| Item 1.01. | Entry into a Material Definitive Agreement.. |
On August 10, 2022 (the “Closing Date”),
Aziyo Biologics, Inc., a Delaware corporation (the “Company” or the “Borrower”) entered into a Credit Agreement,
dated as of August 10, 2022, between Aziyo Biologics, Inc. and the subsidiaries of the Company (each, a “Loan Party,” and,
together with the Company, collectively, the “Loan Parties”), with the financial institutions party thereto from time to time
as lenders and SWK Funding LLC, as agent (the “Credit Agreement”). The Credit Agreement provides for (i) a senior secured
term loan in an aggregate amount of $21.0 million (the “Initial Term Loan”) and (ii) an additional tranche of term loan feature
which permits the Borrower to borrow up to an additional $4.0 million, subject to the achievement of specified operational and financial
metrics by September 30, 2023 (the “Additional Term Loan” and, together with the Initial Term Loan, the “Term Loans”)
and (iii) the establishment of a separate, new asset-based revolving facility of up to $8.0 million.
The Initial Term Loan was drawn on the Closing
Date, and the Company used the borrowings to repay outstanding amounts under the Company’s existing amended and restated term loan
credit agreement with Midcap Financial Trust, as agent and lender, and the other lenders party thereto (as amended, the “Existing
Term Loan”) and the Company’s amended and restated revolving credit agreement with Midcap Funding IV Trust, as agent and lender,
and the other lenders party thereto (as amended, the “Existing Revolving Facility” and, together with the Existing Term Loan,
“Existing Credit Agreement”). The Company intends to use the remaining borrowings under the Initial Term Loan for its ongoing
commercial and product development initiatives.
The Company’s obligations under the Credit
Agreement are guaranteed by the other Loan Parties, including Aziyo Med, LLC, a Delaware limited liability company and a wholly owned
subsidiary of the Borrower. Pursuant to the Credit Agreement and the other Loan Documents, the Company and the other Loan Parties granted
a lien to the Agent in substantially all of the assets now owned or hereafter acquired by any Loan Party, subject to certain customary
exceptions.
All of the Term Loan borrowings under the Credit
Agreement take the form of Secured Overnight Financing Rate (“SOFR”) loans. SOFR loans will bear interest at a rate per annum
equal to the sum of an applicable margin of (i) 8.75% and the “Term SOFR Rate” (based upon an interest period of 3 months),
or (ii) if the Borrower has elected the PIK Interest option (as defined below), 4.75% and the “Term SOFR Rate.” The Borrower
may elect a portion of the interest due, to be paid in-kind at a rate per annum of 4.5% (“PIK Interest”), and such election
may be made (x) until November 15, 2024 if the conditions to draw the Additional Term Loan have not been met, or (y) if such conditions
to draw the Additional Term Loan have been satisfied, until November 17, 2025. The “Term SOFR Rate” is subject to a floor
of 2.75%. Amortization of the Term Loan starts on November 15, 2024, which amortization may be extended to November 17, 2025 if conditions
to draw the Additional Term Loan have been satisfied. Principal payments during the amortization period will be limited based on revenue-based
caps.
Under the Credit Agreement, the Loan Parties are
required: to (a) maintain minimum Consolidated Unencumbered Liquid Assets (as defined in the Credit Agreement) of (i) at any time on or
after the Closing Date and on or before October 10, 2022, $5.0 million, and (ii) at any time thereafter, the greater of (x) $5.0 million,
or (y) the sum of the Operating Burn (as defined in the Credit Agreement) for the two (2) prior, consecutive fiscal quarters then ended;
and (b) maintain certain minimum revenue levels, to be tested on a quarterly basis, beginning on the fiscal quarter ending September 30,
2022.
Any amounts voluntarily or mandatorily prepaid
under the Credit Agreement are subject to a prepayment penalty, subject to certain exceptions, equal to (i) 2.00% of the principal amount
prepaid if the prepayment occurs prior to the first anniversary of the Closing Date, plus all remaining regularly scheduled interest payments
for such first year period, (ii) 2.00% of the principal amount prepaid if the prepayment occurs after the first anniversary and prior
to the second anniversary of the Closing Date, and (iii) 0.00% thereafter. Upon termination of the Credit Agreement, the Company shall
pay an exit fee equal to 6.50% of the aggregate amount of Term Loans funded prior to such termination date.
Pursuant to the Credit Agreement, on August 10,
2022, the Company issued to SWK Funding LLC a warrant (the “Warrant”) to purchase, in the aggregate, up to 187,969 shares
of Class A common stock of the Company, $0.001 par value per share (the “Common Stock”) at an exercise price of $6.65 per
share. The Warrant is immediately exercisable for up to 157,894 shares of Common Stock from time to time on or after the Closing Date.
Subject to and effective upon the borrowing by the Borrower of the Additional Term Loan, the Warrant will be exercisable for up to an
additional 30,075 shares of Common Stock. The exercise price and number of shares of Common Stock issuable upon exercise of the Warrant
are subject to adjustment in the event of stock dividends, stock splits and certain other events affecting the Common Stock. Unless earlier
exercised or terminated in accordance with its terms, the Warrant will expire on the seventh anniversary of the Closing Date.
The foregoing summaries do not purport to be complete
and are qualified in their entirety by reference to the Credit Agreement and the Warrant which are filed as Exhibits 10.1 and 4.1, respectively,
to this Current Report on Form 8-K.