Exhibit 10.2

 

THIRD Amendment

to

AMENDED AND RESTATED Loan and security agreement

This Third Amendment to Amended and Restated Loan and Security Agreement (this
“Amendment”) is entered into as of May 3, 2018, by and between Silicon Valley
Bank (“Bank”) and TRACON Pharmaceuticals, Inc., a Delaware corporation
(“Borrower”), whose address is 8910 University Center Lane, Suite 700, San
Diego, CA 92122.

Recitals

A.Bank and Borrower have entered into that certain Amended and Restated Loan and
Security Agreement dated as of May 13, 2015 (as the same has been and may from
time to time be further amended, modified, supplemented or restated, the “Loan
Agreement”).  

B.Bank has extended credit to Borrower for the purposes permitted in the Loan
Agreement.  

C.Borrower has requested that Bank amend the Loan Agreement to (i) make
available to Borrower an additional term loan facility, and (ii) make certain
other revisions to the Loan Agreement as more fully set forth herein.

D.Bank has agreed to so amend certain provisions of the Loan Agreement, but only
to the extent, in accordance with the terms, subject to the conditions and in
reliance upon the representations and warranties set forth below.

Agreement

Now, Therefore, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1.Definitions.  Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

2.Amendments to Loan Agreement.

2.1Section 2.1.3 (Second Supplemental Growth Capital Loan).  The following new
Section 2.1.3 is hereby added to Section 2.1:

2.1.3Second Supplemental Growth Capital Loan.

(a)Availability. Subject to the terms and conditions of this Agreement, Bank
agrees to make one (1) advance to Borrower (the “Second Supplemental Growth
Capital Advance”) on or about the Third Amendment Date, in an aggregate amount
equal to the Second Supplemental Growth Capital Loan Commitment, which amounts
shall be used by Borrower to repay in full all amounts outstanding under the
Supplemental Growth Capital Advance as of the Funding Date of the Second
Supplemental Growth Capital Advance, including, without limitation, the
Supplemental Final Payment, provided that no

 

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Supplemental Prepayment Fee shall be due and payable in connection with such
repayment. After repayment, the Second Supplemental Growth Capital Advance may
not be reborrowed.

(b)Repayment of Second Supplemental Growth Capital Advance.

(i)Interest-Only Payments.  For the Second Supplemental Growth Capital Advance,
Borrower shall make monthly payments of interest-only commencing on the first
(1st) Business Day of the first (1st) month following the month in which the
Funding Date occurs with respect to the Second Supplemental Growth Capital
Advance and continuing thereafter during the Second Supplemental Interest-Only
Period, on the first (1st) Business Day of each successive month.

(ii)Principal and Interest Payments.  For the amount of the Second Supplemental
Growth Capital Advance outstanding as of the last day of the Second Supplemental
Interest-Only Period, Borrower shall make thirty (30) consecutive equal monthly
payments of principal plus accrued but unpaid interest commencing on the first
(1st) Business Day of the first (1st) month after the Second Supplemental
Interest-Only Period (the “Second Supplemental Conversion Date”), in amounts
that would fully amortize the Second Supplemental Growth Capital Advance, as of
the Second Supplemental Conversion Date, over the Second Supplemental Repayment
Period.  The Second Supplemental Final Payment and all unpaid principal and
accrued and unpaid interest on the Second Supplemental Growth Capital Advance
are due and payable in full on the Second Supplemental Growth Capital Maturity
Date.

(c)Voluntary Prepayment.  Borrower shall have the option to prepay the Second
Supplemental Growth Capital Advance in full, provided Borrower (i) shall provide
written notice to Bank of its election to prepay the Second Supplemental Growth
Capital Advance at least ten (10) days prior to such prepayment and (ii) pays,
on the date of such prepayment, (A) all outstanding principal and accrued but
unpaid interest, plus (B) the Second Supplemental Final Payment, plus (C) the
Second Supplemental Prepayment Fee, plus (D) all other sums, including Bank
Expenses, if any, that shall have become due and payable.

(d)Mandatory Prepayment Upon an Acceleration.  If the Second Supplemental Growth
Capital Advance is accelerated following the occurrence of an Event of Default,
Borrower shall immediately pay to Bank an amount equal to the sum of (i) all
outstanding principal and accrued but unpaid interest, plus (ii) the Second
Supplemental Final Payment, plus (iii) the Second Supplemental Prepayment Fee,
plus (iv) all other sums, including Bank Expenses, if any, that shall have
become due and payable.

2.2Section 2.2 (Payment of Interest on the Credit Extensions).  Section 2.2(a)
is amended by adding a new clause (iii) at the end thereof as follows:

(iii)Second Supplemental Growth Capital Advance.  Subject to Section 2.2(b), the
principal amount outstanding for the Second Supplemental Growth Capital

 

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Advance shall accrue interest at a fixed per annum rate equal to nine percent
(9.00%), which shall be payable monthly.

 

2.3Section 6.2 (Financial Statements, Reports, Certificates).  Section 6.2 is
amended by deleting the last “and” in clause (f), re-lettering clause (g) to
make it a new clause (h), and adding the following new language as clause (g):

(g)Annual Audited Financial Statements.  As soon as available, but no later than
one hundred eighty (180) days after the last day of Borrower’s fiscal year,
audited consolidated financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion on the financial statements
(provided however, that Borrower's unqualified opinion on financial statements
may contain a qualification as to going concern specific to Borrower’s current
working capital, anticipated operating expenses and net losses and the
uncertainties surrounding Borrower’s ability to raise additional capital raise
for a period of one year following the date that the consolidated financial
statements are issued) from an independent certified public accounting firm
acceptable to Bank in its reasonable discretion, provided that Ernst & Young LLP
and any other regional or nationally recognized certified public accounting firm
shall be deemed to be acceptable to Bank; and

 

2.4Section 8.1 (Payment Default).  The first parenthetical in Section 8.1(b) is
hereby amended by deleting the reference to “Growth Capital Maturity Date or
Supplemental Growth Capital Maturity Date” and replacing it with “Second
Supplemental Growth Capital Maturity Date”.

2.5Section 12.1 (Termination Prior to Maturity Date; Survival).  Section 12.1 is
amended by deleting the reference to “the Growth Capital Maturity Date and/or
the Supplemental Growth Capital Maturity Date by Borrower, in accordance with
Section 2.1.1 and 2.1.2” and substituting in lieu thereof “the Second
Supplemental Growth Capital Maturity Date by Borrower, in accordance with
Section 2.1.3”.

2.6Section 13 (Definitions).  The following terms and their respective
definitions set forth in Section 13.1 are amended in their entirety and replaced
with the following:

“Credit Extension” is any Growth Capital Advance, Supplemental Growth Capital
Advance, Second Supplemental Growth Capital Advance, or any other extension of
credit by Bank for Borrower’s benefit under this Agreement.

 

“Warrant” is, collectively, (a) that certain Warrant to Purchase Stock dated as
of November 14, 2013, executed by Borrower in favor of Bank, (b) that certain
Warrant to Purchase Stock dated as of June 4, 2014, executed by Borrower in
favor of Bank, (c) that certain Warrant to Purchase Stock dated as of May 13,
2015, executed by Borrower in favor of Bank, (d) that certain Warrant to
Purchase Stock dated as of January 25, 2017 executed by Borrower in favor of
Bank, and (e) that certain Warrant to Purchase Common Stock dated as of the
Third Amendment Date executed by Borrower in favor of Bank.

 

 

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2.7Section 13 (Definitions).  The following terms and their respective
definitions are hereby added to Section 13.1 in their appropriate alphabetical
order:

“Second Supplemental Conversion Date” is defined in Section 2.1.3(b)(ii).

 

“Second Supplemental Final Payment” is a payment (in addition to and not a
substitution for the regular monthly payments of principal plus accrued
interest) due in accordance with Section 2.1.3 above, equal to the Second
Supplemental Growth Capital Loan Commitment multiplied by the Second
Supplemental Final Payment Percentage.

“Second Supplemental Final Payment Percentage” is four percent (4.00%).

“Second Supplemental Growth Capital Advance” is defined in Section 2.1.3(a).

 

“Second Supplemental Growth Capital Loan Commitment” is Seven Million Dollars
($7,000,000).

“Second Supplemental Growth Capital Maturity Date” is the first (1st) calendar
day of the month that is twenty-nine (29) months from the Second Supplemental
Conversion Date.

 

“Second Supplemental Interest-Only Period” means, for the Second Supplemental
Growth Capital Advance, the period commencing on the first (1st) Business Day
following the Funding Date of the Second Supplemental Growth Capital Advance and
continuing through June 30, 2019, provided that, if Borrower delivers to Bank by
no later than June 30, 2019, evidence that Borrower has (a) raised gross
proceeds of at least Twenty Million Dollars ($20,000,000) pursuant to a bona
fide equity financing, and (b) has obtained FDA IND approval to start a Phase 1
trial for TRC-694, the Second Supplemental Interest-Only Period shall be
extended to November 30, 2019.

 

“Second Supplemental Prepayment Fee” shall be, in connection with any prepayment
of the Second Supplemental Growth Capital Advance, an amount equal to (i) three
percent (3%) of the outstanding principal balance of the Second Supplemental
Growth Capital Advance if such prepayment occurs one (1) year or less after the
Third Amendment Date, (ii) two percent (2%) of the outstanding principal balance
of the Second Supplemental Growth Capital Advance if such prepayment occurs more
than one (1) year and less than two (2) years after the Third Amendment Date,
and (iii) one percent (1%) of the outstanding principal balance of the Second
Supplemental Growth Capital Advance if such prepayment occurs two (2) years or
more after the Third Amendment Date; provided that no Second Supplemental
Prepayment Fee shall be charged if the Second Supplemental Growth Capital
Advance is replaced with a new facility from Bank.

 

“Second Supplemental Repayment Period” is a period of time commencing on the
Second Supplemental Conversion Date and ending on the Second Supplemental Growth
Capital Maturity Date.

 

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“Third Amendment Date” is May 3, 2018.

 

2.8Exhibit D (Compliance Certificate).  Exhibit D to the Loan Agreement is
amended in its entirety and replaced with Exhibit D attached hereto.

3.

Limitation of Amendments.

3.1The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

3.2This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

4.Representations and Warranties.  To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

4.1Immediately after giving effect to this Amendment (a) the representations and
warranties contained in the Loan Documents are true, accurate and complete in
all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are
true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

4.2Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

4.3The organizational documents of Borrower most recently delivered to Bank
remain true, accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect;

4.4The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;

4.5The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

 

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4.6The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
Borrower, except as already has been obtained or made; and

4.7This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

5.Integration.  This Amendment and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or
agreements.  All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Amendment
and the Loan Documents merge into this Amendment and the Loan Documents.

6.Counterparts.  This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

7.Effectiveness.  This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto, (b) the
due execution and delivery to Bank of the Warrant to be issued on the date
hereof, and (c) payment of Bank’s legal fees and expenses in connection with the
negotiation and preparation of this Amendment.

[Signature page follows.]

 

 

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In Witness Whereof, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

BANK

BORROWER

 

Silicon Valley Bank

 

 

By:  _/s/ Igor DaCruz_____________

Name: _Igor DaCruz_____________

Title:  _Vice President____________

 

Tracon Pharmaceuticals, Inc.

 

 

By:  _/s/ Patricia L Bitar __________

Name: _Patricia L Bitar___________

Title:  _Chief Financial Officer _____

 

 

[signature page of Third Amendment to Amended and Restated Loan and Security
Agreement]

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EXHIBIT D

COMPLIANCE CERTIFICATE

TO:SILICON VALLEY BANKDate: ________________________

FROM:TRACON PHARMACEUTICALS, INC.

The undersigned authorized officer of TRACON PHARMACEUTICALS, INC. (“Borrower”)
certifies that under the terms and conditions of the Amended and Restated Loan
and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower
is in complete compliance for the period ending _______________ with all
required covenants except as noted below, (2) there are no Events of Default,
except as noted below, (3) all representations and warranties in the Agreement
are true and correct in all material respects on this date except as noted
below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4)
Borrower, and each of its Subsidiaries, have timely filed all required tax
returns and reports or obtained extensions therefor, and Borrower has timely
paid all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower except as otherwise permitted pursuant to the
terms of Section 5.8 of the Agreement, and (5) no Liens have been levied or
claims made against Borrower or any of its Subsidiaries relating to unpaid
employee payroll or benefits of which Borrower has not previously provided
written notification to Bank.  Attached are the required documents supporting
the certification.  The undersigned certifies that these are prepared in
accordance with GAAP consistently applied from one period to the next except as
explained in an accompanying letter or footnotes and except, with respect to
unaudited financial statements, for the absence of footnotes and subject to
year-end adjustments.  The undersigned acknowledges that no borrowings may be
requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

Required

Complies

 

 

 

Monthly financial statements with
Compliance Certificate

Upon request by Bank

Yes  No

Compliance Certificate

To be delivered with any financial statements delivered to Bank

Yes  No

Annual Board Approved Financial Projections

Within earlier of 7 days of approval or 60 days after FYE

Yes  No

Annual Audited Financial Statements

Within 180 days after FYE

Yes  No

10‑Q, 10‑K, 8-K, and any other material SEC filings

Within 5 days after filing with SEC (if applicable)

Yes   No

 

[Continued on following page]

 

 

 

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The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

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TRACON PHARMACEUTICALS, INC.

By:______________________________

Name: ___________________________

Title: ____________________________

BANK USE ONLY

Received by: _____________________

authorized signer

Date: _________________________

Verified: ________________________

authorized signer

Date: _________________________

Compliance Status:Yes  No