GRITSTONE BIO, INC. : Entering into a Material Definitive Agreement, Creating a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Registrant Arrangement, Financial Statements and Exhibits (Form 8-K)

Section 1.01 Entering into a Material Definitive Agreement.

On July 19, 2022, Gritstone Bio, Inc. (the “Company”) has entered into a loan and guarantee agreement with Hercules Capital, Inc., as administrative agent and guarantee agent for itself and the other lenders, Bank of Silicon Valley and the financial institutions or entities thereto from time to time, each as a lender (the “Loan Agreement”).

The loan agreement provides for a 60-month term loan facility of up to
$80.0 million borrowing capacity over five tranches. At closing the
July 19, 2022the company attracted $20.0 million as part of the first installment and can shoot up to $10.0 million additional on or before March 15, 2023. The remaining installments provide up to an additional amount $50.0 million borrowing capacity, which are subject to the achievement of certain performance milestones.

Borrowings under the Loan Agreement bear interest at (i) an annual cash rate equal to the greater of (x) the lesser of (1) Prime Rate (as usually defined) and (2 ) 5.50%, in both cases plus 3.15%, and (y) 7.15% and (ii) at an annual rate of payment in kind of up to 2.00%. Interest is payable monthly in arrears on the first business day of each month and at the expiry of the Loan Agreement.

At the option of the Company, the Company may prepay all or part of outstanding borrowings together with accrued and unpaid interest and fees and expenses, subject to a prepayment premium ranging from 1.0% to 2.0% 5%, during the first three years following closing, depending on the year of this prepayment. In addition, the Company paid a $150,000 facility fee at closing and will pay a facility fee equal to 0.50% of the principal amount of any borrowings made under the amounts of the last four tranches. The loan agreement also provides for an end-of-term fee equal to 5.75% of the total initial principal amount of the loans so prepaid or repaid, as the case may be.

The term loan is secured by substantially all of the Company’s assets, other than intellectual property. The Loan Agreement and other accompanying documents contain customary representations and warranties and positive and negative covenants, including a clause against the occurrence of a “change of control” and financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge over intellectual property and other assets), investments, distributions (including dividends), securities, investments, transfers, mergers or acquisitions, taxes, business changes and deposit accounts. Starting on April 1, 2023as long as the market capitalization of the Company is equal to or less than $400,000,000the Company is subject to a minimum liquidity requirement equal to the then outstanding balance under the Loan Agreement multiplied by 0.55 or 0.45, which multiplier is dependent on the Company achieving certain performance milestones.

The Loan Agreement includes customary events of default, including defaults in payment, breach of covenants after any applicable recovery period, the occurrence of certain events which could reasonably be expected to have a “Material Adverse Effect” means the cross-default of certain third-party debts and certain events related to bankruptcy or insolvency. Upon the occurrence of an event of default, an additional 4.0% default interest rate may be applied to principal and interest payments due, and lenders may declare all outstanding obligations immediately due and payable. payable and take the other actions set out in the loan agreement, including the continuation of security interests guaranteeing these loans.

The foregoing description of the material terms of the Loan Agreement is qualified in its entirety by the terms and conditions of the Loan Agreement.

On July 21, 2022the company has issued a press release regarding the loan agreement and other matters, a copy of which will be filed as an attachment to the company’s quarterly report on Form 10-Q for the period ending September 30, 2022.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under a

Off-balance sheet arrangement of a registrant.

The information set out in point 1.01 is incorporated herein by reference.

Item 9.01 Financial statements and supporting documents.


Exhibit
  No.       Description

99.1          Press Release dated July 21, 2022

104         Cover Page Interactive Data File (embedded within the Inline XBRL
            document).

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