TREACE MEDICAL CONCEPTS, INC. Entering into a Material Definitive Agreement, Termination of a Material Definitive Agreement, Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Registrant Arrangement, Financial Statements and Exhibits (Form 8-K)


Section 1.01 Entering into a Material Definitive Agreement

On April 29, 2022, Treace Medical Concepts, Inc. (the “Company”) has entered into (1) a Credit and Security Agreement (Term Loan) (the “Term Loan Agreement”) and (2) a Credit and Security Agreement (Revolving Loan) ( the “Revolving Loan Agreement” and collectively with the Term Loan Agreement, the “Loan Agreements”) with entities affiliated with Mid-Cap Financial Trust and financial institutions or other entities that are sometimes parties thereto, each as a lender.

The term loan agreement provides for a 60-month term loan facility of up to $120.0 million borrowing capacity from the Company over four tranches. At the closing of the loan April 29, 2022the company attracted $50.0 million under the first installment. The remaining installments provide up to an additional amount $70.0 million in borrowing capacity, subject to the achievement of certain revenue targets.

The Revolving Loan Agreement establishes a 60-month revolving loan facility offering $30.0 million additional borrowing capacity for the Company. The Company may request a $20.0 million increase in the revolving credit facility for a total commitment of $50.0 million. The Company must maintain a minimum balance drawn under the revolving loan agreement of at least 20% of the borrowing base. At the closing of the loan, the Company withdrew $4.0 million under the revolving loan agreement.

The borrowings bear interest at an annual rate equal to the adjusted forward SOFR, subject to a floor of 1.00% and a ceiling of 3.00%, plus (1) 6.00% under the contract term loan and (2) 4.00% under the revolving loan agreement. “Adjusted Forward SOFR” means the annual rate equal to the sum of the 30-day forward-looking guaranteed overnight funding rate, as published by CME Group Benchmark Administration Limited (CBA) from time to time plus 0.10%, reset monthly.

Interest is payable monthly in arrears on the first day of each month and upon maturity of the loan contracts. The Company is required to pay interest only for the first 48 months and straight-line amortization for the remaining 12 months, subject to the Company’s election to extend the initial interest repayment period from 12 months to 60 months in total, subject to subject to the Company achieving certain revenue targets.

The Company pays (1) a collateral management fee of 0.50% per annum on the outstanding balance under the Revolving Loan Agreement, (2) an unused line fee equal to 0.50% per annum of the unused average of the Revolving Loan Agreement (on a borrowed basis) and (3) an annual administration fee of 0.25% of the amount borrowed under the term loan.

If the term loan is repaid before the maturity date or if the revolving credit facility is terminated before the end of its term, the prepayment charge is 3.0% of the amount repaid in the first year, 2. 0% in the second year and 1.0% in the third year and thereafter, and a final payment charge of 3.0% of the amount borrowed is payable under the term loan.

The loans are secured by substantially all of the Company’s assets, including intellectual property. Loan agreements and other ancillary documents contain the usual representations and warranties and positive and negative clauses.

Under the loan agreements, the Company is not required to meet a minimum level of revenue if liquidity (defined as unrestricted cash plus unused availability under the revolving loan agreement) exceeds the balance outstanding under the term loan agreement. If liquidity falls below this outstanding balance, then the Company is subject to a 12-month minimum revenue covenant.

The foregoing description of material terms of the Loan Agreements is subject in its entirety to the terms and conditions of the Loan Agreements.

Section 1.02 Termination of a Material Definitive Agreement.

On April 29, 2022in connection with the company’s entering into the loan agreements described in item 1.01 of this report, the company (1) has paid the outstanding balance and fees under the term loan agreement, dated July 31, 2020by and between the Company, the subsidiary guarantors who are sometimes parties thereto, certain lenders and CRG Service LLCas administrative agent and collateral agent for the lenders (as amended, the “CRG Loan Agreement”) for an aggregate amount of $30 million and terminated the Facility, and (2) terminated the Loan and Guarantee Agreement dated April 18, 2018 by and between the Company and Bank of Silicon Valley date April 18, 2018as amended (as amended, the “SVB Loan Agreement”).

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The terms and conditions of the CRG Loan Agreement and the SVB Loan Agreement were disclosed in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2021 filed on March 4, 2022which descriptions are incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The information set out in point 1.01 is incorporated herein by reference.

Item 9.01 Financial statements and supporting documents.

Exhibit No.   Description

99.1            Press Release of Treace Medical Concepts, Inc. dated May 2, 2022
104           Cover Page Interactive Data File (embedded within the Inline XBRL document)

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