GEMPHIRE THERAPEUTICS INC. (NASDAQ:GEMP) Files An 8-K Entry into a Material Definitive AgreementItem 9.01 Entry into a Material Definitive Agreement.
Gemphire Therapeutics Inc. (the “Company”) entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”) on July 24, 2017 (the “Effective Date”).
The Loan Agreement established a term loan facility in the aggregate principal amount of up to $15,000,000 (the “Term Loan”) to be funded in three tranches. An initial tranche of not less than $5,000,000 nor more than $10,000,000 (“Tranche A”) was available to be funded to the Company on the Effective Date.A second tranche equal to the lesser of $5,000,000 or $10,000,000 minus the amount advanced in Tranche A (“Tranche B”) was available to be drawn by the Company commencing on the Effective Date and through December 31, 2017, unless an event of default occurs before such date. On the Effective Date, the Company drew and SVB funded Tranche A in the amount of $10,000,000.As such, no additional borrowings are available to be drawn under Tranche B.Conditioned on the occurrence of both a Positive Clinical Trial Event and a Pre-Clinical Event, a third tranche of the lesser of $5,000,000 or $15,000,000 minus the sum of amounts advanced in Tranche A plus the Tranche B (“Tranche C”) may be available to be drawn by the Company through July 31, 2018, unless an event of default occurs before such date. “Positive Clinical Trial Event” means the receipt by SVB of a written electronic communication from a member of the Company’s board of directors (i) stating that the board of directors has determined that the results from either (a) the Company’s ROYAL-1 clinical trial (GEM-301) or (b) the Company’s INDIGO-1 clinical trial (GEM-401) are sufficient to support the development plan for submission of a new drug application with the Food and Drug Administration (“FDA”) and continued development of gemcabene and (ii) attaching a copy of the press release issued by the Company announcing the foregoing.“Pre-Clinical Event” means the receipt by SVB of a written electronic communication from the chief executive officer or chief financial officer of the Company, together with supporting documentation from the FDA, that the FDA has lifted the partial clinical hold with respect to clinical trials of longer than six months in duration for gemcabene.Since the Company drew and SVB funded $10,000,000 on the Effective Date, $5,000,000 may be available to be drawn for Tranche C, subject to the conditions described above.
All amounts advanced under the Term Loan mature on February 1, 2021 and have an interest-only monthly payment period through August 1, 2018, which may be extended to February 1, 2019 upon the occurrence of both a Positive Clinical Trial Event and a Pre-Clinical Event. Following the interest-only payment period, the Company will begin making monthly payments of principal and interest until the maturity date. Interest will accrue on the unpaid principal balance at a floating per annum rate equal to the prime rate, except that, following an event of default, interest will accrue at a rate up to 5% above the rate that is otherwise applicable.
The Loan Agreement requires the Company to pay the following fees: (i) upon the maturity, acceleration or prepayment of the Term Loan, a final payment fee of 10% of the funded principal amount of the Term Loan (the “Final Payment Fee”), (ii) a success feeof 3.5% of the funded principal amount of the Term Loan (the “Success Fee”) in the event any of the following occur prior to 5:00 pm Eastern Time on July 24, 2024: (a) the Company receives FDA approval for any new drug application for gemcabene, (b) a sale or other transfer of all or substantially all of the assets of the Company occurs, (c) a merger or consolidation of the Company with or into another person or entity occurs where the holders of the Company’s outstanding voting equity securities immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor immediately following such transaction or (d) any sale by the holders of the Company’s outstanding voting equity securities where such holders do not continue to hold at least a majority of the Company’s issued and outstanding voting equity securities and (iii) upon termination of the Loan Agreement prior to the maturity date for any reason, a prepayment fee (the “Prepayment Fee”) equal to 2% (if such prepayment occurs prior to the first anniversary of the Effective Date) or 1% (if such prepayment occurs thereafter) of the funded principal amount of the Term Loan.
In the event a Positive Clinical Trial Event does not occur by March 31, 2018, on such date, the Company must either (i) provide cash security and maintain a cash balance in a restricted account at SVB in an amount of at least 50% of the amounts owed by the Company to SVB or (ii) prepay the Term Loan in its entirety. In the event a Pre-Clinical Event does not occur by July 31, 2018, on such date, the Company must either (i) provide cash security and maintain a cash balance in a restricted account at SVB in an amount of at least 50% of the amounts owed by the Company to SVB or (ii) prepay the Term Loan in its entirety.In each case, if the Company chooses to prepay the Term Loan, in addition to the repayment of the outstanding principal and accrued and unpaid interest, the Company is required to pay the Final Payment Fee and, if applicable, the Success Fee, but not the Prepayment Fee.
