Item 1.01. Entry Into a Material Definitive Agreement.
On April 29, 2022 (the “Closing Date”), Ouster, Inc., a Delaware corporation (the “Company”), and its subsidiary Sense Photonics, Inc. entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”) pursuant to which Hercules agreed to make available to the Company a secured term loan facility in the amount of up to $50 million (the “Term Loan Facility”), subject to certain terms and conditions. In accordance with the terms of the Loan Agreement, $20 million was funded by Hercules on the Closing Date. Also, an additional $20 million is available to the Company under the Loan Agreement on or before March 15, 2023. The Company may also borrow an additional $10 million under the Loan Agreement on or before June 15, 2023 subject to satisfying certain conditions relating to the achievement of trailing twelve month revenue and profit milestones.
Advances under the Term Loan Facility bear interest at the rate of interest equal to greater of either (i) (x) the prime rate as reported in The Wall Street Journal plus (y) six and fifteenth one hundredths percent (6.15%), and (ii) nine and forty one hundredths percent (9.40%), subject to compliance with financial covenants and other conditions. The Loan Agreement includes covenants, limitations, and events of default customary for similar facilities. The Loan Agreement matures on May 1, 2026 (the “Maturity Date”).
Interest on amounts borrowed under the Loan Agreement is payable on a monthly basis until June 1, 2025 (the “Amortization Date”). After the Amortization Date, payments shall consist of equal monthly installments of principal and interest payable until the secured obligations are repaid in full. However, if the Company achieves certain equity proceed, revenue or profit targets for the twelve-month period ending December 31, 2023, then the interest-only payments will continue and the Company will be obligated to repay the aggregate principal amount on the Maturity Date. The entire principal balance and all accrued but unpaid interest hereunder, shall be due and payable on the Maturity Date. On the earliest to occur of the Maturity Date, the date on which the obligations under the Loan Agreement are paid and the date on which such obligations become due and payable, the Company is also required to pay Hercules an end of term charge from $1.490 million to $3.725 million, depending on the amount borrowed.
The Company may prepay the principal of any advance made pursuant to the terms of the Term Loan Facility at any time subject to a prepayment charge equal to: 2.50%, if such advance is prepaid in any of the first 12 months following the Closing Date, 1.50%, if such advance is prepaid after 12 months but prior to 24 months following the Closing Date, and 1.0%, if such advance is prepaid anytime thereafter.
If the Company fails to maintain an unrestricted cash balance of $60 million, the Loan Agreement has a revenue financial covenant that requires the Company to achieve certain trailing twelve month revenue targets tested quarterly.
All obligations under the Loan Agreement are unconditionally guaranteed by the Company’s subsidiary Sense Photonics, Inc. The Term Loan Facility is secured by substantially all of the Company’s and the guarantors’ existing and after-acquired assets, including all intellectual property, all securities in existing and future domestic subsidiaries and 65% of the securities in foreign subsidiaries, subject to certain exceptions and exclusions.
The Loan Agreement contains customary covenants for transactions of this type and other covenants agreed to by the parties, including, among others, (i) the provision of annual, quarterly and monthly financial statements, management rights and insurance policies and (ii) restrictions on incurring debt, granting liens, making acquisitions, making loans, paying dividends, dissolving, and entering into leases and asset sales. The Loan Agreement also provides for customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control, judgment and material adverse effect defaults.
The foregoing summary is only a summary of the material terms and does not purport to be complete. The description is qualified in its entirety by reference to the Loan Agreement, which will be filed as an exhibit to a Quarterly Report on Form 10-Q to be filed by the Company.
