Item 1.01
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Entry into a Material Definitive Agreement.
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On December 31, 2018 (the Closing Date), Otonomy, Inc. (the Company) entered into a Loan and Security Agreement
(the Loan Agreement), among the Company, Oxford Finance LLC, as collateral agent, and the lenders party thereto from time to time.
The Loan Agreement provides for a $15.0 million secured term loan credit facility (the Term Loan). The proceeds of the Term
Loan may be used for working capital and general corporate purposes. The Company has the right to prepay the Term Loan in whole or in part at any time, subject to a prepayment fee of 3.00% if prepaid on or prior to the first anniversary of the
Closing Date, 2.00% if prepaid after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date, and 1.00% thereafter. Amounts prepaid or repaid under the Term Loan may not be reborrowed. The Term Loan
was fully funded on the Closing Date and matures on December 1, 2023 (the Maturity Date). The Company paid a facility fee of 0.75% and customary closing fees.
The Term Loan bears interest at a floating rate equal to the greater of 5.25% and the prime rate as reported in the Wall Street Journal from
time to time, plus 3.75%. Interest on the Term Loan is payable monthly in arrears. The Company is permitted to make interest-only payments on the Term Loan for the twenty-four (24) months following the Closing Date. The interest-only
period can be extended by an additional twelve (12) months subject to the achievement of a certain clinical trial milestone. The outstanding principal amount of the Term Loan, together with accrued and unpaid interest, is due on
December 1, 2023. The Company is also obligated to make a final payment of 4.00% of the aggregate original principal amount of the Term Loan upon any prepayment or on the Maturity Date.
The Companys obligations under the Loan Agreement are secured by substantially all of its assets, excluding intellectual property and
subject to certain other exceptions and limitations.
The Loan Agreement contains customary affirmative covenants, including covenants
regarding compliance with applicable laws and regulations, reporting requirements, payment of taxes and other obligations, and maintenance of insurance. Further, subject to certain exceptions, the Loan Agreement contains customary negative
covenants limiting the ability of the Company to, among other things, sell assets, allow a change of control to occur (if the Term Loan is not repaid), make acquisitions, incur debt, grant liens, make investments, pay dividends or repurchase
stock. Upon the occurrence and during the continuance of an event of default, the lenders may declare all outstanding principal and accrued and unpaid interest under the Loan Agreement immediately due and payable, increase the applicable rate
of interest by 5.00%, and exercise the other rights and remedies provided for under the Loan Agreement and related loan documents. The events of default under the Loan Agreement include payment defaults, breaches of covenants or representations and
warranties, material adverse changes, certain bankruptcy events, cross defaults with certain other indebtedness, and judgment defaults.
The description of the Loan Agreement contained herein is qualified in its entirety by reference to the text of the Loan Agreement, a copy of
which is attached as Exhibit 10.1 hereto and incorporated herein by reference.