On December 29, 2017, the Company entered into a loan and security agreement with Silicon Valley Bank (the “Term Loan”). The Term Loan provided for borrowings of $20.0 million. On December 29, 2017, the Company received proceeds of $20.0 million from the issuance of a promissory note. The promissory note issued under the Term Loan is collateralized by substantially all of the Company’s personal property, other than its intellectual property.

Upon entering into the Term Loan, the Company became obligated to make monthly, interest-only payments until March 29, 2019 and, thereafter, to pay 33 consecutive, equal monthly installments of principal and interest from April 1, 2019 through December 1, 2021. The outstanding Term Loan bears a variable interest at an annual rate of 1.25% above the prime rate, which at March 31, 2020 was 3.25%. In addition, a final payment equal to 8.0% of the Term Loan is due upon the earlier of the maturity date, acceleration of the Term Loan or prepayment of all or part of the Term Loan. The Company accrues the final payment amount of $1.6 million, to outstanding debt by charges to interest expense using the effective-interest method from the date of issuance through the maturity date.

Additionally, the Company, as borrower, is required to maintain a minimum cash, cash equivalents and marketable debt securities balance at Silicon Valley Bank of no less than 105% of the total outstanding principal balance of the Term Loan, which was $13.4 million as of March 31, 2020 and $15.3 million as of December 31, 2019.

Further, since 45 days after the Term Loan was entered in, the Company has met its obligation to maintain a balance of unrestricted cash, cash equivalents and marketable debt securities at Silicon Valley Bank in an amount not less than the greater of (i) $55.0 million and (ii) sixty-five percent (65%) of all the Company’s cash, cash equivalents and marketable Debt securities. If the Company does not meet this requirement it will not be considered an event of default provided it immediately secures 87.5% of the principal balance in a restricted cash account.

There are negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions; encumbering or granting a security interest in its intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; limiting the aggregate value of cash maintained by its Australian subsidiary not to exceed $4.0 million and certain other business transactions.

The Term Loan also includes events of default, the occurrence and continuation of any of which provides the lenders the right to exercise remedies against the Company and the collateral securing the amounts due under the Term Loan, including cash in the amount of the outstanding balance. These events of default include, among other things, failure to pay any amounts due under the Term Loan, insolvency, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness and a final judgment against the Company in an amount greater than $0.3 million.

As of March 31, 2020 and December 31, 2019, notes payable consist of the following:

	March 31,			December 31,
	2020			2019
	(in thousands)
Notes payable	$	12,728		$	14,545
Less: current portion		(7,273	)		(7,273	)
Notes payable, net of current portion		5,455			7,272
Accretion related to final payment		1,292			1,192
Notes payable, long term	$	6,747		$	8,464

During the three months ended March 31, 2020 and 2019, the Company recognized $0.3 million and $0.5 million of interest expense, respectively, related to the Term Loan. The effective annual interest rate as of March 31, 2020 on the outstanding debt under the Term Loan was approximately 7.7%.