7. LONG-TERM DEBT

On June 26, 2015, the Company entered into a credit and security agreement (the “Credit Agreement”) with MidCap Financial (“Lender”) that provides a senior secured term loan of $20.0 million. The principal amount may be increased by an additional $20.0 million, for an aggregate amount not to exceed $40.0 million, upon the acceptance by the Food and Drug Administration (“FDA”) of the new drug application (“NDA”) for eteplirsen. All obligations under the Credit Agreement are secured by substantially all of the Company’s assets, excluding, without limitation, the Company’s intellectual property, certain equity interests relating to foreign subsidiaries and all assets owned by foreign subsidiaries, among others.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to 7.75%, with only interest payments due through June 30, 2016. In addition to paying interest on outstanding principal under the Credit Agreement, the Company will pay an origination fee equal to 0.50% of the amount of the term loan when advanced under the Credit Agreement, as well as a final payment fee equal to 2.00% of the amount borrowed under the Credit Agreement when the term loan is fully repaid. Commencing on July 1, 2016 and continuing for the remaining twenty-four months of the facility, the Company will be required to make monthly principal payments of approximately $0.8 million, or monthly payments of approximately $1.7 million if the facility is increased by the additional $20.0 million referenced above.

The Company may voluntarily prepay outstanding loans under the Credit Agreement at any time, provided that the Company may not prepay an amount that is less than the total of all of the credit extensions and other related obligations under the Credit Agreement then outstanding. In the event of a voluntary prepayment, the Company is obligated to pay a prepayment fee equal to 2.95% of the outstanding principal of such advance if the prepayment is made within twelve months after the closing date, or 2.00% of the outstanding principal of such advance if the prepayment is made on or after the date that is twelve months after the closing date.

The Credit Agreement contains affirmative covenants that include government compliance, reporting requirements, maintaining property, making tax payments, maintaining insurance and cooperating during litigation. Additionally, the Company is required to maintain a minimum cash balance as collateral within its operating bank account with cash and cash equivalents of no less than the greater of the outstanding principal amount or $15.0 million. Negative covenants include restrictions on asset dispositions, acquisitions, indebtedness, liens, dividends and share purchases, amendments to material contracts and other restrictions.

The Credit Agreement includes customary events of default, including cross defaults, change of control and material adverse change. Additionally, the Company’s failure to be compliant with the affirmative or negative covenants or make payments when they become due will result in an event of default.

In connection with the senior secured term loan, the Company recorded $20.0 million as long-term debt in the unaudited condensed consolidated balance sheets as of June 30, 2015. In addition, the Company incurred approximately $0.8 million in debt issuance costs that were recorded as a direct deduction to the carrying value of the term loan in the unaudited condensed consolidated balance sheets. These costs are being amortized to interest expense using the effective interest method over the term of the loan. For the three and six months ended June 30, 2015, the Company recognized less than $0.1 million of interest expense related to the term loan.

The following table summarizes the components of the long-term debt recorded for the period indicated:


	As of June 30, 2015 (in thousands)
Principal amount	$	20,000
Unamortized debt issuance expense		(773	)

Net carrying value of senior secured term loan		19,227
Other long-term debt		1,525

Total long-term debt	$	20,752