the fees described in (i) through (iv) above. The exit fee described in (ii) above is payable on the principal amount of all notes prepaid or repaid, including upon the repayment of the notes upon maturity.
The Senior Secured Notes are guaranteed on a senior secured basis by the Company and certain of its subsidiaries. The Senior Secured Notes and guarantees are secured by substantially all of the assets of the Company and its U.S. subsidiaries. Subject to certain exceptions and qualifications, the Amended Note Purchase Agreement contains covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries, including the guarantors, to (i) incur additional indebtedness or issue certain disqualified capital stock, (ii) create liens, (iii) transfer or sell assets, (iv) make certain investments, loans, advances and acquisitions, (v) engage in consolidations, amalgamations or mergers, or sell, transfer or otherwise dispose of all or substantially all of their assets, and (vi) enter into certain transactions with affiliates. The Amended Note Purchase Agreement also provides for customary events of default.
In addition, the restrictive covenants in the Amended Note Purchase Agreement require the Company to comply with certain minimum liquidity requirements and minimum quarterly net product sales requirements. At any time and subject to downward adjustment in certain circumstances, the Company is required to maintain unrestricted cash and cash equivalents in an amount greater than or equal to $15.0 million, and, as of the end of each fiscal quarter, it is required to maintain consolidated Upneeq net product sales greater than or equal to specified quarterly thresholds (currently at $6.0 million for the fiscal quarter ending December 31, 2022, and increasing in $1.0 million increments each fiscal quarter thereafter until the fiscal quarter ending June 30, 2024, for which such fiscal quarter and all subsequent fiscal quarters the threshold is $12.0 million). At September 30, 2022, the Company was in compliance with all conditions of the Amended Note Purchase Agreement.
During the year ended December 31, 2021, the Company incurred aggregate debt issuance costs of $2.1 million related
to the Senior Secured Notes, $1.5 million and $0.6 million of which were recognized as financial commitment assets
underlying the first and second tranche notes, respectively.
The Company elected the fair value option of accounting on the first tranche notes upon issuance and, accordingly, a proportionate amount of related debt issuance costs were immediately written off in October 2021. The Company’s residual financial commitment asset related to the undrawn second tranche notes, was being amortized over the relevant one-year commitment period, however, upon the issuance of the second tranche notes in August 2022 the residual financial commitment asset was immediately expensed. For the three and nine months ended September 30, 2022, the Company recognized $1.1 million and $3.1 million, respectively, of amortization expense from the second tranche financial commitment asset with such expense being recorded within interest expense and amortization of debt discount in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. At September 30, 2022 and December 31, 2021, the second tranche financial commitment asset had a carrying value of zero and $3.1 million, respectively, and was recorded within current assets in the accompanying unaudited condensed consolidated balance sheets.
The Company also elected the fair value option of accounting on the second tranche notes upon issuance and, accordingly, $0.9 million of related debt issuance costs were immediately written off in August 2022, with such expense being recorded within selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.
On a recurring basis, changes in fair value of Senior Secured Notes will be presented in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss at each reporting period (see Note 14).
In the nine months ended September 30, 2022, the Company obtained waivers from the applicable purchasers of mandatory repayments of an aggregate of $5.0 million in principal of the Senior Secured Notes as otherwise required