | 17,373 |  |  | 18,821 |
Current portion of long-term debt |  |  | 2,850 |  |  | 2,250 |
Long-term debt |  | $ | 14,523 |  | $ | 16,571 |
Xcel Term Loan On February 11, 2019, the Company entered into an amended loan agreement with Bank Hapoalim B.M. (“BHI”), which amended and restated the prior Xcel Term Loan. Immediately prior to February 11, 2019, the aggregate principal amount of the prior Xcel Term Loan was $14.5 million. Pursuant to the Xcel Term Loan agreement, the Lenders extended to Xcel an additional term loan in the amount of $7.5 million, such that, as of February 11, 2019, the aggregate outstanding balance of all the term loans extended by BHI to Xcel was $22.0 million, which amount was divided under the Xcel Term Loan agreement into two term loans: (1) a term loan in the amount of $7.3 million (“Term Loan A”) and (2) a term loan in the amount of $14.7 million (“Term Loan B” and, together with Term Loan A, the “Term Loans”). The terms and conditions of the Xcel Term Loan resulted in significantly different debt service payment requirements compared with the prior term debt with BHI. Management assessed and determined that this amendment resulted in a loss on extinguishment of debt and recognized a loss of $0.2 million (consisting of unamortized deferred finance costs) during the prior year quarter. Upon entering into the Xcel Term Loan, Xcel paid an upfront fee in the amount of $0.09 million to BHI. The Xcel Term Loan also allows that BHI and any other lender party to the Xcel Term Loan (collectively, the “Lenders”) can provide to Xcel a revolving loan facility and a letter of credit facility, the terms of each of which shall be agreed to by Xcel and the Lenders. Amounts advanced under the revolving loan facility (the “Revolving Loans”) will be used for the purpose of consummating acquisitions by Xcel or its subsidiaries that are or become parties to the Xcel Term Loan. Xcel will have the right to convert Revolving Loans to incremental term loans (the “Incremental Term Loans”) in minimum amounts of $5.0 million. The Company has not drawn down any funds under either the revolving loan facility or letter of credit facility. On April 13, 2020, the Company amended its Second Amended and Restated Loan and Security Agreement with BHI. Under this amendment, the quarterly installment payment due March 31, 2020 was deferred, and the amounts of the quarterly installment payments due throughout the remainder of 2020 were reduced, while the amount of principal to be repaid through variable payments based on excess cash flow was increased. In addition, there were multiple changes and waivers to the various financial covenants. Further, this amendment permitted Xcel to incur unsecured debt through the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and excludes any associated PPP debt and debt service from the covenant calculations. There were no changes to the total principal balance, interest rate, or maturity date. On August 18, 2020, the Company further amended its Second Amended and Restated Loan and Security Agreement with BHI. Under this amendment, the amounts of the quarterly installment payments due throughout 2021 were reduced, and the amount of principal to be repaid through variable payments based on excess cash flow was increased. In addition, there were multiple changes and waivers to the various financial covenants. There were no changes to the total principal balance, interest rate, or maturity date. The Term Loans mature on December 31, 2023; Incremental Term Loans shall mature on the date set forth in the applicable term note; and Revolving Loans and the letter of credit facility shall mature on such date as agreed upon by Xcel and the Lenders. Any letter of credit issued under the Xcel Term Loan shall terminate no later than one year following the date of issuance thereof. The remaining principal balance of the Xcel Term Loan, as amended, outstanding at September 30, 2020 is payable in fixed installments as set forth in the following table, plus the variable payments as described below:
($ in thousands)
Installment Payment Dates |  | Amount
December 31, 2020 |  | $ | 750
March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 |  | $ | 700
March 31, 2022, June 30, 2022, September 30, 2022, and December 31, 2022 |  | $ | 1,125
March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023 |  | $ | 1,250
In addition to the fixed installments outlined above, commencing with the fiscal quarter ended March 31, 2021, the Company is required to repay a portion of the Xcel Term Loan in an amount equal to 50% of the excess cash flow for the fiscal quarter, provided that no early termination fee shall be payable with respect to any such payment. Excess cash flow means, for any period, cash flow from operations (before certain permitted distributions) less (i) capital expenditures not made through the incurrence of indebtedness, (ii) all cash principal paid or payable during such period, and (iii) all dividends declared and paid (or which could have been declared and paid) during such period to equity holders of any credit party treated as a disregarded entity for tax purposes. To the extent that the cumulative amount of such variable repayments made is less than $4.45 million as of March 31, 2022, any such shortfall must be repaid at that date. Thus, the aggregate remaining annual scheduled principal payments under the Xcel Term Loan are as follows:
|  | Amount of
($ in thousands) |  | Principal
Year Ending December 31, |  | Payment
2020 |  | $ | 750
2021 |  |  | 2,800
2022 |  |  | 8,950
2023 |  |  | 5,000
Total |  | $ | 17,500
Xcel has the right to prepay the Term Loans, Incremental Term Loans, Revolving Loans, and obligations with respect to letters of credit and accrued and unpaid interest thereon and to terminate the Lenders’ obligations to make Revolving Loans and issue letters of credit; provided that any prepayment of less than all of the outstanding balances of the Term Loans and Incremental Term Loans shall be applied to the remaining amounts due in inverse order of maturity. If any Term Loan or any Incremental Term Loan is prepaid on or prior to the third anniversary of the Closing Date (including as a result of an event of default), Xcel shall pay an early termination fee as follows: an amount equal to the principal amount of the Term Loan or Incremental Term Loan, as applicable, being prepaid, multiplied by: (i) two percent (2.00%) if any of Term Loan B or any Incremental Term Loan is prepaid on or before the second anniversary of the later of the Closing Date or the date such Incremental Term Loan was made, as applicable; (ii) one percent (1.00%) if any of Term Loan A is prepaid on or before the second anniversary of the Closing Date; (iii) one percent (1.00%) if any of Term Loan B or any Incremental Term Loan is prepaid after the second anniversary of the later of the Closing Date or such Incremental Term Loan was made, as applicable, but on or before the third anniversary of such date; (iv) one-half of one percent (0.50%) if any of Term Loan A is prepaid after the second anniversary of the Closing Date, but on or before the third anniversary of such date; or (v) zero percent (0.00%) if any Term Loan or any Incremental Term Loan is prepaid after the third anniversary of the later of the Closing Date or the date such Incremental Term Loan was made, as applicable. Notwithstanding the above, Xcel may make a voluntary prepayment of up to $0.75 million without any early termination fees. Any such prepayment would be applied against the April 30, 2021 fixed installment payment and would be excluded from the computation of excess cash flows. Xcel’s obligations under the Xcel Term Loan are guaranteed by and secured by all of the assets of Xcel and its wholly owned subsidiaries, as well as any subsidiary formed or acquired that becomes a credit party to the Xcel Term Loan agreement (the “Guarantors”) and, subject to certain limitations contained in the Xcel Term Loan, equity interests of the Guarantors. Xcel also granted the Lenders a right of first offer to finance any acquisition for which the consideration will be paid other than by cash of Xcel or by the issuance of equity interest of Xcel. Interest on Term Loan A accrues at a fixed rate of 5.1% per annum and is payable on each day on which the scheduled principal payments on Term Loans are required to be made. Interest on Term Loan B accrues at a fixed rate of 6.25% per annum and is payable on each day on which the scheduled principal payments on Term Loans are required to be made. Interest on the Revolving Loans will accrue at either the Base Rate or LIBOR, as elected by Xcel, plus a margin to be agreed to by Xcel and the Lenders and will be payable on the first day of each month. Base Rate is defined in the Xcel Term Loan agreement as the greater of (a) BHI’s stated prime rate or (b) 2.00% per annum plus the overnight federal funds rate published by the Federal Reserve Bank of New York. Interest on the Incremental Term Loans will accrue at rates to be agreed to by Xcel and the Lenders and will be payable on each day on which the scheduled principal payments under the applicable note are required to be made. The Xcel Term Loan contains customary covenants, including reporting requirements, trademark preservation, and the following financial covenants of Xcel (on a consolidated basis with Xcel and the Guarantors under the Second Amended and Restated Loan and Security Agreement):
| · |  | net worth as defined in the loan agreements of at least $90.0 million at the end of each fiscal quarter;
| · |  | liquid assets of at least $3.0 million through December 31, 2020, at least $2.5 million for the fiscal quarters ending March 31, 2021 through September 30, 2021, at least $3.0 million for the fiscal quarter ending December 31, 2021, and at least $5.0 million thereafter;
| · |  | EBITDA shall not be less than $5.0 million for the twelve month fiscal period ending September 30, 2020;
| · |  | the fixed charge coverage ratio for the twelve fiscal month period ending at the end of each fiscal quarter shall not be less than the ratio set forth below:
Fiscal Quarter End |  | Fixed Charge Coverage Ratio
December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 |  | 1.25 to 1.00
March 31, 2022, and thereafter |  | 1.10 to 1.00
| · |  | capital expenditures (excluding any capitalized compensation costs) shall not exceed $1.6 million for the fiscal year ending December 31, 2020, and $0.7 million for any fiscal year beginning after December 31, 2020; and
| · |  | the leverage ratio for the twelve fiscal month period ending at the end of each fiscal period set forth below shall not exceed the ratio below:
Fiscal Period |  | Maximum Leverage Ratio
September 30, 2020 |  | 4.00 to 1.00
December 31, 2020 |  | 3.50 to 1.00
March 31, 2021 |  | 3.15 to 1.00
June 30, 2021 |  | 3.00 to 1.00
September 30, 2021 |  | 2.75 to 1.00
December 31, 2021 |  | 2.50 to 1.00
March 31, 2022 and each Fiscal Quarter end thereafter |  | 1.50 to 1.00
The Company was in compliance with all applicable covenants as of September 30, 2020. For the current and prior year quarter, the Company incurred aggregate interest expense related to term loan debt of approximately $281,000 and $317,000, respectively. For the current nine months and prior year nine months, the Company incurred aggregate interest expense related to term loan debt of approximately $854,000 and $903,000, respectively. The effective interest rate related to term loan debt was approximately 6.6% for the current quarter and current nine months, approximately 6.7% for the prior year quarter, and approximately 6.8% for the prior year nine months.

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