Item
1.01
|
Entry
into a Material Definitive Agreement
|
Promissory
Note
On
October 1, 2018, in connection with the Closing, the Company entered into a Promissory Note with CTL (the “
Note
”),
with a principal amount of $6,000,000. Provided that no event of default occurs under the terms of the Note, the Note will bear
no interest prior to maturity. Monthly payments equal to $138,888.88 will be payable by CTL to the Company beginning on November
1, 2018 and on the first day of each calendar month thereafter until April 1, 2020. Beginning on May 1, 2020 and ending on October
1, 2021, CTL will be obligated to make monthly payments to the Company equal to $194,444.44. The remaining principal balance and
accrued interest, if any, will be payable on October 1, 2021. Any payment that becomes due and remains unpaid for ten calendar
days will be subject to an additional charge equal to the payment amount multiplied by the lesser of (i) 5% or (ii) the Maximum
Rate (as that term is defined in the Note). In the event that CTL defaults on its obligations under the Note, the Company will
have the right to declare the remaining principal and accrued interest under the Note immediately due and payable. CTL’s
obligations under the Note are secured by a security interest in the assets acquired by CTL from Amedica and US Spine under the
Purchase Agreement.
The
foregoing summary of the Note does not purport to be complete and is subject to, and qualified in its entirety by, the full text
of the Note, a copy of which is attached as Exhibit 10.1 to this report and is incorporated by reference herein.
Security
Agreement
On
October 1, 2018, in connection with the Closing, the Company entered into a Security Agreement with CTL (the “
Security
Agreement
”), pursuant to which CTL granted the Company a security interest in the assets acquired by CTL under the Purchase
Agreement to secure CTL’s obligations (i) to pay the Note and (ii) to pay or assume that certain loan made by North Stadium
Investments, LLC (an entity that is controlled by Dr. B Sonny Bal, MD, who is the Company’s Chairman and Chief Executive
Officer) to the Company in a principal amount of $2,500,000 (the “
North Stadium Note
”).
The
foregoing summary of the Security Agreement does not purport to be complete and is subject to, and qualified in its entirety by,
the full text of the Security Agreement, a copy of which is attached as Exhibit 10.2 to this report and is incorporated by reference
herein.
Guaranty
On
October 1, 2018, in connection with the Closing, the Company entered into a Guaranty with Daniel Chon (the “
Guaranty
”),
under which Mr. Chon personally guaranteed CTL’s obligations (i) under the Note and (ii) to, pursuant to the Purchase Agreement,
assume the Company’s obligations under the North Stadium Note. The guaranty will terminate upon payment in full by CTL of
the North Stadium Note.
The
foregoing summary of the Guaranty does not purport to be complete and is subject to, and qualified in its entirety by, the full
text of the Guaranty, a copy of which is attached as Exhibit 10.3 to this report and is incorporated by reference herein.
ROFN
Security Agreement
On
October 1, 2018, in connection with the Closing, the Company entered into a Security Agreement Relating to Right of First Negotiation
with CTL (the “
ROFN Security Agreement
”), which secures the Company’s obligations under the Purchase
Agreement to grant CTL a right of first negotiation, coupled with a right of last refusal, in the event the Company determines
to sell substantially all of its assets, its silicon nitride spinal implant manufacturing technology or its manufacturing operations.
Under the ROFN Security Agreement, the Company granted CTL a security interest in the assets identified by the Purchase Agreement
that are subject to the Right of First Negotiation.
The
foregoing summary of the ROFN Security Agreement does not purport to be complete and is subject to, and qualified in its entirety
by, the full text of the ROFN Security Agreement, a copy of which is attached as Exhibit 10.4 to this report and is incorporated
by reference herein.
Post-Closing Lien Release
The Purchase Agreement required the Company to deliver a lien release relating to
a filing at the United States Patent and Trademark Office (“
USPTO
”). The Company did not deliver the lien release
at closing, but has covenanted to deliver the lien release no later than December 1, 2018. If the Company does not deliver such
lien release by December 1, 2018, Buyer may declare the Purchase Agreement and all related agreements and obligations null and
void. Furthermore, in the event the Company fails to have the lien release filed by November 1, 2018, any and all amounts due
to the Company under the Promissory Note shall be tolled and not become due and payable until such time as the lien release has
been filed with the USPTO.
Forward-Looking
Statements
Certain
statements made herein that are not historical facts are “forward looking statements” within the meaning of the “safe
harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Statements based on historical
data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking
statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are
not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions
and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes
to differ materially from those discussed in the forward-looking statements. Factors that could influence the realization of forward-looking
statements include the risk factors outlined in the “Risk Factors” section of our Quarterly Reports on Form 10-Q filed
with the Securities and Exchange Commission on May 15, 2018 and August 14, 2018 and in our Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 29, 2018. The Company does not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.