12. Debt

Loans Payable

On November 8, 2012, the Company entered into the Loan Agreement with Hercules that provided for an initial term loan advance of $25.0 million, which closed on November 8, 2012, and an additional term loan of $15.0 million, which closed on December 14, 2012. The term loans bear interest at an annual rate equal to the greater of 10.55% and 10.55% plus the prime rate of interest minus 5.25%, but may not exceed 12.55%. Net proceeds from both advances received during the fourth quarter of 2012 were $39.6 million.

The Loan Agreement provides for interest-only payments for twelve months and repayment of the aggregate outstanding principal balance of the loans in monthly installments starting on December 1, 2013 and continuing through May 1, 2016. If the Company receives aggregate gross proceeds of at least $75 million in one or more transactions prior to December 1, 2013, including pursuant to a financing or collaboration, the Company may elect to extend the interest-only period by six months so that the aggregate outstanding principal balance of the loans would be repaid in monthly installments starting on June 1, 2014 and continuing through November 1, 2016. At the Company's option, the Company may elect to prepay all or any part of the outstanding term loans without penalty.

Upon full repayment or maturity of the loans, the Company is required to pay Hercules a fee of $1.2 million, which has been recorded as a discount to the loans and as a long-term liability on the consolidated balance sheets. Additionally, the Company reimbursed Hercules for costs incurred related to the loans of $396,000, which has been reflected as a discount to the carrying value of the loans. The Company is amortizing these loan discounts totaling $1.6 million to interest expense over the term of the loans using the effective interest method. For the year ended December 31, 2012, cash and noncash interest expense related to the Hercules loans payable was $475,000 and $78,000, respectively.

In connection with the Loan Agreement, the Company granted Hercules a security interest in all of the Company's personal property now owned or hereafter acquired, excluding intellectual property but including the proceeds from the sale, if any, of intellectual property, and a negative pledge on intellectual property. The Loan Agreement also contains certain representations, warranties and non-financial covenants of the Company. In addition, the Loan Agreement grants Hercules an option to purchase up to an aggregate of $1.0 million of the Company's equity securities sold to institutional accredited investors in a private financing within one year after the closing of the Loan Agreement upon the same terms and conditions afforded to such investors.

The Loan Agreement defines events of default to include the occurrence of an event that results in a material adverse effect upon the Company's business, operations, properties, assets or condition (financial or otherwise); the Company's ability to perform its obligations when due in accordance with the terms of the Loan Agreement, or upon the ability of Hercules to enforce any of its rights or remedies with respect to such obligations; or the collateral under the Loan Agreement or Hercules' liens on such collateral or the priority of such liens. As of December 31, 2012, there have been no events of default under the Loan Agreement. As of December 31, 2012, the Company has recorded loans payable related to the Loan Agreement of $38.5 million.

Future minimum payments under the loans payable outstanding as of December 31, 2012 are as follows:

Years Ending December 31: (in thousands)

2013	$	5,439
2014		18,138
2015		18,123
2016		8,830

	$	50,530
Less interest		(9,330	)
Less unamortized discount		(2,720	)
Less current portion		(998	)

Loans payable, net of current portion	$	37,482

The carrying value of the loans payable approximates fair value.

Silver Creek Convertible Note

On December 21, 2012, the Company's majority-owned subsidiary Silver Creek entered into a Note Purchase Agreement with certain lenders. The notes issued pursuant to the Note Purchase Agreement bear interest at 6%. The notes mature and convert, along with accrued interest, into Silver Creek Series A preferred stock on December 31, 2013. If at any time prior to maturity Silver Creek enters into a qualifying equity financing, defined as a sale or series of related sales of equity securities prior to the maturity date and resulting in at least $4.0 million of gross proceeds, the notes will automatically convert into the next qualifying equity financing at a 25% discount. The Company determined that this convertible feature met the definition of a derivative and required separate accounting treatment. The derivative was estimated to be valued at $196,000 at December 21, 2012 and December 31, 2012 using a probability-weighted model, and was recorded as derivative liability on the consolidated balance sheets.

	December 31, 2012

	(in thousands)
Total convertible note outstanding	$	1,571
Unamortized discount		(196	)

Net carrying amount of the convertible note		1,375