Item 1.01 Entry into a Material Definitive Agreement.
On January 6, 2023, X4 Pharmaceuticals, Inc. (the "Company") and its subsidiary,
X4 Therapeutics, Inc. (together with the Company, the "Borrowers"), entered into
a Second Amended and Restated Loan and Security Agreement (the "Second A&R Loan
Agreement") with Hercules Capital, Inc., as agent and lender, and Hercules
Capital Funding IV LLC and Hercules Capital Funding Trust 2022-1, as lenders
(collectively, "Hercules"), which provides for a term loan of $32.5 million (the
"Term Loan"). The Second A&R Loan Agreement amended and restated that certain
Amended and Restated Loan and Security Agreement, dated as of June 27, 2019, as
subsequently amended from time to time, by and among the Borrowers, Hercules
Capital, Inc. and other parties thereto (the "First A&R Loan Agreement").
The Second A&R Loan Agreement does not require any scheduled amortization
payments prior to October 1, 2024; provided however, if certain conditions are
met, then amortization payments will not be required until January 1, 2026. The
entire principal balance of the Term Loan and all accrued but unpaid interest
shall be due on the maturity date, which is April 1, 2026; provided however, if
certain conditions are met, the maturity date of the Term Loan will be extended
to July 1, 2027. At the Company's option, the Company may prepay all, but not
less than all, of the outstanding borrowings, subject to a prepayment premium of
up to 3.0% of the principal amount outstanding as of the date of repayment.
Pursuant to the terms of the Second A&R Loan Agreement, the Borrowers paid
approximately $1.4 million to Hercules on January 6, 2023, the Closing Date as
defined in the Second A&R Loan Agreement, in connection with the term loans
previously outstanding under the First A&R Loan Agreement. In addition, the
Second A&R Loan Agreement provides for payments by the Borrowers to Hercules of
(i) $763,750 in connection with the term loans previously outstanding under the
First A&R Loan Agreement, payable upon the earliest to occur of (a) July 1,
2023, (b) the date that the Borrowers prepay the outstanding secured obligations
in full and (c) the date that the secured obligations become due and payable,
and (ii) $1.3 million in connection with the Term Loan outstanding under the
Second A&R Loan Agreement, payable upon the earliest to occur of (a) the
maturity date of the Term Loan, (b) the date that Borrower prepays the
outstanding secured obligations in full, and (c) the date that the secured
obligations become due and payable.
Borrowings under the Term Loan bear interest at a per annum rate equal to the
greater of (i) 3.15% plus the Wall Street Journal prime rate or (ii) 10.15%.
Interest payments on the Term Loan are due on a monthly basis. In an event of
default and until such event is no longer continuing, the interest rate
applicable to borrowings under the Second A&R Loan Agreement would be increased
by 4.0%.
Borrowings under the Second A&R Loan Agreement are collateralized by
substantially all of the Borrowers' personal property and other assets except
for their intellectual property (but including rights to payment and proceeds
from the sale, licensing or disposition of the intellectual property). Under the
Second A&R Loan Agreement, the Borrowers have agreed to affirmative and negative
covenants to which the Borrowers will remain subject until maturity or repayment
of the Term Loan in full. Such covenants include maintaining a minimum liquidity
amount of cash and cash equivalents in an aggregate amount greater than or equal
to $20.0 million or, on and after certain conditions have been met, cash and
cash equivalents in an aggregate amount greater than or equal to $10.0 million.
The Borrowers' obligations under the Second A&R Loan Agreement are subject to
acceleration upon occurrence of specified events of default, including payment
default, insolvency and a material adverse change in the Borrowers' business,
operations or financial or other condition.
In addition, under the Second A&R Loan Agreement, Hercules has the right to
participate, in a cumulative amount of up to $1.0 million in the aggregate, and
subject to exceptions as provided in the Second A&R Loan Agreement, in any
future offering of the Company's equity securities for cash that is solely for
financing purposes and is broadly marketed to multiple investors.
The foregoing description of the Second A&R Loan Agreement does not purport to
be complete and is qualified in its entirety by reference to the full text of
the Second A&R Loan Agreement, a copy of which will be filed as an exhibit to
the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
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Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of the Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K with
respect to the Second A&R Loan Agreement is incorporated by reference into this
Item 2.03.
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