On March 26, 2024 (the "Closing Date"), Castle Biosciences, Inc., a Delaware corporation (the "Company"), entered into a Loan and Security Agreement (the "Loan Agreement"), by and between the Company, its wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC ("Narnia") and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the "Lender") (Filing, Castle Biosciences, MAR 26, 2024, View Source [SID1234641487]). The Loan Agreement provides for (i) on the Closing Date, $10.0 million aggregate principal amount of term loans, and (ii) from the Closing Date until March 31, 2025, an additional $25.0 million term loan facility available at the Company’s option (collectively, the "Term Loans"). The Company drew $10.0 million in Term Loans on the Closing Date. The Company expects to use the proceeds from the Term Loans for the purpose of developing a commercial office building to be used as the Company’s future corporate headquarters, and the remainder for working capital and other general corporate purposes.
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The obligations under the Loan Agreement are secured by a perfected security interest in substantially all of the Company’s and Narnia’s assets except for intellectual property, the real property held by Narnia and certain other customary excluded property pursuant to the terms of the Loan Agreement.
The interest rate applicable to the Term Loans is the greater of (a) the WSJ Prime Rate plus 0.25% or (b) 6.00% per annum. The Term Loans are interest only from the Closing Date through November 30, 2025, which may be extended at the Company’s option through November 30, 2026 as long as no event of default under the Loan Agreement has occurred. After the end of the interest only period, the Company is required to pay equal monthly installments of principal through November 1, 2028, the maturity date.
The Term Loans may be prepaid in full through the first anniversary of the Closing Date with payment of a 1.50% prepayment premium, after which they may be prepaid in full through the second anniversary of the Closing Date with payment of a 1.00% prepayment premium, after which they may be prepaid in full with no prepayment premium. An additional final payment of 2.00% of the amount of Terms Loans advanced by the Lender will be due upon prepayment or repayment of the Term Loans in full.
The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. The Company must also comply with a financial covenant which requires that the Company maintain either a minimum liquidity ratio or minimum EBITDA as more fully described in the Loan Agreement.
The Loan Agreement also includes customary events of default, including failure to pay principal, interest or certain other amounts when due, material inaccuracy of representations and warranties, violation of covenants, specified cross-default and cross-acceleration to other material indebtedness, certain bankruptcy and insolvency events, certain undischarged judgments, material invalidity of guarantees or grant of security interest, material adverse change, involuntary delisting from the Nasdaq Global Market and change of control, in certain cases subject to certain thresholds and grace periods. If one or more events of default occurs and continues beyond any applicable cure period, the Lender may terminate the commitments to make further loans and declare all of the obligations of the Company under the Loan Agreement to be immediately due and payable.
The foregoing description of the Loan Agreement is not intended to be complete and is qualified in its entirety by reference to the Loan Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.