On June 24, 2020 (the "Closing Date"), HTG Molecular Diagnostics, Inc. (the "Company") reported that it entered into a Loan and Security Agreement (the "Loan Agreement"), by and among the Company and Silicon Valley Bank ("SVB"), as lender, which provides a secured term loan in the principal amount of $10.0 million (the "Term Loan") (Filing, HTG Molecular Diagnostics, JUN 25, 2020, View Source [SID1234561674]).
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The proceeds from the Term Loan were fully funded on the June 25, 2020. The proceeds from the Term Loan, together with cash on hand, were used to repay in full all outstanding amounts and fees due under the (i) Credit and Security Agreement (Term Loan), dated as of March 26, 2018, by and among the Company, as borrower, the lenders party thereto from time to time and MidCap Financial Trust, as agent (the "MidCap Term Loan"), in the aggregate amount of approximately $7.5 million, (ii) Credit and Security Agreement (Revolving Loan), dated as of March 26, 2018, by and among the Company, as borrower, the lenders party thereto from time to time and MidCap Funding IV Trust (together with MidCap Financial Trust, "MidCap"), as agent (the "MidCap Revolving Loan"), in the aggregate amount of approximately $22,000 and (iii) Subordinated Convertible Promissory Note, dated as of October 26, 2017, issued by the Company to Qiagen North American Holdings, in the aggregate amount of approximately $3.2 million.
The Term Loan bears interest at a floating rate equal to the greater of 2.50% above the Prime Rate (as defined in the Loan Agreement) and 5.75%. Interest on the Term Loan is due and payable monthly in arrears. The Term Loan has interest-only payments through June 30, 2021. The interest only period may be extended for six months upon the achievement of an equity milestone as more fully described in the Loan Agreement. The ultimate interest-only period will be followed by equal monthly payments of principal and interest through the maturity date of January 1, 2024.
Prepayments of the Term Loan, in whole or in part, will be subject to early termination fees in an amount equal to 3.0% of principal prepaid if prepayment occurs on or prior to the first anniversary of the Closing Date, 2.0% of principal prepaid in prepayment occurs after the first anniversary of the Closing Date but on or prior to the second anniversary of the Closing Date, and 1.0% of principal prepaid if prepayment occurs after the second anniversary of the Closing Date and prior to the maturity date.
Upon termination of the Loan Agreement, the Company is required to pay an exit fee equal to 8.00% of the principal amount of the Term Loan.
The Company’s obligations under the Loan Agreement are secured by a security interest in substantially all of its assets, excluding intellectual property (which is subject to a negative pledge). Additionally, the Company’s future subsidiaries, if any, may be required to become co-borrowers or guarantors under the Loan Agreement.
The Loan Agreement contains customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries, if any, to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions. The Company must also comply with a financial covenant requiring the Company to maintain unrestricted cash at an account with SVB of not less than the greater of (i) $12.5 million and (ii) an amount equal to six (6) times the amount of Company’s average trailing three (3) month Cash Burn (as defined in the Loan Agreement), tested monthly as of the last day of each month.
The Loan Agreement also contains customary events of default relating to, among other things, payment defaults, breaches of covenants, a material adverse change, delisting of the Company’s common stock, bankruptcy and insolvency, cross defaults with certain material indebtedness and certain material contracts, judgments, and inaccuracies of representations and warranties. Upon an event of default, SVB may declare all or a portion of the Company’s outstanding obligations to be immediately due and payable and exercise other rights and remedies provided for under the agreement. During the existence of an event of default, interest on the obligations could be increased by 5.0%.
Warrant
In connection with the Loan Agreement, the Company granted to SVB a warrant to purchase up to 643,413 shares of the Company’s common stock at a purchase price of $0.7771 per share (the "Warrant"). The Warrant will
expire on June 24, 2030 and may be exercised for cash or at the election of the holder on a cashless, net exercise basis.
The foregoing is only a summary of the material terms of the Loan Agreement and the Warrant and does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan Agreement and the Warrant, copies of which are filed as Exhibit 10.1 and Exhibit 4.1 to this report, respectively.