Item 1.01 Entry into a Material Definitive Agreement.
Cardiovascular Systems, Inc. (the "Company") previously disclosed that it
entered into agreements with Chansu Vascular Technologies, LLC ("CVT") to
develop peripheral and coronary everolimus drug-coated balloons. Under the terms
of the agreements signed with CVT, the Company has provided milestone-based
financing to CVT for the development of the drug-coated balloons. On December
30, 2022, the Company and CVT entered into a Loan Agreement with CVT (the "Loan
Agreement"), which replaces the loan agreement entered into between the parties
on January 29, 2021, and the Company, CVT and the owners of CVT entered into the
First Amended and Restated Acquisition Option Agreement (the "AOA"), which
amends the Acquisition Option Agreement entered into between the parties on
January 29, 2021.
The Loan Agreement provides that the Company will make loans to CVT up to an
aggregate principal amount of $49,653,000, of which the outstanding principal
amount as of the date of the Loan Agreement is $19,653,000, for the purposes of
financing the continued product development activities and clinical testing of
the drug-coated balloons and related operating expenses of CVT, and other
purposes approved by the Company. The Company will make additional loans under
the Loan Agreement to CVT of up to $30,000,000, as follows: (i) $15,000,000 on
or before January 6, 2023; (ii) $5,000,000 on or after July 1, 2023; and (iii)
$10,000,000 on or after the Company's receipt of satisfactory evidence of
achievement of a study report establishing that CVT has successfully
demonstrated clinical performance of the peripheral drug-coated balloon in a
first in-human study (the "Milestone"). The loans are repayable by CVT no later
than June 30, 2024 and accrue interest at a rate of 4.35% per annum. CVT's
obligations under the Loan Agreement are secured by CVT's assets pursuant to a
Security Agreement between the Company and CVT. The Loan Agreement contains
customary representations, warranties and covenants of CVT and rights of the
Company upon events of default of CVT.
Under the AOA, beginning on the later of January 1, 2024 and the date the
Milestone is achieved, and ending 90 days following the delivery by CVT to the
Company of updated disclosure schedules, the Company has the exclusive option to
purchase from the owners of CVT all of their membership interests in CVT, and
the owners of CVT have the right to require the Company to purchase all of their
membership interests in CVT. Subject to achievement of the Milestone and the
satisfaction of the conditions to closing set forth in the AOA, upon the closing
of the Company's purchase of the membership interests of CVT, the Company will
make a payment of $10,000,000 (which is subject to reduction of 20% for each
three-month period following December 31, 2023 until the date of the Milestone
if the Milestone has not been achieved by December 31, 2023). The closing date
payment by the Company is subject to reduction for indebtedness of CVT at
closing, other than outstanding indebtedness under the Loan Agreement. In
addition, the Company has agreed to make two contingent payments of $15,000,000
for the receipt of FDA Investigational Device Exemption approval for each of the
coronary drug-coated balloons and the peripheral drug-coated balloons, which
payments will be made at the closing if such approvals are received prior to
closing. Five percent of each payment by the Company will be deposited into an
escrow account from which the Company may recover amounts relating to
indemnification claims under the AOA. Subject to claims for indemnification by
the Company, the escrow amount related to the closing payment will be
distributed to the owners of CVT 18 months after the closing of the Company's
purchase of their membership interests and the escrow amounts related to
post-Closing payments will be distributed to the owners of CVT 12 months after
the date of the applicable post-Closing payment. The AOA contains customary
representations, warranties and covenants of the Company and CVT, as well as
customary indemnification provisions and termination rights for the Company and
CVT.
The descriptions of the material terms of the Loan Agreement and the AOA
contained in this report do not purport to be complete descriptions of the Loan
Agreement and the AOA and are qualified in their entirety by reference to the
full texts of the Loan Agreement and the AOA, which will be filed as exhibits to
the Company's Quarterly Report on Form 10-Q for the three months ended December
31, 2022.
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