Item 1.01 Entry into a Material Definitive Agreement.
On November 4, 2021, Viracta Therapeutics, Inc. (the Company) entered into a loan and security agreement with Silicon Valley Bank and Oxford Finance LLC (the Lenders) and Silicon Valley Bank as collateral agent for the lenders, providing for up to $50.0 million in three tranches (the SVB-Oxford Loan Agreement). Under the terms of the SVB-Oxford Loan Agreement, the Company borrowed the first tranche of $5.0 million, and the Company may borrow up to an additional $20.0 million until August 31, 2022, and up to an additional $25 million until January 1, 2024, which may be extended to January 1, 2025, upon the achievement of a prespecified milestone.
The loans will be due on the scheduled maturity date of November 1, 2026 (the Maturity Date). Repayment of the loans will be interest only through January 1, 2024 (or January 1, 2025, under certain circumstances) (the Amortization Date), followed by equal monthly payments of principal plus accrued interest for (i) 35 months if the Amortization Date is January 1, 2024, and (ii) 23 months if the Amortization Date is January 1, 2025. The per annum interest rate for any outstanding loan is equal to the greater of (i) 8.15% and (ii) the sum of (a) the prime rate, as reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 4.90%. Notwithstanding the foregoing, the per annum interest rate for the period from November 5, 2021, through and including November 30, 2021, shall be 8.15%.
In addition, a final payment equal to 5.0% of the amount of the loans drawn will be due on the earlier of the Maturity Date, acceleration of the loans, or prepayment of the loans. If the Company elects to or is required to prepay the loans, a prepayment fee equal to 1.0% or 2.0% of the then outstanding principal balance will also be due, depending upon when the prepayment occurs.
The Company is subject to customary affirmative and restrictive covenants under the SVB-Oxford Loan Agreement. The Company’s obligations under the SVB-Oxford Loan Agreement are secured by a first priority security interest in substantially all of its current and future assets, other than intellectual property. The Company has also agreed not to encumber its intellectual property assets, except as permitted by the SVB-Oxford Loan Agreement.
The SVB-Oxford Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, the Company’s failures to fulfill certain obligations under the SVB-Oxford Loan Agreement and the occurrence of a material adverse change in the Company’s and/or its subsidiaries’ business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loans, or a material impairment in the perfection or priority of Lenders’ lien in the collateral or in the value of such collateral. If an event of default occurs and is continuing under the SVB-Oxford Loan Agreement, the Lenders would be entitled to exercise their remedies thereunder, including the right to accelerate the loans, upon which the Company may be required to repay all amounts then outstanding under the SVB-Oxford Loan Agreement.
The foregoing description of the SVB-Oxford Loan Agreement does not purport to be a complete statement of the parties’ rights under such agreement and is qualified in its entirety by reference to the full text of the SVB-Oxford Loan Agreement, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.