Item
1.01. Entry into a Material Definitive Agreement.
Debt
Assignment
On
January 3, 2018, Amedica Corporation (the “Company”) and its wholly owned subsidiary US Spine, Inc. entered into an
Assignment Agreement (the “Assignment Agreement”) with certain accredited investors (collectively the “Assignees”
and each an “Assignee”), Hercules Technology III, L.P. (“HT III”) and Hercules Capital, Inc. (“HC”
and, together with HT III, “Hercules”), pursuant to which Hercules assigned to the Assignees all amounts remaining
due under the Loan and Security Agreement, dated June 30, 2014, as amended, between the Company and Hercules (the “Loan
and Security Agreement”) and (2) the note (the “Hercules Note”) between the Company and Hercules evidencing
the amounts due under the Loan and Security Agreement. The total amount assigned by Hercules to the Assignees equals in the aggregate
$2,264,622.80, which is secured by the same collateral underlying the Loan and Security Agreement.
The
foregoing description of the Assignment Agreement and the transactions contemplated thereby does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the full text of the Assignment Agreement, a form of which is filed
as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Exchange
On
January 3, 2018, the Company entered into an exchange agreement (the “Exchange Agreement”) with the Assignees, pursuant
to which the Company agreed to exchange (the “Exchange”) the Hercules Note held by the Assignees for senior secured
convertible promissory notes each in the principal amount of $1,132,311.40 for an aggregate principal amount of $2,264,622.80
(the “Exchange Notes”). The Exchange Notes will mature on February 3, 2019 (the “Maturity Date”).
The
Exchange Notes bear interest at a rate of 15% per annum, with the interest being guaranteed. Prior to the Maturity Date, all interest
accrued under the Exchange Notes is payable in cash or, if certain conditions are met, payable in shares of common stock of the
Company (“Common Stock”) at the Company’s option.
All
principal accrued under the Exchange Notes is convertible into shares of Common Stock (“Conversion Shares”) at the
election of the Assignees at any time at a fixed conversion price of $3.87 per share (the “Conversion Price”). If
the entire principal amount under the Exchange Notes is converted to Common Stock at the Conversion Price, the Assignees would
receive approximately 585,174 shares of Common Stock.
Upon
the occurrence of an event of default, the Assignees are entitled to convert all or any part of their Exchange Note at a conversion
price (the “Alternate Conversion Price”) equal to 70% of the lowest traded price of the Common Stock during the ten
trading days prior to the conversion date, provided that (i) in no event may the Alternate Conversion Price be less than $1.75
per share and (ii) the Assignees shall not be entitled to receive more than 19.99% of the outstanding Common Stock.
If
the maximum amount of principal and interest is converted to Common Stock at the Alternate Conversion Price, the Assignees would
receive no more than 604,113 shares of Common Stock.
So
long as this Exchange Notes remains outstanding or the Assignees hold any Conversion Shares, the Company is prohibited from entering
into any financing transaction pursuant to which the Company sells its securities at a price lower than $1.75 per share. In addition,
the Company is prohibited from (i) exchanging any indebtedness or securities of the Company for any other indebtedness or securities
of the Company, (ii) cooperating with any person to effect any exchange of indebtedness or securities of the Company in connection
with a proposed sale of such securities from an existing holder of such securities to a third party, (iii) reducing or otherwise
changing the exercise price, conversion price or exchange price of certain common stock equivalents of the Company or amending
any non-convertible indebtedness of the Company to make it convertible into securities of the Company, (iv) issuing or selling
any securities either (A) at a conversion, exercise or exchange rate or price that is based upon and/or varies with the trading
prices of, or quotations for, Common Stock, or (B) with a conversion, exercise or exchange rate or price that is subject to being
reset on one or more occasions at a future date or upon the occurrence of specified events, or (v) entering into any agreement
to sell securities at a future determined price, including any equity line of credit or at-the-market offering.
Beginning
on January 17, 2018 and continuing on the first trading day of each of the following 11 successive months thereafter, the Company
is required to redeem one-twelfth of the face amount of the Exchange Note and guaranteed interest. Each amortization payment is
payable in whole or in part in cash equal to 115% of the amortization payment; however, if the Company is in compliance with certain
conditions, the Company may elect to pay the amortization payments in Common Stock. The Holder is entitled to accelerate up to
three future amortization payments and demand such accelerated amortization payments be made in Common Stock at a separate amortization
conversion rate, which is equal to 85% of the average of the three lowest traded prices of the Common Stock during the ten consecutive
trading days immediately prior to the applicable payment date of the amortization payment.
The
Company has the option to prepay any portion of the principal and accrued but unpaid interest outstanding under the note with
a premium payment of 115% of all amounts being prepaid. In the event the Company consummates a public or private offering or other
financing or capital-raising transaction of any kind, in which the Company receives gross proceeds of at least $3 million, the
Company will be required to pay the Assignees an amount in cash equal to 115% of aggregate of the principal amount of the Exchange
Note, any accrued and unpaid interest (including the guaranteed interest mentioned above) and any other amounts payable under
the Exchange Note.
The
Exchange Note contains events of default, which, if triggered, will result in certain increased interest rates and other penalties.
The
foregoing description of the Exchange Agreements, the Exchange Notes and the transactions contemplated thereby does not purport
to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Exchange Agreement and the
Exchange Note, forms of which are filed as Exhibits 10.2, 10.3, 10.4 and 10.5, respectively, to this Current Report on Form 8-K
and are incorporated herein by reference.