4. Term Loan

On June 14, 2018, the Company entered into an Amended and Restated Loan and Security Agreement (the Restated Agreement) with Oxford Finance LLC, as the collateral agent and a lender (Oxford), and Silicon Valley Bank (SVB), as a lender (collectively, the Lenders), which amended and restated the Loan and Security Agreement entered into among Reata and the Lenders on March 31, 2017, as amended on November 3, 2017 (the Loan Agreement).

Under the Restated Agreement, the Term A Loan was increased from $20,000,000 to $80,000,000 and the Term B Loan availability was increased to $45,000,000, upon the achievement of one of two milestones by the earlier of 30 days after the achievement of a milestone or December 31, 2019. If the Company is entitled to draw the Term B Loan, but does not draw the Term B Loan by December 31, 2019, the Company is obligated to pay a non-utilization fee of $450,000. On June 14, 2018, the Company borrowed the additional $60,000,000 under the Term A Loan and recorded a loss on extinguishment as a result of the debt modification of $1,007,000, which consisted primarily of lender fees and unamortized debt issuance costs.

All outstanding Term Loans will mature on June 1, 2023. Under the Term A Loan, the Company will make interest-only payments for 24 months through June 1, 2020; however, if the Company draws the Term B Loan, the Company will make interest-only payments for 36 months through June 1, 2021. The interest-only payment period will be followed by 36 equal monthly payments, or 24 equal monthly payments if the Company draws the Term B Loan, of principal and interest payments. The Term Loans will bear interest at a floating per annum rate calculated as 7.79% plus the greater of the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue or 1.91%, with a minimum rate of 9.7% and maximum rate of 12.29%.

The Company has the option to prepay all, but not less than all, of the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to (a) the aggregate amount of interest that the Company would have paid through the maturity date if prepayment is made on or before the first anniversary of the applicable funding date of the Term Loan, (b) 4.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made after the first anniversary of the applicable funding date of the Term Loan, (c) 3.0% of the outstanding principal balance of the applicable Term Loan if prepayment is made by the after second anniversary of the applicable funding date of the Term Loan, or (d) 1.5% of the outstanding principal balance of the applicable Term Loan if prepayment is made after the third anniversary of the applicable funding date of the Term Loan. The Company will also be required to make a final exit fee payment of 6.5% of the principal balance of the Term A Loan and 4.0% of the Term B Loan, payable on the earliest of the prepayment of the Term Loans, acceleration of any Term Loan, or at maturity of the Term Loans.

The Company may use the proceeds from the Term Loans for working capital and to fund its general business requirements. The Company’s obligations under the Restated Agreement are secured by substantially all of its current and future assets, including its owned intellectual property.

As of September 30, 2018, the Company had $80,000,000 outstanding under the Term A Loan, which was recorded at its initial carrying value of $80,000,000, less debt issuance costs totaling approximately $1,570,000. In connection with the Term A Loan, the debt issuance costs were recorded as a reduction to debt on its balance sheet and are being accreted to interest expense over the life of the Term A Loan. Additionally, the final exit fee of approximately $5,200,000 is being accrued over the life of the Term A Loan through interest expense. The Term A Loan has a current effective interest rate of 10.8% before debt issuance costs and final exit fee and 13.4% including debt issuance costs and final exit fee. The Company is in compliance with all covenants under the Loan Agreement as of September 30, 2018.

The future principal payments for the Company’s Term A Loan as of September 30, 2018 are as follows (in thousands):

2018	$	—
2019		—
2020		15,555
2021		26,667
2022		26,667
2023		11,111
	$	80,000