On April 28, 2017, the Company entered into a loan and security agreement with Silicon Valley Bank, as amended on October 31, 2017, (the “Loan Agreement”), which provided for a $15.0 million credit facility that was made available in two equal tranches. In December 2018, the Company entered into an amendment to the Loan Agreement (the “Loan Amendment”) to increase the amount of the term loan facility from $15.0 million to $45.0 million and make certain other changes. The Loan Agreement, as amended, provides that the funds are available in two tranches: (i) $25.0 million became available upon the effectiveness of the Loan Amendment, of which $15.0 million was used to refinance the existing amount outstanding under the loan facility, and (ii) $20.0 million is to be made available upon the Company’s request prior to September 30, 2019, subject to certain conditions. However, if the Company draws the second tranche, it will be required to provide cash collateral for $20.0 million if the Company’s market capitalization falls below $200 million, until certain market capitalization requirements and thresholds are met.

Silicon Valley Bank has been granted a perfected first priority lien in all of our assets with a negative pledge on our intellectual property. The Loan Agreement contains customary affirmative and negative covenants, including among others, covenants limiting our ability and our subsidiaries’ ability to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments and enter into transactions with affiliates, in each case subject to certain exceptions.

Pursuant to the Loan Amendment, the loans bear interest at the prime rate reported in The Wall Street Journal, plus a spread of 3.0%. Interest only payments are due through October 2020 followed by monthly payments of principal plus interest over the following twenty-five (25) months and a maturity date of November 1, 2022. The Loan Amendment includes (i) a prepayment fee (3.0% of funded amounts in months 1-12, 2.0% of funded amounts in months 13-24, and 1.0% thereafter); and (ii) an end of term charge equal to 6.0% of the amount of principal borrowed. Savara paid minimal legal costs directly attributable to the Loan Amendment and previously paid $0.1 million in legal costs directly attributable to the original issuance of the debt instrument. Such charges were accounted for as debt issuance costs and are being amortized to interest expense using the effective interest method through the scheduled maturity date.

The end of term charge equal to 6.0% of the amount of principal borrowed will be due on the scheduled maturity date and is being recognized as an increase to the principal with a corresponding charge to interest expense over the term of the facility using the effective interest method.

Upon the funding of each tranche, as described above, under the Loan Agreement, the Company was obligated to issue warrants to purchase shares of its common stock, as described below.

Upon funding the first tranche of the Loan Agreement, the Company issued warrants to purchase 24,725 shares of the Company’s common stock at an exercise price of $9.10 per share, with a ten-year life, expiring April 28, 2027 (“April 2017 Warrants”). Upon funding the second tranche of the Loan Agreement, the Company issued warrants to purchase 41,736 shares of the Company’s common stock at an exercise price of $5.39 per share with a ten-year life, expiring June 15, 2027 (“June 2017 Warrants”). The April 2017 Warrants and June 2017 Warrants issued were valued using the Black-Scholes option pricing model with the following assumptions: volatility of 71.42% and 71.57%, respectively, expected term of ten years, risk-free interest rate of 2.33% and 2.16%, respectively, and a zero-dividend yield. The collective warrant fair value of $0.4 million has been recorded as a debt discount and is being amortized through interest expense using the effective interest method through the scheduled maturity date.

Upon the funding of the tranche in connection with the Loan Amendment, the Company was obligated to issue warrants to purchase 11,332 shares of the Company’s common stock at an exercise price of $8.824 per share with a ten-year life, expiring December 4, 2028 (“December 2018 Warrants”). The December 2018 Warrants issued were valued using the Black-Scholes option pricing model with the following assumptions: volatility of 80.09%, expected term of ten years, risk-free interest rate of 2.98%, and a zero-dividend yield. The collective warrant fair value of approximately $0.1 million has been recorded as a debt discount and is being amortized through interest expense using the effective interest method through the scheduled maturity date, as amended and described above.

The following table summarizes the components of the debt facility carrying value, which approximates the fair value (in thousands):

	As of March 31, 2019
	Short-term		Long-term
Principal payments to lender and end of term charge	$	—	$	25,132
Debt Issuance costs		—		(243	)
Debt discount related to warrants		—		(212	)
Carrying Value	$	—	$	24,677