MBRX » Topics » Loan and Security Agreement

This excerpt taken from the MBRX 10-Q filed May 2, 2008.
Loan and Security Agreement

 

In March 2008, the Company entered into a Loan and Security Agreement (“Agreement”) with Oxford Corporation (“Oxford”), pursuant to which Oxford provided the Company with a three-year, $5.0 million term loan.  Interest accrues at an annual rate of 9.83%, with six interest-only monthly payments, made in arrears, beginning in May 2008, followed by 30 equal monthly payments of principal and interest beginning in November 2008.  The Company has the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee.  The loan is collateralized by the general assets of the Company, excluding intellectual property and assets of certain subsidiaries.  There are no financial covenants under the terms of this Agreement.

 

In connection with the Agreement, the Company issued to Oxford a warrant to purchase up to 154,639 shares of the Company’s common stock at an exercise price of $1.94 per share, which represents the closing price of the Company’s common stock on the date of the Agreement.  The warrant is immediately exercisable and expires in March 2018.  The warrant holder may elect to exercise the warrant by physical settlement or net-share settlement.  In accordance with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company’s Own Stock, the warrant met all criteria within the guidance providing for the classification of this financial instrument as equity. The fair value of this warrant, totaling $220,000 at March 14, 2008, was determined using the Black-Scholes model with the following assumptions: risk free interest rate of 3.05%, dividend yield of 0%, expected volatility of 81.63%, and an expected term of 5 years.

 

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