Item 1.01 Entry into a Material Definitive Agreement.
On April 1, 2022, Oncorus, Inc. (the "Company") entered into a loan and security agreement (the "Loan Agreement") with K2 HealthVentures LLC ("K2HV", together with any other lender from time to time party thereto, the “Lenders”), K2HV as administrative agent for the Lenders, and Ankura Trust Company, LLC, as collateral agent for the Lenders. The Loan Agreement provides up to $45.0 million principal in term loans consisting of a first tranche of $20.0 million funded at closing and three subsequent tranches totaling $25.0 million to be funded upon the achievement of certain time-based, clinical and regulatory milestones.
The facility carries a 48-month term with interest only payments for 24 months, subject to increase to up to 36 months upon the Company drawing on the third tranche and no event of default having occurred. The Term Loan will mature on April 1, 2026 and bears a variable interest rate equal to the greater of (i) 7.75% and (ii) the sum of (A) the prime rate last quoted in The Wall Street Journal (or a comparable replacement rate if The Wall Street Journal ceases to quote such rate) and (B) 4.25%. The Company may prepay, at its option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the term loans, subject to a prepayment premium to which the Lenders are entitled and certain notice requirements.
The Lenders may elect at any time following the closing and prior to the full repayment of the term loans to convert any portion of the principal amount of the term loans then outstanding, up to an aggregate of $5.0 million in principal amount, into shares of the Company's common stock, $0.0001 par value per share ("Common Stock"), at a conversion price of $2.2689, subject to customary 9.99% and 19.99% Nasdaq beneficial ownership limitations.
The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limit or restrict the Company’s ability to, among other things, dispose of assets, make changes to the Company’s business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, pay dividends or other distributions or repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain exceptions. As security for its obligations under the Loan Agreement, the Company granted the Lenders a first priority security interest on substantially all of the Company’s assets (other than intellectual property), subject to certain exceptions.
In connection with entering into the Loan Agreement, the Company also issued to K2HV a warrant to purchase a number of shares of Common Stock equal to the quotient of 2.95% of the aggregate funded term loan amount divided by $1.5126, the exercise price, up to a maximum of 877,627 shares (the "Warrant"). The Warrant expires on April 1, 2032.
The Loan Agreement and the Warrant each provide the Lenders with certain piggyback registration rights with respect to the shares issuable upon conversion under the Loan Agreement or upon exercise of the Warrant.
The Loan Agreement and the Warrant are filed as Exhibits 10.1 and 4.1 to this Current Report on Form 8-K, respectively. The above descriptions of the Loan Agreement and Warrant do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Loan Agreement and the Warrant filed herewith.