Item 1.01. Entry into a Material Definitive Agreement.
Term Loan Credit Agreement
On October 30, 2019, Protagonist Therapeutics, Inc. (the “Company”) entered into a Credit and Security Agreement, dated as of October 30, 2019 (the “Closing Date”) by and among the Company, MidCap Financial Trust, as a lender, Silicon Valley Bank, as a lender, the other lenders party thereto from time to time and MidCap Financial Trust, as administrative agent and collateral agent (“Agent”) (the “Term Loan Credit Agreement”), which provides for a $50.0 million term loan facility. The Term Loan Credit Agreement provides for (i) on the Closing Date, $10.0 million aggregate principal amount of term loans, (ii) at the Company’s option, until December 31, 2020, an additional $20.0 million term loan facility subject to the satisfaction of certain conditions and (iii) at the Company’s option, until September 30, 2021, an additional $20.0 million term loan facility subject to the satisfaction of certain conditions (collectively, the “Term Loans”). The Company intends to use the proceeds of the Term Loans for general corporate purposes.
The obligations under the Term Loan Credit Agreement are secured by a perfected security interest in all of the Company’s assets except for intellectual property and certain other customary excluded property as set forth therein.
The Term Loans are subject to an origination fee of 0.25% of each funded tranche of Term Loans. The Term Loans may be prepaid in full or in part through October 30, 2020 with payment of a 3.0% prepayment premium, after which they may be prepaid in full or in part through October 30, 2021 with payment of a 2.0% prepayment premium, after which they may be prepaid in full or in part with payment of a 1.0% prepayment premium. An additional 2.85% of the amount of Term Loans advanced by the lenders will be due upon prepayment or repayment of the Term Loans.
The interest rate applicable to the Term Loans is the WSJ Prime Rate plus 2.91%, subject to a floor of 4.94%. Commencing November 1, 2019, the Company initially will make interest-only payments for 24 months, followed by 24 months of amortization payments. All unpaid principal and accrued interest is due and payable in full no later than October 1, 2023.
The Term Loan Credit Agreement requires that the Company maintain cash and cash equivalents of at least 35% of the outstanding Term Loans at all times. The Term Loan Credit Agreement also contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions.
Events of default under the Term Loan Credit Agreement include: (i) failure by the Company to timely make payments due under the Term Loan Credit Agreement; (ii) material misrepresentations or misstatements in any representation or warranty by the Company when made; (iii) failure by the Company or its subsidiaries to comply with the covenants under the Term Loan Credit Agreement and other related agreements; (iv) certain defaults under a specified amount of other indebtedness of the Company or its subsidiaries; (v) insolvency or bankruptcy-related events with respect to the Company or any of its subsidiaries; (vi) certain undischarged judgments against the Company or its subsidiaries; (vii) certain ERISA-related events with respect to the Company or its subsidiaries above a specified amount; (viii) certain security interests or liens under the loan documents ceasing to be, or being asserted by the Company not to be, in full force and effect; (ix) the institution of criminal proceedings against the Company; (x) an event of default under the guarantee of the obligations under the Term Loan Credit Agreement; (xi) the prepayment of any subordinated debt other than as specifically permitted by the terms of such subordination; (xii) the occurrence of a Material Adverse Change (as defined in the Term Loan Credit Agreement); (xiii) certain adverse actions by the FDA or DEA with respect to certain products or which could be reasonably expected to result in a Material Adverse Change (as defined in the Term Loan Credit Agreement); (xiv) a default or material breach under certain specified material contracts and (xv) any loan document ceasing to be, or any challenge or assertion by the Company that such loan document is not, in full force and effect. If one or more events of default occurs and continues beyond any applicable cure period, the Agent may, with the consent of the lenders holding a majority of the loans and commitments under the facilities, or will, at the request of such lenders, terminate the commitments of the lenders to make further loans and declare all of the obligations of the Company under the Term Loan Credit Agreement to be immediately due and payable.
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