Item 1.01. Entry into a Material Definitive Agreement.
Restructuring agreement with K2 HealthVentures LLC (“K2HV”) to fully discharge and satisfy outstanding debt owed to K2HV for the prepayment of $27.5 million and the granting of contingent value rights and warrants
On June 16, 2023, Molecular Templates, Inc. (the “Company”), Molecular Templates OpCo, Inc. and K2 HealthVentures LLC (“K2HV”) agreed to the full discharge and satisfaction of all of the Company’s loan obligations under Loan and Security Agreement, dated as of May 21, 2020, as amended (the “K2HV Loan and Security Agreement”), and to the termination of such agreement (other than customary surviving obligations), in exchange for an aggregate repayment in cash of $27.5 million and the granting of a contingent value right to K2HV and a warrant to purchase common stock to K2HV’s affiliated holder, as set forth in the (i) Convertible Secured Contingent Value Right Agreement, dated as of June 16, 2023 (the “CVR Agreement”) and (ii) the Warrant to purchase Common Stock issued on June 16, 2023, each as more fully described below. Capitalized terms used herein without definition shall have the meaning ascribed to them in the CVR Agreement.
The CVR Agreement
To fully settle the $37.8 million of outstanding debt obligations (including principal, accrued interest, fees outstanding or due upon prepayment of the Loans) under the K2HV Loan and Security Agreement, the Company paid K2HV$27.5 million, granted to K2HV the right to receive certain contingent payments as described below, and issued the warrant to purchase common stock, described below, to K2HV’s affiliated holder. These contingent value rights require payments to K2HV if certain Contingent Payment Events occur, further described below, or if there is an Acceleration Event. The payment due upon any Contingent Payment Event or an Acceleration Event is capped at an amount (the “Remaining Value”) which is initially $10,303,646, which amount, to the extent not repaid is subject to escalating multipliers which increase from the closing date by multiplying the Remaining Value by a multiplier ranging between 1.0 at closing to 2.5x for any Remaining Amount not yet paid as of September 16, 2024, resulting in a potential maximum payment obligation of $25,759,115. In addition, upon a Change in Control, the Company shall pay an additional payment of $2,500,000.
Contingent Payment Events include (a) receipt of cash from (i) the sale of assets, (ii) the receipt of milestone payments and other license related payments, and (iii) the receipt of any cash payment characterized as an “Extraordinary Item” under Generally Accepted Accounting Principles, subject to certain exceptions, (b) the initiation of any new registrational study or expansion cohort designed with registrational intent, or the initiation of a phase 2B or phase 3 study, (c) a Change in Control, excluding changes resulting from equity financings, and (d) any final dissolution or other final winding up transaction. Acceleration Events include any Insolvency Proceeding, impairment of security and the lack of any Trading Market (where Trading Market includes the OTC Markets Group Inc electronic inter-dealer quotation system or other quotations), each as defined.
For Contingent Payment Events, the Company must pay K2HV either a specified percentage of the proceeds received, up to an amount equaling the applicable Remaining Value or, in the case of clause (b)
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