Item 1.01 Entry into a Material Definitive Agreement.
On December 16, 2019, Bellerophon Therapeutics, Inc. (the “Company”) and New Mountain Partners II AIV-A LP, New Mountain Partners II AIV-B LP, Allegheny New Mountain Partners LP, New Mountain Affiliated Investors II LP, Puissance Capital Management LP, Jonathan M. Peacock, Naseem Amin and Ted Wang (each a Lender and collectively, the “Lenders”) entered into a Binding Term Sheet and Agreement for Line of Credit Facility (the “Term Sheet”). Pursuant to the Term Sheet, the Lenders will make available to the Company, on a pro rata basis, a $10,000,000 line of credit facility pursuant to which the Company will have the right to draw down $5,000,000 after March 31, 2020, provided that the Company has randomized the first patient in its iNO-PF Phase 3 clinical trial by such date, and another $5,000,000 after June 30, 2020, provided that no drawdowns shall be made later than December 31, 2020, and such drawdowns shall be convertible into shares of the Company’s common stock, par value $0.01 per share, immediately prior to a change of control pursuant to the terms and conditions of the Term Sheet (the “Credit Line”). It shall be a condition to each drawdown that there has been no material adverse change in the condition (financial or otherwise), properties, business or operation of the Company since the date of the Term Sheet.
The Company shall pay the Lenders a fee in cash equal to $300,000 in the aggregate (divided pro rata among each Lender) upon the earliest of (i) the occurrence of a Change of Control (as defined below), (ii) the first drawdown or (iii) the completion by the Company of a single capital raise with gross proceeds of at least $10,000,000.
The Company has no obligation to draw down on the Credit Line and anticipates that it would only do so if financing was not available on more favorable terms. Accordingly, the Company views the Credit Line as a resource that will strengthen its financial position and providing a source of capital if needed.
The Credit Line matures on December 16, 2021 and bears interest at 8.0% per annum, which is payable in kind. The Lenders have the right to require the repayment of the loan at any time after the Company completes a single capital raise with gross proceeds of at least $15,000,000. Events of default under the Credit Facility include a Change of Control, bankruptcy and insolvency.
Immediately prior to the consummation of a Change of Control, each Lender will have a right to convert outstanding drawdown loan amounts into shares of common stock of the Company at a conversion price per share equal to $0.4138 (subject to adjustment for stock splits and similar transactions); provided that the aggregate number of shares of common stock of the Company to be issued upon conversion of the drawdown loan amounts under the Credit Facility to a Lender other than New Mountain Capital (or its affiliates), in addition to shares of Company common stock owned by or otherwise issued to such Lender, shall not exceed 19.99% of the Company’s issued and outstanding common stock in the aggregate pursuant to the Company’s obligations under Nasdaq Listing Rule 5635(c) (or any successor or similar rule or interpretation thereof) unless stockholder approval is obtained. “Change of Control” shall mean (i) a merger or consolidation of the Company with another corporation (other than a merger effected exclusively for the purpose of changing the domicile of the Company), (ii) the sale, assignment, transfer, conveyance or other disposal of all or substantially all of the properties or assets or all or a majority of the outstanding voting shares of capital stock of the Company, (iii) a purchase, tender or exchange offer accepted by the holders of a majority of the outstanding voting shares of capital stock of the Company, or (iv) a “person” or “group” (as these terms are used for purposes of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of at least a majority of the voting power of the capital stock of the Company.
The foregoing summary of the Term Sheet does not purport to be complete and is subject to, and qualified in its entirety by, the full text of such document, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.