| Item 1.01 | Entry into a Material Definitive Agreement. |
On September 25, 2018, Zosano Pharma Corporation (the “Company”) entered into a Master Lease Agreement (including related schedules, the “Lease Agreement”) with Trinity Capital Fund III, L.P. (the “Lessor”).
Under the Lease Agreement, Lessor has agreed to provide the Company with access to an equipment lease line of credit in an aggregate principal amount of up to $14 million (the “Commitment”). The first advance, of a principal amount of $5 million, was funded on September 25, 2018, with monthly rent payments based on a monthly rate factor of 0.0320 for a term ofthirty-six months. Additional advances, of a principal amount of up to $9 million, can be drawn down at the Company’s option at any time until March 30, 2020, or the earlier expiration pursuant to the terms of the Lease Agreement, with monthly rent payments based on a monthly rate factor of 0.0320, with upward adjustments indexed to the prime rate, customarily defined, for a term ofthirty-six months.
At the end of the drawdown period, the Company has agreed to pay Lessor anon-utilization fee equal to 3% of the unused portion of the Commitment.
The Company has the option, at the end of each lease term, to (a) extend the lease term for an additional three months, with the option to purchase the equipment at 4% of equipment cost following the end of such extended term, (b) purchase the equipment at 12% of equipment cost or (c) return the equipment to Lessor and pay a restocking fee of 6% of equipment cost.
The restocking fee of 6% of equipment cost shall apply if the lease term is cancelled or terminated prior to the end of the lease term.
Under the terms of the Lease Agreement, at closing, the Company agreed to enter into a Security Agreement granting Lessor first priority liens and security interests in substantially all of the Company’s assets as collateral for the obligations thereunder. Upon delivery and acceptance of the equipment, Lessor’s security interest extends solely to the equipment and related assets.
The Lease Agreement also contains representations and warranties by the Company and indemnification provisions in favor of Lessor and customary covenants (including limitations on other liens, but no financial covenants), and events of default (including payment defaults, breaches of covenants following any applicable cure period, a material adverse change, and events relating to bankruptcy or insolvency).
In addition, pursuant to the Agreement, the Company issued the Lessor a warrant (the “Warrant”) to purchase an aggregate of 75,000 shares of the Company’s common stock, $0.0001 par value per share, at an exercise price of $3.5928 per share. The Warrant is immediately exercisable upon issuance, and excluding certain mergers or acquisitions, expires on the seven-year anniversary of the date of issuance.
The foregoing description of the material terms of the Lease Agreement and the Warrant does not purport to be complete and is subject to, and is qualified in its entirety by, reference to the Lease Agreement, which will be filed as an exhibit to the Company’s Quarterly Report on Form10-Q for the quarter ending September 30, 2018, and the Warrant, which is filed as an exhibit to this Current Report onForm 8-K.
