Item 1.01 Entry into a Material Definitive Agreement.
On September 29, 2022 (the “Closing Date”), Alphatec Holdings, Inc. (the “Company”), together with its wholly owned subsidiary, Alphatec Spine, Inc. (“Spine,” and together with the Company, the “Borrowers”), entered into an asset-based revolving credit facility in the maximum aggregate amount of $50 million (the “Revolving Facility” and the loans drawn thereunder, the “Loans”), pursuant to the terms and conditions of that certain Credit, Security and Guaranty Agreement, dated as of September 29, 2022 (the “Credit Agreement”), by and among the Borrowers, the other borrowers from time to time party thereto, the guarantors from time to time party thereto, MidCap Financial Trust and the other lenders from time to time party thereto (the “Lenders”), and MidCap Funding IV Trust, as administrative agent (in such capacity, the “Agent”). The Borrowers will use the proceeds of the Loans to pay transaction fees and for working capital needs and general corporate purposes of the Borrowers and their subsidiaries. Under certain circumstances the commitments of the Lenders under the Revolving Facility may be increased by additional amounts up to $25 million, for a total of $75 million.
Availability of the Loans under the Revolving Facility at any time is subject to the Borrowing Base, which is equal to (i) the sum of (a) 85% of the Eligible Accounts (the accounts receivable of the Borrowers’ qualified under the terms of the Credit Agreement) plus (b) 40% of the Eligible Inventory (the inventory of the Borrowers’ qualified under the terms of the Credit Agreement, and in any event not to exceed the lesser of $15 million or 50% of the Borrowing Base) minus (ii) the sum of all reserves.
The Loans bear interest at the sum of Term SOFR plus 3.5% per annum, and mature on the earlier of (i) September 29, 2027 or (ii) 90 days prior to the final maturity date of any of the Company’s outstanding convertible senior notes due 2026 (such date, the “Maturity Date”). In connection with the Revolving Facility, the Borrowers are obligated to pay certain unused line fees, minimum balances fees, collateral management fees, audit fees and other fees. The Borrowers may borrow, repay and reborrow the Loans prior to the Maturity Date, subject to the terms of the Credit Agreement.
As security for its obligations under the Credit Agreement, the Borrowers granted the Agent, for the benefit of the Lenders, a continuing security interest in substantially all of their assets, excluding intellectual property and subject to certain customary exceptions. The obligations of the Borrowers are also secured by a first priority lien on the equity interests held by the Borrowers in their subsidiaries.
The Credit Agreement includes customary conditions to borrowing, representations and warranties and covenants, including affirmative covenants and negative covenants that restrict the Borrowers’ and their subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. The Credit Agreement also has a financial covenant requiring the Borrowers to maintain $10 million of liquidity at all times.
The Credit Agreement also contains customary events of default, including among other things, the Borrowers’ failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events, or the Borrowers’ breach of the covenants under the Credit Agreement. Upon the occurrence of an event of default, the Lenders may, among other things, accelerate the Borrowers’ obligations under the Credit Agreement.
The above description of the Credit Agreement is a summary and is not complete. A copy of the Credit Agreement is filed as exhibit 10.1 to this Current Report on Form 8-K, and the above summary is qualified in its entirety by reference to the terms of the Credit Agreement.