Indebtedness

Term Loan

In May 2010, the Company entered into the Loan Agreement with SVB, pursuant to which the Company could borrow up to $1.5 million. The Loan Agreement was secured by substantially all of the Company’s assets, excluding its intellectual property. Outstanding borrowings bore interest at a fixed per annum rate equal to 8.25%. The Company borrowed the entire $1.5 million in two equal advances in June 2010 and July 2010, and principal and interest payments were due through September 2013.

In September 2012, the Company modified the Loan Agreement with SVB such that the Company was able to borrow up to $5.0 million (the “First Loan Modification Agreement”). On September 4, 2012, the Company borrowed $2.0 million under the First Loan Modification Agreement, of which $0.5 million of the proceeds was used to repay the outstanding balance of the original Loan and Security Agreement. The interest rate on the amount borrowed in 2012 was fixed at 5.75% per annum. On February 1, 2013, the Company borrowed the remaining loan amount of $3.0 million under the First Loan Modification Agreement. The interest rate on the amount borrowed in 2013 was fixed at 5.75% per annum. The Company made interest-only payments until October 1, 2013, and was required to make consecutive equal monthly payments of principal, plus accrued interest, over the remaining term. The Company accounted for the amendment as a modification, as the terms of the amendment were not substantially different from the original terms of the Loan Agreement.

In November 2014, the Company modified the Loan Agreement with SVB such that the Company was able to increase the amount it may borrow under this venture debt facility to $15.0 million (the “Second Loan Modification Agreement”). On November 25, 2014, the Company borrowed a first tranche of $10.0 million, of which amount approximately $3.2 million was applied to the repayment of outstanding debt obligations to SVB under the First Loan Modification Agreement, including accrued interest. The Company borrowed the remaining $5.0 million on May 11, 2015. The interest rate for each tranche was set at the funding date for such tranche at 3.75% above the prime lending rate published in the Wall Street Journal. The interest rate on the amount borrowed in 2014 was fixed at 7.00% per annum.

The Company accounted for the Second Loan Modification Agreement as an extinguishment as the terms of the Second Loan Modification Agreement were substantially different from the original terms of the Loan Agreement, and recorded a loss on extinguishment of $0.5 million, which was recorded in other expenses on the Statement of Operations and Comprehensive Loss. The warrants issued in connection with the debt (see Note 9) were treated as part of the extinguishment loss.

In connection with the Second Loan Modification Agreement, the Company issued to SVB and Life Science Loans, LLC warrants to purchase a total of 27,500 shares of the Company's common stock at a per share exercise price of $11.04 (the "Warrants"). In connection with the Company's draw-down of $5.0 million in May 2015 the Warrants automatically became exercisable for the purchase of an additional 27,500 shares of common stock at a per share exercise price of $11.83. The exercise price and the number of shares are subject to adjustment upon a merger event, reclassification of the shares of common stock, subdivision or combination of the shares of common stock or certain dividend payments. The Warrants may be exercised on a cashless basis at any time. The Warrants are exercisable until November 24, 2024 and will be exercised automatically on a net issuance basis if not exercised prior to the expiration date and if the then-current fair market value of one share of common stock is greater than the exercise price then in effect.

On December 4, 2015, the Company entered into a Consent and Third Amendment to Loan and Security Agreement (the "Third Loan Amendment") with SVB in connection with the assignment of the Company's proprietary Supermin^TM albumin variant assets to a third party pursuant to a Patent Assignment and License Agreement dated as of December 4, 2015.

The Third Loan Amendment modified the repayment terms of the Loan Agreement under specified circumstances and the circumstances under which the Company was required to fund a cash collateral account with SVB in an amount equal to the outstanding amount under the Loan Agreement. As a result of the Company's Phase 3 clinical trial of isunakinra for the treatment of severe allergic conjunctivitis, which constituted a "Study Discontinuation Event" pursuant to the terms of the Loan Agreement, the Company was required to fund a cash collateral account with SVB in an amount equal to approximately $15.1 million, representing the outstanding obligations under the Loan Agreement.

The Company accounted for the Third Loan Amendment as a modification as the terms of the Third Loan Amendment were not substantially different from the terms of the Second Loan Amendment. The Company recorded a debt discount of $328,000, which is being accreted as interest expense over the remaining term of the loan. The Company recorded interest expense of $102,000 for the year ended December 31, 2015. The offsetting credit to the debt discount was recorded as additional paid-in-capital.

The Company also accreted the final payment over the term of the debt using the effective interest method. As of December 31, 2015, the Company had accreted $354,000 of the final payment. The Company also evaluated the debt for embedded features that need to be bifurcated, noting that the contingent interest feature and events of default were required to be bifurcated, but were concluded to be de minimis in value at inception and at December 31, 2015. At December 31, 2015 and 2014, $14.1 million and $10.0 million were outstanding on the term loan under the Loan Agreement, respectively. On March 1, 2016, the Company prepaid all outstanding amounts owed to SVB and terminated the Loan Agreement (See Note 14).

Scheduled principal payments on outstanding debt, as of December 31, 2015, are as follows (in thousands):



2016	$	4,263
2017	4,978
2018	4,883
	$	14,124