LOAN AND SECURITY AGREEMENT
Exhibit 10.34
LOAN AND SECURITY AGREEMENT
BORROWER: | HISTOGENICS CORPORATION | DATE: JULY 9, 2014 |
This LOAN AND SECURITY AGREEMENT (this Agreement) is entered into as of the date set forth above (the Effective Date) by and between SILICON VALLEY BANK (Bank), and the borrower named above (Borrower). Capitalized terms used but not otherwise defined herein shall have the meanings given them on Schedule C. The parties agree as follows:
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SCHEDULE A
LOAN TERMS
BORROWER: HISTOGENICS CORPORATION
EQUIPMENT LOANS | ||
Equipment Loan Amount: | One Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00) (the Equipment Loan
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Equipment Loan Draw Period: | The period of time commencing upon the Effective Date and ending on the earlier to occur of (a) March 31, 2015, or (b) an Event of Default (the Equipment Loan Draw Period)
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Maturity Date: | For each Loan, the Payment Date that is thirty-five (35) months after the applicable Amortization Date for such Loan (the Maturity Date).
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Equipment Loans: | Subject to the terms and conditions of this Agreement, during the Equipment Loan Draw Period, from time to time and upon the delivery to Bank by Borrower of a completed and executed irrevocable LOAN PAYMENT/ADVANCE REQUEST FORM (in a form acceptable to Bank), and any additional information as Bank may reasonably request (including copies of the invoices for the equipment to be financed) at least five (5) Business Days before the proposed funding date, Bank will make up to four (4) Loans, each in a minimum amount of One Hundred Thousand Dollars ($100,000.00), the aggregate of which will not exceed the Equipment Loan Amount.
The Loans may only be used to finance Eligible Equipment purchased on or after ninety (90) days before the date of each Loan and may not exceed one hundred percent (100%) of the equipment invoice, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Notwithstanding the foregoing, the initial Loan hereunder may be used to reimburse Borrower for Eligible Equipment purchased on or after the date which is nine (9) months prior to the Effective Date, provided such Loan is made on the Effective Date and in a minimum amount of One Hundred Thousand Dollars ($100,000.00). Transferable software licenses, leasehold improvements or other soft costs (including sales tax, freight and installation expenses) may constitute up to twenty-five percent (25%) percent of each Loan.
In addition to the LOAN PAYMENT/ADVANCE REQUEST FORM, Borrower shall provide Bank with (a) a UCC financing statement covering the Eligible Equipment, and (b) an opportunity to confirm that upon filing the UCC financing statement covering the Eligible Equipment Bank shall have a first priority perfected security interest in such Eligible Equipment.
Once repaid, Loans may not be re-borrowed.
Bank will be obligated to make a Loan, so long as (i) each of the representations and warranties in Section 3 of the Agreement is materially true on the date the LOAN PAYMENT/ADVANCE REQUEST FORM is submitted and on the effective date of such Loan (except to the extent they relate specifically to an earlier date, in which case such representation and warranties shall continue to have been true and accurate as of such specified date), and (ii) no Event of Default shall have occurred and be continuing or result from such Loan.
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Repayment: | Commencing on the first Payment Date of the month following the month in which |
the Funding Date of a Loan occurs, and continuing on each Payment Date thereafter,
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Commencing on the applicable Amortization Date, and continuing on each Payment Date thereafter, Borrower shall repay each Loan in (i) thirty-six (36) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth below. The final payment due on the applicable Maturity Date shall include all outstanding principal and all accrued and unpaid interest under each Loan and all other outstanding Obligations with respect to each Loan.
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Interest Rate: | Loans accrue interest on the outstanding principal balance at a per annum rate of two and three quarters of one percent (2.75%) above the Prime Rate, fixed at the time of the advance for each Loan. Interest is computed on a 360 day year for the actual number of days elapsed.
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Default Rate: | Any amounts outstanding during the continuance of an Event of Default shall bear additional interest at the rate of five percent (5.0%) per annum.
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Prepayment Upon an Event of Loss: | Borrower shall bear the risk of any loss, theft, destruction, or damage of or to the Financed Equipment. If, during the term of this Agreement, any item of Financed Equipment becomes obsolete or is lost, stolen, destroyed, damaged beyond repair, rendered permanently unfit for use, or seized by a governmental authority for any reason for a period ending beyond the Maturity Date with respect to such Financed Equipment (an Event of Loss), then, within ten (10) days following such Event of Loss, Borrower shall (i) pay to Bank on account of the Obligations all accrued interest to the date of the prepayment, plus all outstanding principal owing with respect to the Financed Equipment subject to the Event of Loss, plus the Prepayment Premium and the Final Payment; or (ii) if no Event of Default has occurred and is continuing, at Borrowers option, repair or replace any Financed Equipment subject to an Event of Loss provided the repaired or replaced Financed Equipment is of equal or like value to the Financed Equipment subject to an Event of Loss and provided further that Bank has a first priority perfected security interest in such repaired or replaced Financed Equipment. Any partial prepayment of Loan paid by Borrower on account of an Event of Loss shall be applied to prepay amounts owing for such Loan in inverse order of maturity.
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Mandatory Prepayment: | If the Loans are accelerated following the occurrence of an Event of Default or otherwise, Borrower shall immediately pay to Bank an amount equal to the sum of: (i) all outstanding principal and accrued interest under the Loans, (ii) the Prepayment Premium, (iii) the Final Payment, and (iv) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts.
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Permitted Prepayment: | Borrower shall have the option to prepay all (but not less than all) of the Loans provided Borrower (i) provides written notice to Bank of its election to prepay the Loans at least thirty (30) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all outstanding principal and accrued interest under the Loans, (B) the Prepayment Premium, (C) the Final Payment, and (D) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts.
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Request to Debit Accounts: | Bank may debit any of Borrowers deposit accounts (including account number(s): ) for principal and interest payments or any amounts Borrower owes Bank when due. Bank will notify Borrower when it debits Borrowers accounts. Such debits are not a set-off. Payments received after 12:00 noon Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional interest shall accrue.
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LIMITATION TO BANKS OBLIGATIONS | ||
Limitation: | Banks obligation to lend the undisbursed portion of the Loan will terminate if, in Banks sole discretion, there has been any material impairment in t he general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations, or there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement.
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FEES | ||
Final Payment: | Borrower will pay the Final Payment, when due hereunder.
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Prepayment Premium: | Borrower will pay the Prepayment Premium, when due hereunder.
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Commitment Fee: | Borrower will pay to Bank on the Effective Date a fully earned, non-refundable commitment fee of Five Thousand Dollars ($5,000.00).
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WARRANT | ||
Warrant: | Concurrently on the Effective Date, Borrower will execute, deliver and issue to Bank a warrant to purchase stock (the Warrant), pursuant to Banks standard form of warrant.
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BANKING MATTERS | ||
Banking Matters: | Borrower shall maintain all of its and all of its Subsidiaries (if any) operating, depository, and securities accounts with Bank and Banks affiliates.
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FINANCIAL REPORTING REQUIREMENTS | ||
Financial Reports: | Borrower shall provide Bank:
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Monthly Financial Statements. Within thirty (30) days after the end of each month, monthly financial statements prepared by Borrower in accordance with GAAP, together with a Compliance Certificate signed by a Responsible Officer in the form of Schedule E
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Annual Audited Financial Statements. Within one hundred eighty (180) days following the end of Borrowers fiscal year, annual, audited, consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion in the financial statements from independent public accountants acceptable to Bank; and
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Board-Approved Operating Plan. As soon as available, but no later than sixty (60) days after the last day of Borrowers fiscal year, and contemporaneously with any updates or changes thereto, Board-approved operating plan (reflecting projections on a quarterly or monthly basis) as to the then-current fiscal year in a form acceptable to Bank. |
SCHEDULE B
COLLATERAL
The Collateral consists of all right, title and interest of Borrower in and to the following:
Each item of equipment, or personal property financed with a Loan pursuant to that certain Loan and Security Agreement, dated as of July 9, 2014 (the Loan Agreement), by and between Borrower and Bank, including, without limitation, the property described in Annex A hereto, whether now owned or hereafter acquired, together with all substitutions, renewals or replacements of and additions, improvements, and accessions to any and all of the foregoing, and all proceeds from sales, renewals, releases or other dispositions thereof.
Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed not to encumber any of its copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing, without Banks prior written consent.
ANNEX A
Description of Equipment | Make | Model | Serial # | Invoice # |
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SCHEDULE C
DEFINITIONS
As used in this Agreement, the following words shall have the following meanings:
Agreement is defined in the preamble hereof.
Amortization Date is, for each Loan, the first Payment Date following the six (6) month anniversary of the Funding Date of such Loan.
Bank is defined in the preamble hereof.
Bank Expenses is defined in Section 8.2.
Board means Borrowers board of directors.
Borrower is defined in the preamble hereof.
Business Day is defined in Section 3.6.
Collateral is any and all properties, rights and assets of Borrower described on Schedule B.
Compliance Certificate is that certain certificate in the form attached hereto as Schedule E.
Contract Threshold Amount means One Hundred Thousand Dollars ($100,000.00).
Effective Date is defined in the preamble hereof.
Eligible Equipment is the following to the extent it complies with all of Borrowers representations and warranties to Bank, is acceptable to Bank in all respects, is located at 830 Winter Street, 3rd Floor, Waltham, Massachusetts 02451, or such other location of which Bank has approved in writing, and is subject to a first priority lien in favor of Bank: new and used general purpose equipment, computer equipment, office equipment, test and laboratory equipment, furnishings, subject to the limitations set forth herein.
Equipment Loan Amount is defined on Schedule A.
Equipment Loan Draw Period is defined on Schedule A.
Event of Default is defined in Section 5.
Event of Loss is defined in Schedule A.
Final Payment is, for each Loan, a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) equal to the original principal amount of such Loan extended by Bank multiplied by the Final Payment Percentage, due on the earliest to occur of (a) the applicable Maturity Date, (b) the acceleration of any Loan, or (c) the prepayment of a Loan pursuant to this Agreement.
Final Payment Percentage is, for each Loan, four percent (4.0%).
Financed Equipment is all present and future Eligible Equipment in which Borrower has any interest which is financed by a Loan.
Funding Date is any date on which a Loan is made to or for the account of Borrower which shall be a Business Day.
GAAP is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
Intellectual Property means any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing.
Loan and Loans are defined in Section 1.
Loan Documents are, collectively, this Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated.
Material Adverse Change means the occurrence of (a) any material impairment in the business, operations, or financial condition of the Borrower, (b) a material impairment of the prospect of repayment of any portion of the Obligations; or (c) a material impairment in the perfection or priority of Banks security interest in the Collateral or in the value of such Collateral (other than normal depreciation) which is not covered by adequate insurance.
Maturity Date is defined in Schedule A.
Obligations is defined in Section 1.
Ownership Threshold means forty-nine percent (49.0%).
Payment Date is the first (1st) Business Day of each calendar month.
Permitted Indebtedness means (a) Borrowers indebtedness to Bank; (b) indebtedness existing on the Effective Date and shown on Schedule D; (c) indebtedness incurred by Borrower owed to a third-party subordinated to Borrowers indebtedness owed to Bank which subordination is reflected in a written agreement as accepted and approved by the Bank prior to the incurrence of such third-party indebtedness; (d) indebtedness to trade creditors incurred in the ordinary course of business; (e) indebtedness secured by Permitted Liens; (f) indebtedness arising from the endorsement of instruments in the ordinary course of business; and (g) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness described in (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower or its Subsidiaries, as the case may be.
Permitted Investments means (a) investments shown on Schedule D and existing on the Effective Date; (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within one (1) year from its acquisition, (ii) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poors Ratings Service or Moodys Investors Service, Inc., (iii) Banks certificates of deposit issued maturing no more than one (1) year after issue, (iv) investments permitted by Borrowers investment policy, as amended from time to time, provided that such investment policy (and such amendments thereto) has been approved by Bank in writing (which approval shall not be unreasonably withheld, conditioned or delayed); (c) investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (d) investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrowers Board; (e) deposit and investment accounts of Borrower in which Bank has a lien prior to any other lien (other than liens securing customary fees and expenses (but no credit/debt relationship or margin account) of the depository or investment intermediary); and (f) investments not otherwise permitted in an aggregate amount of not more than One Hundred Thousand Dollars ($100,000.00) in each fiscal year.
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Permitted Liens means (a) liens in favor of Bank; (b) liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its books, if they have no priority over any of Banks security interests; and (c) statutory liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons imposed without action of such parties, provided, they have no priority over any of Banks security interests and the aggregate amount of such liens does not at any time exceed One Hundred Thousand Dollars ($100,000.00).
Permitted Transfer means Transfers of (a) inventory in the ordinary course of business; (b) non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business and other non-perpetual licenses that may be exclusive in some respects, such as, by way of example, with respect to field of use or geographic territory, but that do not result, under applicable law, in a sale of all of Borrowers interest in the property that is the subject of the license; and (c) worn-out or obsolete equipment (that does not constitute Financed Equipment).
Person is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
Prepayment Premium shall be an additional fee payable to Bank in amount equal to: (a) for a prepayment made on or prior to the first (1st) anniversary of the Funding Date of such Loan, two percent (2.0%) of the then outstanding principal amount of such Loan as of the date immediately and prior to such prepayment, and (b) for a prepayment made after the first (1st) anniversary of the Funding Date of such Loan, one percent (1.0%) of the then outstanding principal amount of such Loan as of the date immediately and prior to such prepayment.
Prime Rate is the greater of (a) the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the prime rate then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Bank, the Prime Rate shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors), and (b) three and one quarter of one percent (3.25%).
Responsible Officer is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower.
Subsidiaries is defined in Section 3.1.
Transfer is defined in Section 3.10.
Warrant is defined on Schedule A.
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SCHEDULE D
STATEMENT OF BORROWERS INFORMATION
Borrower hereby represents and warrants, as of the date of the Agreement, subject to any updates provided to Bank as required under the Agreement: (If none, please indicate so. Attach additional pages, if necessary.)
*1. The exact legal name of Borrower, as set forth in its formation documents, is: Histogenics Corporation.
*2. Borrower currently operates and has operated during the previous five years under only the following names: Histogenics Corporation. In 2011, Borrower acquired ProChon Biotech Ltd., which operated under the name ProChon Biotech Ltd. prior to that time.
*3. Borrower is organized in the State of Delaware and is qualified to do business in the following states: Massachusetts.
*4. The following are all of Borrowers Subsidiaries and their respective states (or countries, if other than the U.S.) and dates of formation, as well as the percentage of total capital stock owned by Borrower:
Borrower owns 100% of the total capital stock of the following Subsidiaries:
Name of Wholly-Owned Subsidiary (Date of Organization) | Jurisdiction of Organization | Name under which the subsidiary conducts business | ||
Histogenics Limited (2010) | United Kingdom | Histogenics Limited | ||
Prochon BioTech, Ltd. (1996) | Israel | Prochon BioTech, Ltd. |
**5. The following are all actions, suits, proceedings and investigations pending, or to Borrowers knowledge, currently threatened by or against Borrower, in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change in Borrowers business, operations or financial condition:
None.
**6. The following is a description of all returns, recoveries, disputes and claims of at least $50,000 each, received by Borrower within the last thirty (30) days:
None.
***7. The following are all of Borrowers copyrights or mask works registered with the United States Copyright Office:
None.
****8. The following are all of Borrowers patents, trademarks and service marks, and all applications filed by Borrower in the United States Patent & Trademark Office for a patent or to register a trademark or service mark:
See IP Schedule attached hereto.
9. The following is all of the Borrowers indebtedness existing as of the date of the Agreement:
ThermoFisher Scientific Equipment Lease ($10,915 as of May 31, 2014).
Series A-1 Preferred Stock Royalty Redemption Right - Beginning January 1, 2017 and ending December 31, 2019, holders of the Companys Series A-1 Preferred Stock (an any securities that such preferred stock is converted into) may redeem $30M in cash or common stock in exchange for a 3% royalty right on future revenues of Borrower.
10. The following is all of the Borrowers investments (other than Subsidiaries) existing as of the date of the Agreement:
None. The Company holds its cash in cash and cash equivalent securities.
11. The following are all liens to which Borrowers assets and property are subject as of the date of the Agreement:
None
12. | Other exceptions to representations and warranties under Section 3 of the Agreement: |
None
Borrower must update Bank of any material change to information:
* | at least thirty (30) days prior to the date of occurrence of the event necessitating such update. |
** | within five (5) days of the date of occurrence of the event necessitating such update. |
*** | at least 15 days prior to the date of filing of any application with the United States Copyright Office. |
**** | at least 30 days prior to the date of filing of any application with the United States Patent and Trademark Office. |
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SCHEDULE E
COMPLIANCE CERTIFICATE
TO: | SILICON VALLEY BANK | |
FROM: | HISTOGENICS CORPORATION |
The undersigned authorized officer of HISTOGENICS CORPORATION (Borrower) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the Agreement), (i) Borrower is in complete compliance for the period ending with all required covenants except as noted below and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date. In addition, the undersigned authorized officer of Borrower certifies that Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under Complies column.
Reporting Covenant | Required | Complies | ||
Monthly financial statements + CC | Monthly within 30 days | Yes No | ||
Annual (Audited) financial statements | FYE within 180 days | Yes No | ||
Board-approved operating plan | FYE within 60 days | Yes No |
Borrower only has deposit accounts located at the following institutions: .
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 NOON EASTERN TIME
Fax To: | Date: |
LOAN PAYMENT: | HISTOGENICS CORPORATION (Borrower) |
From Account # | To Account # | |
(Deposit Account #) | (Loan Account #) |
Principal $ | and/or Interest $ |
All Borrowers representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects up to and including the date of the transfer request for a loan payment, but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date: | ||
Authorized Signature: | Phone Number: |
LOAN ADVANCE: | ||
Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire. |
From Account # | To Account # | |
(Loan Account #) | (Deposit Account #) |
Amount of Advance $ | ||
All Borrowers representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects up to and including the date of the transfer request for an advance, but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date: | ||
Authorized Signature: | Phone Number: |
OUTGOING WIRE REQUEST | ||
Complete only if all or a portion of funds from the loan advance above are to be wired. | ||
Deadline for same day processing is 12:00 noon, Eastern Time. |
Beneficiary Name: | Amount of Wire: $ | |||
Beneficiary Bank: | Account Number: | |||
City and State: | ||||
Beneficiary Bank Transit (ABA) #:_ _ _ _ _ _ _ _ Beneficiary Bank Code (Swift, Sort, Chip, etc.): | ||||
(For International Wire Only) | ||||
Intermediary Bank: | Transit (ABA) #: | |||
For Further Credit to: | ||||
Special Instruction: | ||||
By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us). | ||||
Authorized Signature: | 2nd Signature (If Required): | |||
Print Name/Title: | Print Name/Title: | |||
Telephone # | Telephone # |
ENDNOTE ANNOTATIONS FOR INTERNAL SVB USE ONLY