On November 21, 2017, TESARO, Inc. (the Company) and its wholly owned subsidiary TESARO Securities Corporation (the Subsidiary Guarantor) entered into a Loan Agreement (the Loan Agreement) with BioPharma Credit PLC, as collateral agent and a lender (the Collateral Agent), and BioPharma Credit Investments IV Sub LP, as a lender. The Loan Agreement provides for a senior secured term loan facility of up to $500 million to be funded in two tranches: (i) a Tranche A Loan in an aggregate principal amount of $300 million (the Tranche A Loan) to be funded on or about December 6, 2017 (the Tranche A Funding Date), subject to entering into a security agreement and delivery of other customary deliverables; and (ii) a Tranche B Loan in an aggregate principal amount of up to $200 million (the Tranche B Loan, and together with the Tranche A Loan, the Term Loans), to be funded at the option of the Company no earlier than June 30, 2018 and no later than December 20, 2018, and in any event upon no less than 90 days notice.
Each Term Loan has a scheduled maturity on the date that is the seven-year anniversary of the Tranche A Funding Date (the Maturity Date). Each Term Loan will amortize in equal quarterly installments in an aggregate amount equal to 3.0% of the original principal amount of such Term Loan, commencing on the first quarter following the 24-month anniversary of the funding of such Term Loan, with the remainder due on the Maturity Date.
Outstanding borrowings under the Tranche A Loan will bear interest at a rate equal to LIBOR plus 8% and outstanding borrowings under the Tranche B Loan will bear interest at a rate equal to LIBOR plus 7.5%, each subject to a LIBOR floor and cap. The interest is payable quarterly in arrears.
Each tranche under the Loan Agreement will be subject to a funding fee equal to 2.00% of the funded amount of the tranche, payable when the tranche is funded. In addition, in the event a tranche is prepaid in whole or in part prior to the 4th anniversary of the date the applicable tranche was funded, it will be subject to a prepayment fee. On or prior to the 2nd anniversary of the applicable funding date, the prepayment fee is 3.00% of the principal amount prepaid, thereafter and on or prior to the 3rd anniversary of the applicable funding date, the prepayment fee is 2.00% of the principal amount prepaid, and thereafter and on or prior to the 4th anniversary of the applicable funding date, the prepayment fee is 1.00% of the principal amount prepaid. In addition to the prepayment fees, in connection with a full or partial prepayment of a tranche prior to the 2nd anniversary of the applicable funding, a make whole amount will be payable equal to the foregone interest from the date of prepayment through the 2nd anniversary.
Obligations under the Loan Agreement will be guaranteed as of the Tranche A Funding Date by the Subsidiary Guarantor and thereafter by any other material wholly owned domestic subsidiaries formed or acquired by the Company from time to time. Obligations under the Loan Agreement will be secured by security interests in (i) all U.S. intellectual property of the Company relating to the Companys VARUBI® (rolapitant) and ZEJULA® (niraparib) products, (ii) rights under any U.S. new drug application relating to VARUBI and ZEJULA, (iii) 100% of the equity interests in wholly owned domestic subsidiaries and 65% of the equity interests in directly owned foreign subsidiaries, in each case of the Company and any guarantor, and (iv) cash held in all deposit accounts of the Company and any guarantor.
The Loan Agreement contains customary representations, warranties and covenants of the Company and its subsidiaries (subject to various qualifications), including covenants limiting the ability of the Company and its subsidiaries to, among other things, transfer currently owned U.S. intellectual property rights related to the collateral, incur additional indebtedness, incur additional liens and security interests on the collateral granted to the Collateral Agent, pay or make dividends, share repurchases and other distributions, and prepay subordinated indebtedness (other than the Companys existing convertible notes). The Company is not subject to any financial maintenance covenant under the Loan Agreement.
The Loan Agreement includes events of default relating to customary matters, including, among other things, nonpayment of principal, interest and other amounts, failure to comply with covenants, the occurrence of a material adverse change in the ability of the Company to perform its obligations, the rendering of judgments or orders or the acceleration or payment default by the Company in respect of other indebtedness in excess of $10 million, and bankruptcy. A change of control of the Company triggers a mandatory prepayment of the Term Loans.