On May 11, 2021 (the Closing Date), the Company entered into the Credit Agreement with Oaktree Fund Administration, LLC as administrative agent (Oaktree) and the lenders party thereto (collectively, the “Lenders”) that provides for a five-year senior secured term loan facility in an aggregate original principal amount of up to $125.0 million, available to the Company in five tranches (collectively, the “Term Loans”).

Upon entering into the Credit Agreement, the Company borrowed $15.0 million in term loans from the Lenders (the “Tranche A-1 Term Loan”). Under the terms of the Credit Agreement, the Company may, at its sole discretion, borrow from the Lenders up to an additional $110.0 million in term loans subject to certain milestone events, as follows:

●Through December 31, 2021, $30.0 million of tranche A-2 term loans will be available for draw if the Company receives written acceptance by the FDA of an NDA filing relating to the use of ganaxolone in the treatment of CDD.

●Through December 31, 2022, $30.0 million of tranche B term loans will be available for draw if the Company receives written approval from the FDA of an NDA permitting the marketing of ganaxolone in the U.S. to treat CDD (FDA Approval).

●Through June 30, 2023, $25.0 million of tranche C term loans will be available for draw if the Company receives FDA Approval and completes one or more financings (including through the issuance of common stock, convertible debt, subordinated debt, a synthetic royalty, or a sublicense) resulting in gross proceeds to the Company of at least $40.0 million and net proceeds to the Company of at least $36.0 million. In addition, the availability of this tranche is subject to certain clinical outcomes.

●Through December 31, 2023, $25.0 million of tranche D term loans will be available for draw if the Company receives FDA Approval and earns at least $50 million in net product revenue in the U.S. for six consecutive months.

In addition, the Credit Agreement contains a minimum liquidity covenant that requires the Company to maintain cash and cash equivalents of at least $10.0 million from the Closing Date until the funding of the tranche A-2 term loans, at least $20.0 million from the funding of the tranche A- 2 term loans until the funding of the tranche B term loans, and at least $15.0 million from the funding date of the tranche B term loans until the maturity of the Term Loans.

The Term Loans will be guaranteed by certain of the Company’s future subsidiaries (Guarantors). The Company’s obligations under the Credit Agreement are secured by a pledge of substantially all of the Company’s assets and will be secured by a pledge of substantially all of the assets of the Guarantors.

The Term Loans mature on May 11, 2026 (Maturity Date). The Term Loans bear interest at a fixed per annum rate (subject to increase during an event of default) of 11.50%, and the Company is required to make quarterly interest payments until the Maturity Date. The Company is also required to make quarterly principal payments beginning on June 30, 2024 in an amount equal to 5.0% of the aggregate amount of the Term Loans outstanding on June 30, 2024, and continuing until the Maturity Date. On the Maturity Date, the Company is required to pay in full all outstanding Term Loans and other amounts owed under the Credit Agreement.

At the time of borrowing any tranche of the Term Loans, the Company is required to pay an upfront fee of 2.0% of the aggregate principal amount borrowed at that time. In addition, a commitment fee of 75 basis points per annum will accrue on each of the tranche B, C, and D commitments for the period beginning 120 days after the funding date of the tranche A-2 term loans until the applicable tranche is either funded or terminated.

The Company may prepay all or any portion of the Term Loans, and is required to make mandatory prepayments of the Term Loans from the proceeds of asset sales, casualty and condemnation events, and prohibited debt issuances, subject to certain exceptions. All mandatory and voluntary prepayments of the Term Loans are subject to prepayment premiums equal to (i) 4% of the principal prepaid (or the tranche A-2 term loan commitment amount terminated) plus a “make-whole” amount equal to the interest that would have accrued through May 11, 2023 if prepayment (or termination of the tranche A-2 term loan commitment) occurs on or before May 11, 2023, (ii) 4% of the principal prepaid (or the tranche A-2 term loan commitment amount terminated) if prepayment (or termination of the tranche A-2 term loan commitment) occurs after May 11, 2023 but on or before May 11, 2024, or (iii) 2% of the principal prepaid if prepayment occurs after May 11, 2024 but on or before May 11, 2025. If prepayment occurs after May 11, 2025, no prepayment premium is due.

The Company is also required to make mandatory prepayments of the Term Loans upon an event of default under the Credit Agreement resulting from the occurrence of a change of control. These mandatory prepayments are subject to a prepayment premium equal to (i) 12.5% of the principal prepaid (or the tranche A-2 term loan commitment amount terminated) if such prepayment occurs on or before May 11, 2022 or (ii) 10.0% of the principal prepaid (or the tranche A-2 term loan commitment amount terminated) if the prepayment occurs after May 11, 2022 but on or before May 11, 2023.

In addition, the Company is required to pay an exit fee in an amount equal to 2.0% of all principal repaid, whether as a mandatory prepayment, voluntary prepayment, or a scheduled repayment.

In addition to the minimum liquidity covenant, the Company is subject to a number of affirmative and restrictive covenants under the Credit Agreement, including limitations on its ability and its subsidiaries’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, and enter into affiliate transactions, subject to certain exceptions. As of June 30, 2021 the Company was in compliance with all covenants.

Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Credit Agreement, the breach of certain of its other covenants under the Credit Agreement, the occurrence of cross defaults to other indebtedness, or defaults related to enforcement action by the FDA or other Regulatory Authority or recall of ganaxolone, Oaktree and the Lenders will have the right, among other remedies, to accelerate all amounts outstanding under the Term Loans and declare all principal, interest, and outstanding fees immediately due and payable.

The Company borrowed $15.0 million upon entering into the Credit Agreement in May 2021 and incurred debt issuance costs of $4.4 million, including the exit fee of $0.3 million, that are classified as a contra-liability on the consolidated balance sheet and are being recognized as interest expense over the term of the loan using the effective-interest method.

For the six months ended June 30, 2021, the Company recognized interest expense of $0.3 million, of which $0.2 million was interest on the Term Loans and $0.1 million was non-cash interest expense related to the amortization of debt issuance costs.

The following table summarizes the composition of Notes payable as reflected on the consolidated balance sheet as of June 30, 2021 (in thousands):

The aggregate maturities of Notes payable as of June 30, 2021 are as follows (in thousands):