Item
1.01 Entry into a Material Definitive Agreement.
On
May 6, 2021 (the “Closing Date”), Xtant Medical Holdings, Inc. (the “Company”), as guarantor, and its subsidiaries,
Bacterin International, Inc., Xtant Medical, Inc. and X-spine Systems, Inc., as borrowers (collectively, the “Borrowers”),
entered into a (i) Credit, Security and Guaranty Agreement (Term Loan) (the “Term Credit Agreement”) with MidCap Financial
Trust, in its capacity as agent (the “Agent”), and a lender and the additional lenders from time to time party thereto
and (ii) Credit, Security and Guaranty Agreement (Revolving Loan) (the “Revolving Credit Agreement” and, together with the
Term Credit Agreement, the “Credit Agreements”), with the Agent and the lenders from time to time party thereto.
The
Term Credit Agreement provides for a secured term loan facility (the “Term Facility”) in an aggregate principal amount
of $12,000,000 (the “Term Loan Commitment”), which was funded to the Borrowers on the Closing Date, and an additional
$5,000,000 tranche available solely at the discretion of the Agent and the lenders, for the purposes agreed to between the Company,
the Borrowers and the lenders in advance of the making of loans under such additional tranche. The Revolving Credit Agreement
provides for a secured revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the
“Facilities”) under which the Borrowers may borrow up to $8,000,000 (such amount, the “Revolving Loan Commitment”)
at any one time, the availability of which is determined based on a borrowing base equal to percentages of certain accounts receivable
and inventory of the Borrowers in accordance with a formula set forth in the Revolving Credit Agreement. All borrowings under
the Revolving Facility are subject to the satisfaction of customary conditions, including the absence of default, the accuracy
of representations and warranties in all material respects and the delivery of an updated borrowing base certificate.
The
Facilities have a maturity date of May 1, 2026. Each of the Borrowers, and the Company, as guarantor, are jointly and severally
liable for all of the obligations under the Facilities on the terms set forth in the Credit Agreements. The Borrowers’ obligations,
and the Company’s obligations as a guarantor, under the Credit Agreements are secured by first-priority liens on substantially
all of their assets, including, without limitation, all inventory, equipment, accounts, intellectual property and other assets
of the Company and the Borrowers.
The
proceeds of the Term Facility were used to pay transaction fees in connection with the Facilities and to pay in full all outstanding
indebtedness and accrued interest under the Company’s prior credit facility, which is described below. The proceeds of the
Revolving Facility may be used to pay transaction fees in connection with the Facilities, to pay in full all outstanding indebtedness
and accrued interest under the Company’s prior credit facility, and for working capital and general corporate purposes.
The
loans and other obligations pursuant to the Credit Agreements will bear interest at a per annum rate equal to the sum of the LIBOR
rate, as such term is defined in the Credit Agreements, plus the applicable margin of 7.00% in the case of the Term Credit Agreement,
and 4.50% in the case of the Revolving Credit Agreement, subject in each case to a LIBOR floor of 1.00%.
In
addition to paying interest on the outstanding loans under the Facilities, the Borrowers will also be required to pay an unused
line fee equal to 0.50% per annum in respect of unutilized commitments under the Revolving Facility, a fee for failure to maintain
a minimum balance under the Revolving Facility, a collateral management fee under the Revolving Facility equal to 0.50% of the
amount outstanding under the Revolving Facility, an origination fee equal to 0.50% of the Revolving Loan Commitment and 0.50%
of the Term Loan Commitment, and if activated, of any additional term loan tranche, and certain other customary fees related to
the Agent’s administration of the Facilities. If the Term Loan Facility is prepaid or the Revolving Loan Commitment is terminated
prior to its respective maturity date, the Borrowers will be required to make certain prepayment fees in an amount equal to (i)
3.0% of the amount repaid in the case of the Term Facility in the first year following the Closing Date and 3.0% of the terminated
amount of the Revolver Commitment Amount in the first year following the Closing Date, (ii) 2.0% of the amount repaid in the case
of the Term Facility in the second year following the Closing Date and 2.0% of the terminated amount of the Revolver Commitment
Amount in the second year following the Closing Date, (ii) 1.0% of the amount repaid in the case of the Term Facility in the third
year following the Closing Date and 1.0% of the terminated amount of the Revolver Commitment Amount in the third year following
the Closing Date and (iv) 0% at any time thereafter.
The
Credit Agreements contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including
covenants that, among other things, limit or restrict the ability of the Borrowers, subject to negotiated exceptions, to incur
additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends
or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments,
and change the nature of their businesses. In addition, the Credit Agreements require the Borrowers and the Company to maintain
net product revenue at or above minimum levels and to maintain a minimum adjusted EBITDA and a minimum liquidity, in each case
at levels specified in the Credit Agreements.
The
Credit Agreements also contain customary representations and warranties and events of default, in each case subject to grace periods,
thresholds and materiality qualifiers, as more fully described in the Credit Agreements. If an event of default occurs, the lenders
under the Facilities are entitled to take various actions, including the acceleration of amounts due under the Facilities, termination
of the commitments under the Facilities and certain other actions available to secured creditors.
The
foregoing descriptions of the Term Credit Agreement and the Revolving Credit Agreement are only a summary of their material terms and
do not purport to be complete and are qualified in their entirety by reference to the full text of the Term Credit Agreement and
the Revolving Credit Agreement, which are filed as Exhibit 10.1 and 10.2, respectively, to this Current Report on Form 8-K and incorporated
herein by reference.