Item 1.01
Entry into a Material Definitive Agreement.
On August 2, 2019, Flexion Therapeutics, Inc. (“Flexion”) entered into an amended and restated credit and security agreement with Silicon Valley Bank as agent, MidCap Financial Trust, Flexpoint MCLS Holdings, LLC, and the other lenders from time to time party thereto (collectively, the “Lenders”), providing for a term loan of $40.0 million and a revolving credit facility of up to $20.0 million, both of which mature on January 1, 2024 (the “Maturity Date”). Flexion concurrently borrowed the $40.0 million term loan and used $7.7 million of the proceeds to repay the remaining amount owed on its existing term loan with Silicon Valley Bank and MidCap Funding XIII Trust. The revolving credit facility will be available to Flexion beginning January 1, 2020, subject to certain conditions imposed by the Lenders, including an initial borrowing limitation of up to $10.0 million until the Lenders complete an audit of certain collateral accounts. The amended and restated credit and security agreement also contains a minimum revenue covenant that will be in effect at any time Flexion’s liquidity (defined as cash and cash equivalents held with Silicon Valley Bank) is below $80 million. If the revenue covenant becomes applicable and Flexion fails to comply with it, the amounts due under the amended and restated credit and security agreement could be declared immediately due and payable.
Term loan borrowings under the credit facility accrue interest monthly at a floating interest rate equal to the greater of the Prime Rate (as reported in the Wall Street Journal) plus 1.50% or 6.50% per annum. Under the term loan credit facility, following an 18-month interest-only period, principal will be due in 36 equal monthly installments commencing February 1, 2021 and ending on the Maturity Date. Flexion may prepay the term loan at any time by paying the outstanding principal balance, a final payment equal to 4.75% of the term loan amount, all accrued interest and a prepayment fee of 3% of the outstanding term loan amount if repaid in the first year, 2% of the outstanding term loan amount if repaid in the second year, and 1% of the outstanding term loan amount if repaid in the third year of the loan; no prepayment fee is required thereafter.
Borrowings under the revolving credit facility accrue interest monthly at a floating interest rate equal to the greater of the Prime Rate (as reported in the Wall Street Journal) or 5.50% per annum. The revolving credit facility is co-terminus with the term loan. Beginning on January 1, 2020, if the interest payment on the revolving credit facility is less than the amount of interest that would have been payable had Flexion borrowed 25% of the total commitment under the revolving credit facility (the “Revolving Commitment Amount”), then Flexion will be required to pay the difference. Flexion is also required to pay a facility fee in respect of the revolving credit facility equal to 1% of the Revolving Commitment Amount. Flexion may retire the revolving credit facility early, at any time, by paying the outstanding principal balance, all accrued interest and a termination fee equal to 2% of the Revolving Commitment Amount if repaid in the first year, and 1% of the Revolving Commitment Amount if repaid in the second year; with no termination fee thereafter. Beginning on January 1, 2020, to the extent any portion of the Revolving Commitment Amount is undrawn, Flexion will be required to pay an “unused line fee” equal to 0.25% per annum of the average unused portion of the Revolving Commitment Amount, calculated on a calendar year basis as an amount equal to the difference between (i) the Revolving Commitment Amount and (ii) the greater of (A) 25.0% of the Revolving Commitment Amount, and (B) the average for the period of the daily closing balance of the Revolving Commitment Amount outstanding.
Flexion granted the Lenders a security interest in substantially all of its personal property, rights and assets, other than intellectual property, to secure the payment of all amounts owed under the credit facility. Flexion also agreed not to encumber any of its intellectual property without the Lenders’ prior written consent.
The amended and restated credit and security agreement contains certain representations, warranties and affirmative and negative covenants customary for agreements of this type.
The foregoing description of the amended and restated credit and security agreement does not purport to be complete and is qualified in its entirety by the terms of the agreement, which is filed herewith as Exhibit 99.3.