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Item 1.01
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Entry Into a Material
Definitive Agreement.
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On
August 5, 2020 (the “Closing Date”), Aptevo Therapeutics Inc. (“Aptevo”) entered into a $25 million Credit
and Security Agreement (the “Credit Agreement”) by and among Aptevo and its subsidiary, as borrowers, MidCap Financial
Trust, as agent, and the lenders from time to time party thereto. The Credit Agreement provides Aptevo and the other borrower
thereunder with a $25 million term loan, which was provided in a single tranche on the Closing Date. The term loan will amortize
on a monthly basis commencing in March 2022 and will mature on August 5, 2024. Amounts drawn under the Credit Agreement bear interest
at a rate of LIBOR plus 6.25% per annum, subject to a 1.50% LIBOR floor and a LIBOR cap of 2.50%.
The
Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, in each case
applicable to Aptevo and its subsidiaries. The negative covenants include restrictions on, among other things, indebtedness, liens,
dividends and other distributions, repayment of subordinated indebtedness (if any), mergers, dispositions, investments (including
licensing), acquisitions, transactions with affiliates and modification of organizational documents or certain other agreements.
The Credit Agreement contains mandatory prepayment provisions that require Aptevo and its subsidiaries to prepay the term loan
with the proceeds of sales of certain contractual payment streams.
The
Credit Agreement also contains customary events of default, including, among other things, failure to pay principal or interest
due under the Credit Agreement, default of covenants, a cross-default to Aptevo’s or its subsidiary’s other material
indebtedness, breach of material contracts by Aptevo or its subsidiaries, commencement of liquidation, reorganization or similar
relief, or termination or loss of right to certain contractual payments. The obligations of Aptevo and the other borrowers under
the Credit Agreement are secured by all of their assets other than (1) certain voting shares of future foreign subsidiaries of
Aptevo if granting security over such shares would result in an adverse tax event, and (2) any lease, license or other contract
where the grant of a security interest would constitute a default, be prohibited by applicable law, or would require certain third-party
consents, except to the extent the anti-assignment override provisions of the Uniform Commercial Code apply.
The
related financing documents contain (1) a customary agency fee, (2) an origination fee of $125,000, (3) a termination fee (payable
on a total or partial prepayment of the term loan, in respect of the portion of the term loan prepaid) in an amount that would
be necessary to generate (i) a 10% return on invested capital during the first 6 months following the Closing Date, (ii) a 12%
return on invested capital during months 7, 8, or 9 following the Closing Date, and (iii) a 13% return on invested capital during
months 10, 11, or 12 following the Closing Date, whether such prepayment is voluntary or by reason of the occurrence of an event
of default or acceleration of the loan, and (4) an exit fee (payable on a total or partial prepayment of the term loan, in respect
of the portion of the term loan prepaid) in an amount equal to 6% of the amount prepaid at any time following the first anniversary
of the Closing Date, whether such prepayment is voluntary or by reason of the occurrence of an event of default or acceleration
of the loan.
The foregoing
description of the Credit Agreement and related financing documents is a summary, is not complete, and is qualified in its entirety
by the full text of the Credit Agreement, a copy of which the Company intends to file as an exhibit to its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2020.