On August 31, 2020, Selecta Biosciences, Inc. (the "Company") reported that it entered into a term loan facility of up to $35.0 million (the "Term Loan"), consisting of term loans in an aggregate amount of $25.0 million (the "Term A Loan") and term loans in an aggregate amount of $10.0 million (the "Term B Loan"), with Oxford Finance LLC, a Delaware limited liability company ("Oxford"), as collateral agent (in such capacity, "Collateral Agent"), and the lenders party thereto (the "Lenders"), including Oxford in its capacity as a lender and Silicon Valley Bank, a California corporation ("SVB"), the proceeds of which will be used to repay the Company’s existing term loan facility and for general corporate and working capital purposes (Filing, 8-K, Selecta Biosciences, AUG 31, 2020, View Source [SID1234564405]).
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The Term Loan is governed by a loan and security agreement, dated August 31, 2020, between the Company, Collateral Agent and the Lenders (the "Loan Agreement"). The Term A Loan was funded in full on August 31, 2020 (the "Funding Date"). The Term B Loan will be available, subject to Collateral Agent’s discretion and customary terms and conditions, during the period commencing on the date the Company has delivered to the Collateral Agent and the Lenders evidence that (i) the Company or one of the Company’s collaboration partners has enrolled its first randomized patient for a Phase 1 clinical trial evaluating SEL-302, and (ii) the Company has enrolled the first patient in each of two Phase 3 pivotal trials evaluating SEL-212 (the "Second Draw Period Milestone") and ending on the earliest of (i) the date which is thirty (30) days following the date the Second Draw Period Milestone is achieved, (ii) September 30, 2021 and (iii) the occurrence of an event of default, other than an event of default that has been waived in writing by Collateral Agent and the Lenders in their sole discretion (such period, the "Second Draw Period").
The Term Loan will mature on August 1, 2025. Each advance under the Term Loan accrues interest at a floating per annum rate equal to the greater of (a) seven and nine tenths of one percent (7.90%), and (b) the lesser of (x) the sum of (i) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, and (ii) four and sixty-five hundredths of one percent (4.65%) and (y) ten percent (10.00%). The Term Loan provides for interest-only payments on a monthly basis until April 1,2022; provided however, if the Company has delivered to Collateral Agent and the Lenders prior to September 30, 2021 evidence that Borrower has achieved the Second Draw Period Milestone, the Term Loan provides for interest-only payments on a monthly basis until October 1, 2022. Thereafter, amortization payments will be payable monthly in equal installments of principal and interest to fully amortize the outstanding principal over the remaining term of the loan, subject to recalculation upon a change in the prime rate. The Company may prepay the Term Loan in full but not in part provided that the Company (i) provides ten days’ prior written notice to Collateral Agent, (ii) pays on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest, and (B) a prepayment fee of between 3.0% and 1.0% of the aggregate original principal amount advanced by the lender depending on the timing of the prepayment. Amounts outstanding during an event of default are payable upon SVB’s demand and shall accrue interest at an additional rate of 5.0% per annum of the past due amount outstanding. At the end of the loan term (whether at maturity, by prepayment in full or otherwise), the Company shall make a final payment to the lender in the amount of 9.0% of the aggregate original principal amount advanced by the lender.
The Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. The Company has also granted Collateral Agent a negative pledge with respect to its intellectual property.
The Loan Agreement contains customary covenants and representations, including but not limited to financial reporting obligations and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The Loan Agreement also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights for the benefit of Collateral Agent.
The events of default under the Loan Agreement include, but are not limited to, the Company’s failure to make any payments of principal or interest under the Loan Agreement or other transaction documents, the Company’s breach or default in the performance of any covenant under the Loan Agreement or other transaction documents, the occurrence of a material adverse change, the Company making a false or misleading representation or warranty in any material respect under the Loan Agreement, the Company’s insolvency or bankruptcy, any attachment or judgment on the Company’s assets of at least $500,000, or the occurrence of any default under any agreement or obligation of the Company involving indebtedness in excess of $500,000. If an event of default occurs, Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.
On August 31, 2020, in connection with the Loan Agreement, the Company issued warrants to the Lenders (collectively, the "Warrants") to purchase an aggregate of 203,850 shares (the "Warrant Shares") of the Company’s common stock, par value $0.0001 per share ("Common Stock"), at an exercise price equal to $2.54 per share, subject to customary adjustments for stock