ENDOLOGIX, INC. (NASDAQ:ELGX) Files An 8-K Entry into a Material Definitive Agreement
Item1.01 Entry into a Material Definitive Agreement.
Facility Agreement
On April3, 2017 (the Agreement Date), Endologix, Inc. (the
Company) entered into a Facility Agreement (the Facility
Agreement) with affiliates of Deerfield Management Company, L.P.
(collectively, Deerfield), to which Deerfield agreed to loan to
the Company up to $120 million, subject to the terms and
conditions set forth in the Facility Agreement (the Term Loan).
The Company drew the entire principal amount of the Term Loan on
the Agreement Date. The Company agreed to pay Deerfield a yield
enhancement fee equal to 2.25% of the principal amount of the
funds disbursed on the Agreement Date. The Company also agreed to
reimburse Deerfield for all reasonable out-of-pocket expenses
incurred by Deerfield in connection with the negotiation and
documentation of the Facility Agreement up to a capped amount.
Concurrently with entering into the Facility Agreement, the
Company entered into a Guaranty and Security Agreement with
Deerfield (the Security Agreement), to which, as security for the
repayment of the Companys obligations under the Facility
Agreement, the Company granted to Deerfield a first priority
security interest in substantially all of the Companys assets
including intellectual property, with the priority of such
security interest being pari passu with the security interest
granted to the Revolver.
The Company estimates that the net proceeds from the Term Loan
will be approximately $113 million, after deducting estimated
transaction expenses. As described below, the Company intends to
use approximately $52.5 million of the net proceeds from the Term
Loan to repurchase $53.1 million aggregate principal amount of
outstanding 2.25% Convertible Senior Notes due 2018, plus the
accrued but unpaid interest thereon, from the holders thereof in
privately negotiated transactions. Endologix intends to use the
remainder of the net proceeds from the Term Loan for working
capital and general corporate purposes.
Any amounts drawn under the Facility Agreement will accrue
interest at a rate of 6.87%per annum, payable quarterly in
arrears beginning on July1, 2017 and on the first business day of
each calendar quarter thereafter and on the Maturity Date, unless
repaid earlier. The Company will be required to pay Deerfield on
each of April2, 2021,April2, 2022 and April2, 2023 (the Maturity
Date), an amortization payment equal to $40 million (or, if on
the Maturity Date, the remaining outstanding principal amount of
the Term Loan).
Upon a change of control of the Company, if the acquirer
satisfies certain conditions set forth in the Facility Agreement,
such acquirer may assume the outstanding principal amount under
the Facility Agreement without penalty. If such acquirer does not
satisfy the conditions set forth in the Facility Agreement,
Deerfield may, at its option, require the Company to repay the
outstanding principal balance under the Facility Agreement plus,
depending on the timing of the change of control transaction, the
Company may be required to pay a make-whole premium and will be
required to pay a change of control fee.
At any time on or after the fourth anniversary of the Agreement
Date, the Company has the right to prepay any amounts owed under
the Facility Agreement without premium or penalty, unless such
prepayment occurs in connection with a change of control of the
Company, in which case the Company must pay Deerfield a change of
control fee unless such change of control occurs beyond a certain
period after the Maturity Date. At any time prior to the fourth
anniversary of the Agreement Date, any prepayment made by the
Company will be subject to a make-whole premium and, if such
prepayment occurs in connection with a change of control of the
Company, a change of control fee.
Any amounts drawn under the Facility Agreement may become
immediately due and payable upon customary events of default, as
defined in the Facility Agreement, or the consummation of certain
change of control transactions, as described above.
The Facility Agreement contains various representations and
warranties, events of default, and affirmative and negative
covenants, customary for financings of this type, including
reporting requirements, requirements that the Company maintain
timely reporting with the U.S. Securities and Exchange Commission
(the Commission) and restrictions on the ability of the Company
and its subsidiaries to incur additional liens on their assets,
incur additional indebtedness and acquire and dispose of assets
outside the ordinary course of business.
Warrants
In connection with the execution of the Facility Agreement, the
Company issued to Deerfield warrants to purchase an aggregate of
6,470,000 shares of common stock of the Company at an exercise
price of $9.23 per share (the Warrants). The number of shares of
common stock of the Company into which the Warrants are
exercisable and the exercise price of the Warrants will be
adjusted to reflect any stock splits, recapitalizations or
similar adjustments in the number of outstanding shares of common
stock of the Company.
The Warrants expire on the seventh anniversary of the Agreement
Date. Subject to certain exceptions, the Warrants contain
limitations such that the Company may not issue shares of common
stock of the Company to Deerfield upon the exercise of the
Warrants if such issuance would result in Deerfield beneficially
owning in excess of 4.985% of the total number of shares of
common stock of the Company then issued and outstanding.
The holders of the Warrants may exercise the Warrants for cash,
on a cashless basis or through a reduction of an amount of
principal outstanding under the Term Loan. In connection with
certain major transactions, the holders may have the option to
convert the Warrants, in whole or in part, into the right to
receive the transaction consideration payable upon consummation
of such major transaction in respect of a number of shares of
common stock of the Company equal to the Black-Scholes value of
the Warrants, as defined therein, and in the case of other major
transactions, the holders may have the right to exercise the
Warrants, in whole or in part, for a number of shares of common
stock of the Company equal to the Black-Scholes value of the
Warrants.
Registration Rights Agreement
In connection with the Term Loan and the issuance of the
Warrants, the Company entered into a Registration Rights
Agreement with Deerfield (the Registration Rights Agreement). to
the terms of the Registration Rights Agreement, the Company has
agreed to file a registration statement on Form S-3 (or if Form
S-3 is not then available, such other form of registration
statement as is then available) with the Commission on or prior
to the 30th day following the Agreement Date, to register for
resale the shares of common stock of the Company issuable upon
the exercise of the Warrants.
Credit and Security Agreement
On the Agreement Date, the Company entered into a Credit and
Security Agreement (the Credit Agreement) with Deerfield ELGX
Revolver, LLC (Deerfield Revolver), to which the Company may
borrow up to the lesser of $50 million or its applicable
borrowing base from time to time prior to March31, 2020 (the
Revolver). Any outstanding principal under the Revolver will
accrue interest at a rate equal to 3-month LIBOR (with a 1%
floor) plus 4.60%, payable monthly in arrears on the first
business day of the immediately succeeding calendar month and on
the maturity date. The Company is subject to other fees in
addition to interest on the outstanding principal amount under
the Revolver, including in connection with an early termination
of the Revolver. The Revolver replaces the Companys $50 million
asset-based revolving line of credit with MidCap Financial Trust.
The Companys obligations under the Credit Agreement are secured
by a first priority security interest in substantially all of the
Companys assets including intellectual property, with the
priority of such security interest being pari passu with the
security interest granted to the Term Loan.
The foregoing descriptions of the Facility Agreement, the
Warrants, the Registration Rights Agreement and the Credit
Agreement do not purport to be complete and are qualified in
their entirety by reference to these agreements, copies of which
are filed as exhibits to this Current Report on Form 8-K and are
incorporated herein by reference.
Item2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The disclosure set forth in Item1.01 above relating to the
Facility Agreement, the Security Agreement and the Credit
Agreement is hereby incorporated by reference into this Item2.03.
Item3.02. Unregistered Sale of Equity
Securities.
The Warrants described in Item1.01 above were offered and sold in
reliance upon exemptions from registration to Section4(a)(2) of
the Securities Act of 1933, as amended (the Securities Act), and
Rule 506 of RegulationD thereunder. The Facility Agreement
contains representations and warranties to support the Companys
reasonable belief that Deerfield had access to information
concerning its operations and financial condition, that Deerfield
is acquiring the Warrants for its own account and not with a view
to the distribution thereof, and that Deerfield is an accredited
investor as defined by Rule 501 promulgated under the Securities
Act.
Item8.01. Other Events.
On April4, 2017, in privately-negotiated transactions, the
Company agreed to repurchase approximately $53.1 million in
aggregate principal amount of its 2.25% Convertible Senior Notes
due 2018 (the 2018 Notes) for approximately $52.5 million in
cash, which amount includes accrued and unpaid interest on the
repurchased 2018 Notes.
Item9.01 Financial Statements and Exhibits.
| (d) | Exhibits. |
|
Exhibit No. |
Description |
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| 4.1 |
Form of Warrant to Purchase Common Stock of Endologix, Inc., issued to Deerfield Private Design Fund IV, L.P., Deerfield International Master Fund, L.P., Deerfield Partners, L.P., and Deerfield Private Design Fund III, L.P., together with a schedule of holders and amounts (issued April 3, 2017). |
|
| 4.2 |
Registration Rights Agreement, dated April 3, 2017, by and among Endologix, Inc., Deerfield Private Design Fund IV, L.P., Deerfield International Master Fund, L.P., Deerfield Partners, L.P., and Deerfield Private Design Fund III, L.P. |
|
| 10.1 |
Facility Agreement, dated April 3, 2017, by and among Endologix, Inc., certain subsidiaries of Endologix, Inc., Deerfield Private Design Fund IV, L.P., Deerfield International Master Fund, L.P., Deerfield Partners, L.P., and Deerfield Private Design Fund III, L.P. |
|
| 10.2 |
Credit and Security Agreement, dated April 3, 2017, by and among Endologix, Inc., certain subsidiaries of Endologix, Inc. and Deerfield ELGX Revolver, LLC. |
About ENDOLOGIX, INC. (NASDAQ:ELGX)
Endologix, Inc. is engaged in developing, manufacturing, marketing and selling medical devices for the treatment of aortic disorders. The Company’s products are intended for the treatment of abdominal aortic aneurysms (AAA). The AAA products are built on one of two platforms, including traditional minimally invasive endovascular repair (EVAR) or endovascular sealing (EVAS), its solution for sealing the aneurysm sac while maintaining blood flow through two blood flow lumens. The EVAR products include the Endologix AFX Endovascular AAA System (AFX), the VELA Proximal Endograft (VELA) and the Endologix Powerlink with Intuitrak Delivery System (Intuitrak). The EVAS product is the Nellix EndoVascular Aneurysm Sealing System (Nellix EVAS System). Its EVAS product is the Nellix EndoVascular Aneurysm Sealing System (Nellix EVAS System). It offers accessories to facilitate the optimal delivery of its EVAR products, including compatible guidewires, snares, and catheter introducer sheaths. ENDOLOGIX, INC. (NASDAQ:ELGX) Recent Trading Information
ENDOLOGIX, INC. (NASDAQ:ELGX) closed its last trading session up +0.06 at 6.72 with 1,095,184 shares trading hands.