Item 1.01 Entry into a Material Definitive Agreement.
On March 7, 2022, Eloxx Pharmaceuticals, Inc. (the “Company”) entered into the First Amendment to the Loan and Security Agreement (the “Amendment”) by and among (i) Hercules Capital, Inc., a Maryland corporation (“Hercules”), in its capacity as administrative agent, collateral agent, and a lender, (ii) Hercules Capital IV, L.P., (together with Hercules, the “Lenders”), as a lender, (iii) the Company, as a borrower, (iv) Zikani Therapeutics, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, as a borrower (together with the Company, the “Borrower”), and (v) Eloxx Pharmaceuticals Ltd., an Israeli company and wholly-owned subsidiary of the Company (together with the Lenders and the Borrower, the “Parties”), which amended certain terms of the Loan and Security Agreement, dated September 30, 20221, by and among the Parties (the “Loan Facility”).
The Amendment eliminates any prepayment premium allowing the Company to prepay outstanding amount of principal at any time, plus accrued and unpaid interest, without incurring a prepayment fee, which under the original Loan Facility ranged from 1% to 3% of the outstanding principal.
The Amendment also fixes the interest-only payment-period end-date to September 1, 2023, which under the original Loan Facility was April 1, 2023, unless the Company raised $35 million by June 30, 2023 (the “Equity Milestone”), in which case the interest-only period would be extended to October 1, 2023, provided further, that if both the Equity Milestone and the Clinical Milestone (as set out in the original Loan Facility) were achieved prior to April 1, 2023, such interest-only payment period would be extended to April 1, 2024.
The minimum cash covenant that requires the Company to maintain at all times a certain qualified cash balance and was previously set at a range of $6.3 million to $10 million based on certain factors is reduced by the Amendment to $2.25 million. The Amendment also provides that if the Company raises $20 million on or prior to May 31, 2023, the minimum qualified cash requirement is reduced to $0.
As a condition to entering into the Amendment, the Company repaid $7.5 million of the outstanding principal (without incurring a prepayment premium), reducing the remaining outstanding Term Loan Advances to $5.0 million.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.