Item 1.01 Entry into a Material Definitive Agreement.
On April 23, 2020, Miragen Therapeutics, Inc., a Delaware corporation (the “Company”) received $1,725,585 in loan funding from the Paycheck Protection Program (the “PPP”), established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (the “SBA”). The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the Company dated April 21, 2020 (the “Note”) in the principal amount of $1,725,585, to Silicon Valley Bank (the “Bank”), the lender.
Under the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly payments of principal and interest. Payments of principal and interest on the PPP Loan will be deferred for the first six months of the PPP Loan term.
The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the eight-week period after the loan origination for certain purposes, including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 75% of the loan amount is used for eligible payroll costs. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. The Company intends to use the PPP Loan for qualifying and other related expenses. The Company can provide no assurance that it will obtain forgiveness of the PPP Loan in whole or in part.
The Note may be prepaid in part or in full, at any time, without penalty. The Note provides for certain customary events of default, including (i) the Company’s failure to make a payment when due under the Note, (ii) the Company’s failure to do anything required by the Note or any other loan document, (iii) if the Company defaults on any other loan with the Bank, (iv) the Company’s failure to preserve, or account to the Bank’s satisfaction for, any of the collateral or its proceeds, (v) the Company’s failure, or anyone acting on behalf of the Company’s failure, to disclose any material fact to the Bank or the SBA, (vi) if the Company makes, or anyone acting on behalf of the Company makes, a materially false or misleading representation to the Bank or the SBA, (vii) the Company’s default on any loan or agreement with another creditor, if the Bank believes the default may materially affect the Company’s ability to pay the Note, (viii) the Company’s failure to pay any taxes when due, (ix) if the Company becomes the subject of a proceeding under any bankruptcy or insolvency law, (x) if the Company has a receiver or liquidator appointed for any part of the Company’s business or property, (xi) if the Company makes an assignment for the benefit of creditors, (xii) if the Company has any adverse change in financial condition or business operation that the Bank believes may materially affect the Company’s ability to pay the Note, (xiii) if the Company reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the Bank’s prior written consent, or (xiv) if the Company becomes the subject of a civil or criminal action that the Bank believes may materially affect the Company’s ability to pay the Note. Upon the occurrence of an event of default, the Bank has customary remedies and may, among other things, require immediate payment of all amounts owed under the Note, collect all amounts owing from the Company, and file suit and obtain judgment against the Company.
The foregoing description of the Note is qualified in its entirety by reference to the full text of the Note, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated herein by reference.
Separate from the Note, as of December 31, 2019, the Company had $7.7 million of outstanding debt principal obligations under an existing loan and security agreement with the Bank.