Item
1.01
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Entry
into a Material Definitive Agreement.
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On
October 19, 2020, Interpace Biosciences, Inc. (the “Company”) and its direct subsidiaries entered into a Joinder and
Second Loan Modification Agreement (the “Second Amendment”) with its existing lender Silicon Valley Bank (“SVB”),
which amended that certain Loan and Security Agreement, dated as of November 13, 2018, by and among the Company (formerly known
as Interpace Diagnostics Group, Inc.), Interpace Diagnostics Corporation, Interpace Diagnostics, LLC, (collectively, the “Borrowers”)
and SVB, as amended by that certain First Loan Modification Agreement, dated as of March 18, 2019, between the Borrowers and SVB
(as so amended, the “Loan Agreement.”)
Joinder
Pursuant
to the terms of the Second Amendment, the Company’s subsidiary, Interpace Pharma Solutions, Inc. (the “New Borrower”),
joined the Loan Agreement as a Borrower thereunder and granted SVB a continuing lien upon and security interest in all of the
assets of New Borrower.
Waivers
SVB
waived upon certain conditions certain existing or potential defaults under the Loan Agreement. Under the terms of the Loan Agreement,
the Company covenants to maintain at all times an Adjusted Quick Ratio of at least 1.15 to 1.0. SVB waived the Company’s
failure to comply with such requirement for the months ended July 31, 2020 and August 31, 2020.
For
one existing and one potential default in connection with the Company’s reporting requirements to SVB (collectively, the
“Forbearance Defaults”), SVB agreed to forebear from exercising its rights and remedies until the earlier to occur
of (a) the occurrence of any Event of Default (as defined in the Loan Agreement) other than the Forbearance Defaults or (b) December
31, 2020. The existing Forbearance Default arose from the Company’s non-timely filing of its Quarterly Report on Form 10-Q
(the “10-Q”) for the period ended June 30, 2020, and resulting failure to comply with the requirement to provide SVB
with a Company-prepared consolidated balance sheet and income statement covering the Company’s consolidated operations within
45 days after the end of such quarter. In the event that, on or prior to December 31, 2020, the Company provides SVB with a copy
of the 10-Q as filed with the U.S. Securities and Exchange Commission (the “SEC”) for each of the fiscal quarters
ended June 30, 2020 and September 30, 2020, then each existing and potential Forbearance Default will be deemed to be waived by
SVB. The 10-Q for the period ended June 30, 2020 was filed with the SEC on October 19, 2020.
Amendments
The
Second Amendment modifies certain terms in the Loan Agreement. The Second Amendment amends the Adjusted Quick Ratio financial
covenant to exclude compliance by the Company with such covenant for the month of October 2020 as well as any month thereafter
ending prior to the Funding Date (as defined in the Loan Agreement) of the first Advance (as defined in the Loan Agreement), if
any.
The
Second Amendment requires delivery of certain insurance policy endorsements within 45 days, naming SVB as an additional insured,
sole lender’s loss payee, or notice party for material alteration or cancellation. Any failure to meet the insurance policy
endorsement delivery requirement will result in an immediate Event of Default without any grace or cure period.
The
Second Amendment also increases the maximum aggregate amount utilized for the issuance of the Letter of Credit by SVB in favor
of Saddle Lane Realty, LLC, as the Company’s landlord for its Pittsburgh, Pennsylvania laboratory facility, from $250,000
to $1,000,000.
With
respect to any principal amount outstanding under the Revolving Line (as defined and discussed below), the Second Amendment
increases the floating per annum rate of interest to the greater of (A) one percent (1.0%) above the Prime Rate (as defined in
the Loan Agreement) and (B) four and one-quarter of one percent (4.25%). Prior to the Second Amendment, such interest accrued
at a rate equal to one-half of one percent (0.50%) above the Prime Rate. Such interest continues to be payable monthly in arrears.
The
Company continues to be required under the terms of the Second Amendment to provide certain financials and periodic reporting.
The Second Amendment lengthens the time for delivery to SVB of documents filed by the Company with the SEC (except for the Company’s
Annual Report on Form 10-K or the 10-Q’s, which are subject to distinct requirements) from five days to ten days from the
date of such filing.
The
Second Amendment also requires that proceeds from Governmental Account Debtors (as defined in the Second Amendment) making payments
under Medicare or Medicaid are segregated from all other funds and proceeds from other Account Debtors, and that all such Governmental
Account Debtors are instructed by the Company to deliver or transmit all such proceeds into a new Governmental Collateral Account.
Although SVB will not have control over the new Governmental Collateral Account, the Company instructed SVB to sweep, on a daily
basis, all amounts deposited in the Governmental Collateral Account to the Cash Collateral Account as and when funds clear and
become available. The Company may revoke such instructions at its election.
The
Company, its subsidiaries, and any Guarantor are required to maintain excess cash and conduct certain banking including all business
credit card banking with SVB and its affiliates.
General
The
Loan Agreement provides for up to $4.0 million of debt financing consisting of a term loan of up to $850,000 and a revolving line
of credit (the “Revolving Line”) based on the Company’s outstanding accounts receivable of up to $3.75 million.
The Company’s ability to use the term loan portion of the Loan Agreement expired in 2019. The Revolving Line has a maturity
date of November 13, 2021. During September 2020, the Company paid down the outstanding Revolving Line balance in full.
The
Company currently does not have the ability to drawn down on the Revolving Line. The Second Amendment provides that any future
Credit Extension (as defined in the Loan Agreement) by SVB to the Company will be made in SVB’s sole and absolute discretion.
The Company agreed to reimburse SVB for all out-of-pocket reasonable and documented legal fees and expenses incurred in connection
with the Second Amendment.
Upon
the occurrence and during the continuance of an Event of Default, Obligations (as defined in the Loan Agreement) and certain fees
and expenses shall bear interest at a rate per annum which is two percent (2.0%) above the rate that is otherwise applicable thereto.
Upon certain Events of Default, all Obligations are immediately due and payable without any action by SVB. In other cases, SVB
may, among other things, declare all Obligations immediately due and payable without notice or demand, demand that the Company
deposit cash in excess of the aggregate face amount of all Letters of Credit (as defined in the Loan Agreement), or demand payment
of and performance under, and collect any Accounts and General Intangibles (in each case as defined in the Loan Agreement). The
Company indemnifies and releases SVB and certain persons representing SVB from claims in connection with the Loan Agreement and
related documentation thereunder and waives certain defenses and rights against SVB.
The
foregoing summary of the Second Amendment is not a complete summary of its terms and is subject to and qualified in its entirety
by reference to the full text of such Second Amendment, which is filed as Exhibit 4.3 to this Current Report on Form 8-K
and is incorporated herein by reference. The foregoing summary of the Loan Agreement is not a complete summary of its terms and
is subject to and qualified in its entirety by reference to the full text of such documents, which were previously filed and are
incorporated herein by reference as Exhibits 4.1 and 4.2.