Item 1.01. Entry into a Material Definitive Agreement
Highbridge Loan Agreement
On April 21, 2020, Senseonics Holdings, Inc. (the "Company") and Senseonics,
Incorporated, a wholly-owned subsidiary of the Company (together with the
Company, "Senseonics") entered into a Loan and Security Agreement (the
"Highbridge Loan Agreement") with certain funds managed by Highbridge Capital
Management, LLC ("Highbridge"), as the lenders (together with the other lenders
from time to time party thereto, the "Lenders") and Wilmington Savings Fund
Society, SCB, as collateral agent.
Pursuant to the Highbridge Loan Agreement, the Company may borrow up to an
aggregate of $20.0 million in aggregate principal through the issuance and sale
of First Lien Secured Notes due October 2021 (the "First Lien Notes"). The first
tranche of borrowing, in which the Company will issue and sell First Lien Notes
in the aggregate principal amount of $15.0 million, is expected to close on or
about April 24, 2020 (the "Closing Date"), subject to customary closing
conditions. Under the terms of the Highbridge Loan Agreement, the Company may
issue up to an additional $5.0 million in aggregate principal amount of First
Lien Notes in a subsequent closing, conditioned upon the effectiveness of the
registration statement described below. In connection with the Highbridge Loan
Agreement, the Company has also agreed to issue 1,500,000 shares of common stock
of the Company, $0.001 par value per share ("Common Stock") to the Lenders as a
commitment fee (the "Commitment Fee Shares") on the Closing Date. The Company
expects to use the proceeds of the First Lien Notes for working capital and
general corporate purposes.
The First Lien Notes are secured, senior obligations of Senseonics Interest in
cash at the annual rate of 12% or, at the Company's option, payment in kind at
an annual rate of 13%, on the First Lien Notes will be payable monthly in
arrears. The maturity date for the First Lien Notes will be October 24, 2021
(the "First Lien Maturity Date"), unless earlier repurchased, redeemed or
converted in accordance with their terms. The obligations under the First Lien
Notes are secured by substantially all assets of Senseonics.
The Company will have the right to prepay the First Lien Notes at any time,
subject to a prepayment premium, which in certain circumstances the Company may
elect to pay in common stock, equal to the aggregate amount of interest payments
through maturity. However, if the date of payment in cash of such prepayment
premium is on or before August 22, 2020, the prepayment premium will be reduced
by 25%.
Subject to certain conditions, if the Company retains or reinvests proceeds of
an asset sale pursuant to the asset sale prepayment provisions in the Highbridge
Loan Agreement, the Lenders shall be entitled to convert First Lien Notes and
Holders (defined below) shall be entitled to convert Second Lien Notes in
aggregate combined principal amount equal to 45% of such net proceeds retained
or reinvested (together with any applicable prepayment premium) to Common Stock
at a price per share equal to 90% of the greater of (i) the daily volume
weighted average of the price per share of the Common Stock, on the conversion
date, or if the conversion date is not a trading date, the trading day
immediately prior to the conversion date and (ii) $0.57 per share. This
conversion option has a daily limit of $1,000,000 in aggregate converted
principal (inclusive of principal amount of Second Lien Notes that are
voluntarily converted by the Holders).
From and after a Strategic Transaction Announcement (as defined in the form of
First Lien Note), the Company may elect to convert up to $9,375,000 in aggregate
principal of the First Lien Notes to Common Stock at a price per share equal to
90% of the greater of (i) the daily volume weighted average of the price per
share of the Common Stock, on the conversion date, or if the conversion date is
not a trading date, the trading day immediately prior to the conversion date and
(ii) $0.57 per share of Common Stock. This conversion option has a daily limit
of $300,000 in aggregate converted principal. If the Company or the Lenders
elect to convert any of the First Lien Notes, the amount converted will be equal
to the principal and unpaid accrued interest plus the applicable prepayment
premium.
The Highbridge Loan Agreement contains customary terms and covenants, including
without limitation: financial covenants, such as operating within an approved
budget and maintaining a minimum cash balance; and negative covenants, such as
limitations on indebtedness, liens, mergers, asset transfers, certain investing
activities and other matters customarily restricted in such agreements. Most of
these restrictions are subject to certain minimum thresholds and exceptions. The
Highbridge Loan Agreement also contains customary events of default, after which
the First Lien Notes may be due and payable immediately, including, without
limitation, payment defaults, material inaccuracy of representations and
warranties, covenant defaults, material adverse changes, bankruptcy and
insolvency proceedings, cross-defaults to certain other agreements, judgments
against us, and change of control, termination of any guaranty, governmental
approvals, and lien priority.
Exchange Agreement with Highbridge
In addition, on April 21, 2020 the Company entered into a Note Purchase and
Exchange Agreement (the "Exchange Agreement") with certain funds managed by
Highbridge providing for the exchange (the "Exchange") of $24.0 million
aggregate principal amount of the Company's outstanding 5.25% Senior Convertible
Notes due 2025 (the "2025 Notes") for (i) $15,675,000 aggregate principal amount
of newly issued Second Lien Secured Notes due January 2022 (the "Second Lien
Notes" and, together with the First Lien Notes, the "Senior Notes"), (ii)
11,026,086 shares of Common Stock, (iii) warrants (the "Warrants") to purchase
up to 4,500,000 shares of Common Stock at an exercise price of $0.66 per share,
and (iv) $346,500 in accrued and unpaid interest on the 2025 Notes being
exchanged. The Exchange is expected to close on or about April 24, 2020,
subject to customary closing conditions. The Warrants may be exercised in cash
or on a cashless basis at any time through the three year anniversary of the
issuance date. The Exchange is being made in reliance on Section 3(a)(9) of the
Securities Act of 1933, as amended (the "Securities Act").
The Second Lien Notes are secured, senior obligations of Senseonics, junior only
to the First Lien Notes. Interest in cash at the annual rate of 7.5% or, at the
Company's option, payment in kind at an annual rate of 8.25%, on the Second Lien
Notes will be payable monthly in arrears. The maturity date for the Second Lien
Notes will be January 24, 2022 (the "Second Lien Maturity Date"), unless earlier
repurchased, redeemed or converted in accordance with their terms. The
obligations under the Second Lien Notes are secured by substantially all assets
of Senseonics.
The Company will have the right to prepay the Second Lien Notes at any time,
subject to a prepayment premium, which in certain circumstances the Company may
elect to pay in common stock, equal to the aggregate amount of interest payments
through maturity. However, if the date of payment in cash of such prepayment
premium is on or before August 22, 2020, the prepayment premium will be reduced
by 25%.
The holders of the Second Lien Notes (the "Holders") will have the right to
convert up to $7,000,000 aggregate principal of the Second Lien Notes (together
with any applicable prepayment premium) to Common Stock at a price per share
equal to 90% of the greater of (i) the daily volume weighted average of the
price per share of the Common Stock, on the conversion date, or if the
conversion date is not a trading date, the trading day immediately prior to the
conversion date and (ii) $0.57 per share. This conversion option has a daily
limit of $1,000,000 in aggregate converted principal (inclusive of principal
amount of First Lien Notes that are voluntarily converted by the Lenders).
Subject to certain conditions, if the Company retains or reinvests proceeds of
an asset sale pursuant to the Asset Sale Prepayment Provisions in the Exchange
Agreement, the Holders shall be entitled to convert additional Second Lien Notes
and the Lenders shall be entitled to convert First Lien Notes in aggregate
combined principal amount equal to 45% of such net proceeds retained or
reinvested (together with any applicable prepayment premium).
From and after a Strategic Transaction Announcement, the Company may elect to
convert up to $8,675,000 in aggregate principal of the Second Lien Notes to
Common Stock at a price per share equal to 90% of the greater of (i) the daily
volume weighted average of the price per share of the Common Stock, on the
conversion date, or if the conversion date is not a trading date, the trading
day immediately prior to the conversion date and (ii) $0.57 per share. This
conversion option has a daily limit of $300,000 in aggregate converted
principal. If the Company or the Holders elect to convert any of the Second Lien
Notes, the amount converted will be equal to the principal and unpaid accrued
interest plus the applicable premium.
The Exchange Agreement contains customary terms and covenants, including without
limitation: financial covenants, such as maintaining a minimum cash balance; and
negative covenants, such as limitations on indebtedness, liens, mergers, asset
transfers, certain investing activities and other matters customarily restricted
in such agreements. Most of these restrictions are subject to certain minimum
. . .
Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under an
Off-Balance Sheet Arrangement of a Registrant.
The information in Item 1.01 above is incorporated by reference into this Item
2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information in Item 1.01 above is incorporated by reference into this Item
3.02.
Forward Looking Statements
Any statements in this Current Report on Form 8-K about future expectations,
plans and prospects for the Company, including statements about the use of
proceeds from the First Lien Notes, the potential borrowing of additional
amounts through the issuance of additional First Lien Notes, the Company's
potential entry into a strategic transaction and the future conversion or
repayment of the Senior Notes, the Company's intentions regarding the use of
proceeds from the First Lien Notes, the potential receipt of the Stockholder
Approval, and other statements containing the words "believe," "expect,"
"intend," "may," "projects," "will," and similar expressions, constitute
forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. Actual results may differ materially from those
indicated by such forward-looking statements as a result of various important
factors, the uncertain outcome, impact, timing, effects and results of the
Company's exploration of strategic alternatives, the ability of the Company to
enter into or consummate a strategic transaction with a third party, the
uncertainty of receiving the Stockholder Approval, uncertainties in the
development and regulatory approval processes, effects of the COVID-19 pandemic,
uncertainties concerning the development of medical devices and such other
factors as are set forth in the risk factors detailed in the Company's Annual
Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on
March 16, 2020 and the Company's other filings with the SEC under the heading
"Risk Factors." In addition, the forward-looking statements included in this
Current Report on Form 8-K represent the Company's views as of the date hereof.
The Company anticipates that subsequent events and developments will cause the
Company's views to change. However, while the Company may elect to update these
forward-looking statements at some point in the future, the Company specifically
disclaims any obligation to do so except as required by law. These
forward-looking statements should not be relied upon as representing the
Company's views as of any date subsequent to the date hereof.
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