Item
1.01. Entry into a Material Definitive Agreement.
On
July 28, 2020 (the “Closing Date”), Corbus Pharmaceuticals Holdings, Inc. (the “Company”)
entered into a Loan and Security Agreement (the “Loan Agreement”) with its subsidiary, Corbus Pharmaceuticals,
Inc., as borrower (the “Borrower” and, together with the Company, the “Loan Parties”), the
Company, as guarantor, each lender party thereto (the “Lenders”), K2 HealthVentures LLC, as administrative
agent for the Lenders (the “Administrative Agent”), and Ankura Trust Company, LLC, as collateral agent for
the Lenders (the “Collateral Trustee”).
Proceeds.
Pursuant to the Loan Agreement, the Lenders agreed to make term loans in an aggregate principal amount of up to $50,000,000, available
to the Borrower in three tranches. The initial tranche of $20,000,000 was funded on the Closing Date (before payment of a
facility fee of $375,000 to the Lenders). The second
tranche of $20,000,000 is available to be funded at the Borrower’s election on or before September 30, 2020, subject to
certain customary conditions and the achievement of certain regulatory and developmental milestones. The third tranche of $10,000,000
is available to be funded at the Borrower’s election on or before March 31, 2022, subject to certain customary conditions
and the achievement of certain regulatory and developmental milestones.
Interest
and Principal Payments. The Borrower is required to make interest-only payments on the loans for all monthly payment dates
prior to September 1, 2022 or, if the third tranche is drawn, March 1, 2023. The loans are scheduled to begin amortizing
on either September 1, 2022 or March 1, 2023, as applicable, with equal monthly payments of principal plus interest
being made by the Borrower to the Lenders in consecutive monthly installments following such interest-only period. Upon final
payment or prepayment of the loans, the Borrowers must pay a final payment equal to 5.95% of the aggregate original principal
amount of the loans borrowed
Maturity.
The loans mature on August 1, 2024 unless accelerated pursuant to an event of default, as described below. All
amounts outstanding under the Loan and Security Agreement will be due and payable upon the earlier of the maturity date or the
acceleration of the loans and commitments upon an event of default.
Interest
Rate. Outstanding amounts borrowed under the loans will accrue interest at a variable annual rate equal to the
greater of (i) 8.5% and (ii) the rate of interest noted in The Wall Street Journal, Money Rates section, as the “Prime Rate”
plus 5.25%, in each case, subject to a step-down of 25 basis points upon the funding of the second tranche.
Equity
Conversion Option. The Lenders may jointly elect at any time and from time to time prior to the payment in full of the
loans to convert any portion (in a minimum amount of $500,000) of the principal amount of the loans then outstanding into shares
of the Company’s common stock (the “Conversion Shares”) at a conversion price of $9.40, which
conversion price is subject to adjustment in certain circumstances; provided that the aggregate principal amount of loans converted
by the Lenders into common stock may not exceed $5,000,000. The Company granted registration rights to the Lenders in respect
of the Conversion Shares.
Issuance
of Warrants. In the connection with the closing of each tranche, the Company is obligated to issue a warrant to
K2 HealthVentures Equity Trust LLC to purchase a number of shares of the Company’s common stock equal to the original
principal loan amount multiplied by 3.00%, divided by the warrant exercise price of $6.96 per share (the “Warrant”).
The Warrant may be exercised either for cash or on a cashless “net exercise” basis. The Warrant will
be immediately exercisable and will expire ten years from the date of issuance. In connection with the funding of
the first $20,000,000 tranche, the Company issued a Warrant exercisable for up to 86,206 shares of the Company’s common
stock at an exercise price of $6.96 per share.
Prepayment.
The Loans are subject to mandatory prepayment provisions that require prepayment following the occurrence and during the
continuation of an event of default as further described below or immediately prior to the effectiveness of a change of control
transaction. At the Borrower’s option, the Borrower may prepay the loans in full, subject to a prepayment fee
of 3% of the amount prepaid if the prepayment of such loan occurs no later than the two year anniversary of the funding date of
such loan, 2% if the prepayment of such loan occurs after the two year anniversary of the funding date of such loan but no later
than the three year anniversary of the funding date of such loan, or 1% if the prepayment of such loan occurs after the three
year anniversary of the funding date of such loan but prior to August 1, 2024.
Security,
Guarantors. All obligations under the Loan Agreement are guaranteed by an unconditional guaranty by the Company, and
Borrower’s obligations under the Loan Agreement and the Company’s obligations under the guaranty are secured by a lien on substantially
all of the Borrower’s and the Company’s personal property, excluding intellectual property, and the Company pledged its equity
interests in its subsidiaries, including Borrower, subject to certain limitations with respect to its foreign subsidiaries.
Covenants;
Representations and Warranties; and Other Provisions. The Loan Agreement contains customary representations, warranties
and covenants. including covenants by the Company and Borrower limiting additional indebtedness, liens, mergers and acquisitions,
dispositions, investments, distributions, subordinated debt, transactions with affiliates and fundamental changes. If and only
if the Borrower does not achieve certain regulatory and developmental milestones before the second tranche funding occurs, then
the Loan Parties shall be required to maintain unrestricted cash of at least $10,000,000 thereafter; provided, however, that this
requirement shall not apply while the Company’s market capitalization remains above $200 million and the Borrower shall
have the right to cure any breach so long as the applicable shortfall is not greater than $3,000,000, subject to limitations usual
and customary for credit facilities of this type. If and only if the Borrower does not achieve certain regulatory and developmental
milestones after the second tranche funding occurs, then the Loan Parties shall be required to maintain unrestricted cash in an
amount of at least the aggregate principal amount of all loans outstanding; provided, however, that this requirement shall not
apply while the Company’s market capitalization remains above $500,000,000.
Default
Provisions. The Loan Agreement includes customary events of default, including payment defaults, breaches of covenants,
change of control and occurrence of a material adverse effect. Upon the occurrence and continuation of an event of default, a
default interest rate of an additional 5% per annum may be applied to the outstanding loan balances, and the Administrative Agent
may declare all outstanding obligations immediately due and payable and the Collateral Trustee may exercise secured party
rights and remedies as set forth in the Loan Agreement and under applicable law.
The
preceding summaries of the Loan Agreement and the Warrant do not purport to be complete and are qualified in their entirety by
reference to the form of Warrant and the Loan Agreement, copies which are filed as Exhibits 4.1 and 10.1, respectively, and which
are incorporated herein by reference.