| Item 1.01 | Entry into a Material Definitive Agreement. |
On May 21, 2020, Molecular Templates, Inc. (the “Company”) entered into a Loan and Security Agreement (the “Loan and Security Agreement”) among Molecular Templates OpCo, Inc., as borrower (the “Borrower”), the Company, as guarantor, the lenders from time to time party thereto (collectively, the “Lenders”), K2 HealthVentures LLC, as administrative agent for Lenders (in such capacity, together with its successors, “Administrative Agent”), and Ankura Trust Company, LLC, as collateral agent for Lenders.
Amount. Pursuant to the Loan and Security Agreement, the Lenders agreed to extend up to $45.0 million to the Company (the “Term Loan”), consisting of: (i) a first tranche commitment of $15.0 million which was drawn on the closing date (the “First Tranche Term Loan”), (ii) a second tranche commitment of up to $20.0 million to be drawn between March 1, 2021 and June 30, 2021 at the Company’s option, subject to the achievement of certain clinical milestones (the “Second Tranche Term Loan”), and (iii) at the Company’s option, subject certain conditions including Lenders’ consent, a third tranche closing of $10.0 million to be drawn after the Company’s second tranche draw, but prior to December 31, 2021 (the “Third Tranche Term Loan”, and together with the First Tranche Term Loan and the Second Tranche Term Loan, the “Term Loan”). The Borrower may use the proceeds of the Term Loan (i) to repay existing outstanding Indebtedness of Borrower owing to Perceptive Credit Holdings II, LP and (ii) for general working capital purposes and corporate purposes permitted under the Loan and Security Agreement.
Amortization. On July 1, 2022 (“Amortization Date”), the term loans shall amortize monthly such that the principal amount of the Term Loans and interest accrued thereon shall be fully amortized by the Maturity Date; provided that if the Amortization Date is extended or the applicable rate is changed, the amortization schedule will be recalculated based on the adjusted applicable rate and/or adjusted number of payment dates through the Maturity Date. In the event that no event of default has occurred and is continuing and the Second Tranche Term Loan has been fully funded, the Amortization Date shall be July 1, 2023.
Maturity. The Term Loan matures on June 1, 2024 (the “Maturity Date”) unless accelerated pursuant to an event of default, as described below. All amounts outstanding under the Loan and Security Agreement will be due and payable upon the earlier of the maturity date or the acceleration of the loans and commitments upon an event of default.
Interest Rate. Amounts borrowed under the Term Loan bear interest at a variable annual rate equal to the greater of (i) 8.45%, and (ii) the sum of (A) the Prime Rate, plus (B) 5.2% (the “Interest Rate”). Furthermore, interest is payable monthly in arrears on the first calendar day of each month commencing on July 1, 2020.
Prepayment. The Term Loan is subject to mandatory prepayment provisions that require prepayment following the occurrence and during the continuation of an event of default as further described below. The Borrowers may, at their option, prepay all the Term Loan by providing at least fifteen days’ prior written notice to the Administrative Agent of its election to prepay such Term Loans. Any prepayment may be made conditional upon the occurrence of a “change of control” or a refinancing of the obligations.
Prepayment Premium. Prepayments of the Term Loan prior to the Maturity Date are subject to the following prepayment premium based on the aggregate principal amount of the term loans as of the date of any such prepayment: (i) on or prior to the second anniversary of the closing date, 3.00%, (ii) following the second anniversary or the closing date, but on or prior to the third anniversary of the closing date, 2.00%, (iii) following the third anniversary of the closing date, but on or prior to the maturity date of the Term Loans, 1.00%; provided that, if a Term Loan is prepaid in connection with a refinancing by one or more Lenders, the prepayment fee shall be waived.
Security; Guarantors. The Company is a guarantor of the Borrower’s obligations under the Loan and Security Agreement. Further, the Borrower’s obligations are secured by (i) a first priority, perfected lien on substantially all the property and assets of the Borrower and the Company, including their wholly-owned domestic subsidiaries, except for intellectual property (other than the security interest in proceeds from any intellectual property) and certain other customary excluded assets as set forth therein.
Covenants; Representations and Warranties; Other Provisions. The Loan and Security Agreement contains customary representations, warranties and covenants, including covenants by the Company and Borrower limiting
