13D Filing: OrbiMed Advisors and Xtant Medical Holdings Inc. (XTNT)

As a condition to the closing of the Transactions, the Issuer, the OrbiMed Purchasers are required to enter into an amendment to the 2016 Notes (the “2016 Notes Amendment”), which will amend the 2016 Notes by clarifying that the restriction that prevents any holder or any of its affiliates from effecting a conversion thereof if such conversion would result in the holder or any of its affiliates beneficially owning in excess of 9.99% of the then outstanding Shares shall not be applicable to the Tier 2 Transaction. The 2016 Notes Amendment is required to enable the OrbiMed Purchasers to exchange the 2016 Notes pursuant to the Tier 2 Transaction.

Indenture Notes SPA

On January 17, 2017, the Issuer entered into an indenture notes securities purchase agreement (the “Indenture Notes SPA”) and a convertible promissory notes securities purchase agreement (the “PIK Notes SPA”) with the OrbiMed Purchasers.

In order to satisfy interest obligations the Issuer owed to the OrbiMed Purchasers pursuant to $52,000,000 of convertible promissory notes issued under the Indenture, the Issuer entered into the Indenture Notes SPA, pursuant to which the OrbiMed Purchasers agreed to purchase a new series of 6% convertible senior notes in the aggregate principal amount of $564,300 and $995,700, respectively (the “Indenture Notes”).  The Indenture Notes are convertible into Shares at a conversion price of $0.7589 per Share at any time prior to the close of business on the second business day immediately preceding the Maturity Date.  Interest under the Indenture Notes accrues at a rate of 6% per year.

In order to satisfy interest obligations the Issuer owed to the OrbiMed Purchasers pursuant to $2,238,166 of convertible promissory notes issued under the 2016 SPA, the Issuer entered into the PIK Notes SPA, pursuant to which the OrbiMed Purchasers agreed to purchase a new series of 6% convertible senior notes in the aggregate principal amount of $24,288.41 and $42,856.59, respectively (the “PIK Notes” and, collectively with the Indenture Notes, the “2017 Notes”).  The PIK Notes are convertible into Shares at a conversion price of $0.7589 per Share at any time prior to the close of business on the second business day immediately preceding the Maturity Date.  Interest under the PIK Notes accrues at a rate of 6% per year.

As described more fully above, as a condition to the closing of the Transactions, the Issuer and the OrbiMed Purchasers are required to enter into the 2017 Notes Amendment to enable the OrbiMed Purchasers to convert the 2017 Notes pursuant to the Tier 1 Transaction.

Registration Rights Agreement

As a condition to the closing of the Transactions, the Issuer is required to enter into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Noteholders.  Upon demand by the Noteholders, the proposed Registration Rights Agreement requires the Issuer to, among other things, file with the SEC a shelf registration statement (which, initially, will be on Form S-1 and, as soon as the Issuer is eligible, will be on Form S-3) covering the resale, from time to time, of the Shares issuable upon conversion or exchange of the Notes or issued in the Private Placement within 90 days of such demand and to use its best efforts to cause the shelf registration statement to become effective under the Securities Act no later than the 180th day after such demand.

Investor Rights Agreement

As a condition to the closing of the Transactions, the Issuer is required to enter into an Investor Rights Agreement (the “Investor Rights Agreement”) with ROS Acquisition, ORO II and certain other investors.  Under the proposed Investor Rights Agreement, ROS Acquisition and ORO II are permitted to nominate a majority of the directors and designate the chairperson of the Board at subsequent annual meetings, as long as they maintain an ownership threshold in the Issuer of at least 40% of the then outstanding Shares (the “Ownership Threshold”).  If the OrbiMed Purchasers are unable to maintain the Ownership Threshold, the Investor Rights Agreement contemplates a reduction of nomination rights commensurate with the Issuer ownership interests.   At the request of the Reporting Persons, the Issuer has nominated Matthew Rizzo and Michael Eggenberg, both of whom are employees of Advisors, for election to the Board at the Special Meeting.