Werewolf Therapeutics Inc

On May 2, 2024, we, as borrower, entered into a loan and security agreement, or the Loan Agreement, with K2 HealthVentures LLC, or K2HV (we refer to K2HV, together with any other lender from time to time, as the Lenders); K2HV, as administrative agent for the Lenders; and Ankara Trust Company, LLC, as collateral trustee for the Lenders. The Loan Agreement provides for up to $60.0 million principal in term loans. We received $30.0 million in gross loan proceeds at closing, $25.0 million from the first tranche commitment upon closing and $5.0 million from the second tranche commitment. A third tranche commitment of up to $10.0 million is available to be drawn at our option during certain availability periods, subject to the achievement, as determined by the administrative agent in its discretion, of certain time-based, clinical and regulatory milestones and receipt of not less than $60.0 million in net cash proceeds from certain financing activities, with at least $50.0 million from a single offering of common stock. A fourth tranche commitment of up to $20.0 million is available to be drawn down at our option through May 1, 2026 or if the third tranche is funded, May 1, 2027, subject to Lender’s review of our clinical, financial and operating plan and subject to Lender’s consent in its sole and absolute discretion.

The term loan matures on May 1, 2028, and we are obligated to make interest only payments for the first 24 months, or 36 months if the third tranche is funded, and then interest and equal principal payments for the next 24 or 12 months, as applicable. The term loan bears a variable interest rate equal to the greater of (i) 10.3%, 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) 1.8%. We may prepay, at our 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. We were required to pay the Lenders’ certain customary fees and expenses at closing and will be required to pay additional fees that may be due upon maturity or prepayment such as final payment fees and prepayment fees.

The Lenders may elect prior to the full repayment of the term loans to convert up to $5.0 million of outstanding principal of the term loans into shares of our common stock, at a conversion price of the lesser of $6.32 per share and the lowest effective price per share of our next equity financing, subject to customary adjustments and 9.99% and 19.99% beneficial ownership limitations. There will be no prepayment penalty for any principal amount converted into common stock. The Loan Agreement provides the Lenders with certain piggyback registration rights with respect to the shares of common stock issuable upon conversion of term loans under the Loan Agreement.

The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, dispose of assets, make changes to our business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, incur additional liens, 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, we granted the Lenders a first priority security interest on substantially all of our assets (other than intellectual property), subject to certain exceptions.

Subject to certain conditions, we granted the Lenders the right, prior to repayment of the term loans, to invest up to $5.0 million in the aggregate in future offerings of capital stock, subject to certain exceptions and conditions.

The foregoing description of the Loan Agreement is qualified in its entirety by reference to the full text thereof, which we intend to file as an exhibit to our Quarterly Report on Form 10-Q for the quarter ending June 30, 2024.