| Item 1.01 | Entry into a Material Definitive Agreement. |
On April 4, 2022, Fusion Pharmaceuticals Inc. (the “Company”) entered into a loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC, as collateral agent and lender (the “Lender”). The Lender has agreed to make available to the Company term loans in an aggregate principal amount of up to $75.0 million under the Loan Agreement. The Company plans to use the proceeds of the term loans for working capital and general corporate purposes. The Loan Agreement provides a term loan commitment of $50.0 million in two potential tranches: (i) a $25.0 million Term A loan facility, with $10.0 million funded on the closing date and the remaining $15.0 million to be funded at the request of the Company on a one-time basis at any time prior to April 4, 2023 and (ii) a $25.0 million Term B loan facility to be funded at the request of the Company, subject to certain conditions being met, no later than June 30, 2023. Both of these term loans have a maturity date of April 1, 2027. The Loan Agreement also provides access to an additional Term C loan facility in the amount of $25.0 million, to be funded at the Lender’s sole discretion.
Borrowings under all three loan facilities bear interest at a floating per annum rate equal to the greater of (i) 8.00% and (ii) the sum of (a) the greater of (x) 1 Month LIBOR Rate and (y) 0.10% plus (b) 7.90%. The Company is permitted to make interest-only payments on any outstanding amount due under the term loans through June 1, 2025, after which time principal will also be repaid based on an amortization schedule.
The Company is obligated to pay a final fee equal to 4.00% of the aggregate amount of the term loans funded, to occur upon the earliest of (i) the maturity date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. The Company has the option to prepay all, but not less than all, of the outstanding principal balance of the term loans under the Loan Agreement. If the Company prepays all or a portion of the term loans prior to the maturity date, it is obligated to pay the Lender a prepayment fee based on a percentage of the outstanding principal balance of the loans, equal to 3% if the payment occurs on or before 12 months after the funding date of the applicable loan, 2% if the prepayment occurs more than 12 months after, but on or before 24 months after, the funding date of the applicable loan, or 1% if the prepayment occurs more than 24 months after, but on or before 36 months after, the funding date of the applicable loan, and no prepayment fee is required thereafter.
The Company’s obligations under the Loan Agreement are collateralized by a first priority security interest in substantially all of its assets.
The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. For purposes of making certain investments and entering into certain licenses, the Company is required to maintain cash on hand equal to 9 months (or, after the Term B loans are funded, 12 months) of cash runway. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% per annum may be applied to the outstanding loan balances, and the Lender may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the Loan Agreement and under applicable law, including, without limitation, termination of its obligations to extend credit to the Company.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information provided in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
| Item 3.02 | Unregistered Sales of Equity Securities. |
In connection with the Loan Agreement and the funding of the Term A loan facility, the Company issued to the Lender warrants (the “Initial Warrants”) to purchase an aggregate of 26,110 shares of the Company’s common stock, equal to 2.00% of the initial $10.0 million funded from the Term A loan facility divided by the exercise price of $7.66. The Company is obligated to issue additional warrants (the “Additional Warrants”) to the Lender in the
