On October 14, 2008, Cytori Therapeutics, Inc. (the “Company”) entered into a Loan and Security Agreement (the “Loan Agreement”) with General Electric Capital Corporation (“GECC”) and Silicon Valley Bank (together, the “Lenders”), pursuant to which the Lenders agreed to make term loans (each a “Term Loan” and collectively, the “Term Loans”) to the Company in an aggregate principal amount of up to $15.0 million, subject to the terms and conditions set forth in the Loan Agreement (the “Loan Facility”). As security for its obligations under the Loan Agreement, the Company granted a security interest in substantially all of its existing and after-acquired assets, including its intellectual property assets.
On October 14, 2008, the Lenders funded an initial term loan in the principal amount of $7.5 million (the “Initial Term Loan”). The Company may request one additional term loan in the principal amount of $7.5 million on or before December 12, 2008 (the “Subsequent Term Loan”), subject to satisfying certain financial conditions. Each Term Loan shall accrue interest at a fixed rate of 10.58% per annum. The Company is required to repay the Initial Term Loan over a period of approximately 36 months, and if the Subsequent Term Loan is made, the Company will be required to repay it over a period of approximately 36 months. At maturity of each Term Loan, the Company will make a final payment equal to 5% of each Term Loan (the “Final Payment Fee”).
The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, minimum cash and cash liquidity requirements. In addition, it contains customary events of default that entitle the Lenders to cause any or all of the Company’s indebtedness under the Loan Agreement to become immediately due and payable. The events of default include any event whereby Olympus Corporation obtains the right under agreements between the Company and Olympus (the “Olympus Agreements”) to require the Company to purchase or sell any shares of its joint venture subsidiary, and any event of default by the Company under the Olympus Agreements. The Company may voluntarily prepay the Term Loans in full, but not in part and any voluntary or mandatory prepayment is subject to applicable prepayment premiums. The Company will also be required to pay the Final Payment Fee in connection with any voluntary or mandatory prepayment.
The proceeds of the Initial Term Loan, after payment of lender fees and expenses and the repayment of existing equipment loan indebtedness to GECC, are approximately $6.8 million. The net proceeds will be used for working capital, capital expenditures and other general corporate purposes.
On October 14, 2008, pursuant to the terms and conditions of the Loan Agreement, the Company issued to each Lender a warrant to purchase up to 89,074 shares of the Company’s common stock at an exercise price equal to $4.21 per share (the “Warrants”). The Warrants are immediately exercisable and will expire on October 14, 2018.
A copy of the press release announcing the Loan Facility is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Off-Balance Sheet Arrangement of Registrant
The information set forth in Item 1.01 of this Current Report on Form 8-K that relates to the creation of a direct financial obligation of the Company is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sale of Equity Securities
The information set forth in Item 1.01 of this Current Report on Form 8-K that relates to the issuance of the Warrants is incorporated by reference into this Item 3.02.
The offer and sale of the Warrants have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). The Warrants were offered and sold to accredited investors in reliance upon exemptions from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
