SMTI Sanara MedTech Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 1, 2023

 

SANARA MEDTECH INC.

(Exact name of registrant as specified in its charter)

 

Texas		001-39678		59-2219994
(State or other jurisdiction of		(Commission File Number)		(IRS Employer
incorporation)				Identification No.)

 

1200 Summit Avenue, Suite 414 Fort Worth, Texas		76102
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (817) 529-2300

 

(Former name or former address, if changed since last report)

 

Not Applicable

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

	☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
	☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		SMTI		The Nasdaq Capital Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01

Entry into a Material Definitive Agreement.

 

Asset Purchase Agreement

 

On August 1, 2023, Sanara MedTech Inc., a Texas corporation (the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) by and among the Company, as guarantor, Sanara MedTech Applied Technologies, LLC, a Texas limited liability company and wholly owned subsidiary of the Company (the “Purchaser”), The Hymed Group Corporation, a Delaware corporation (“Hymed”), Applied Nutritionals, LLC, a Delaware limited liability company (“Applied” and, together with Hymed, the “Sellers”), and Dr. George D. Petito (the “Owner”), pursuant to which the Purchaser acquired certain assets of the Sellers and the Owner, including, among others, the Sellers’ and Owner’s inventory, intellectual property, manufacturing and related equipment, goodwill, rights and claims, other than certain excluded assets, all as more specifically set forth in the Purchase Agreement (collectively, the “Purchased Assets”), and assumed certain Assumed Liabilities (as defined in the Purchase Agreement), upon the terms and subject to the conditions set forth in the Purchase Agreement (such transaction, the “Asset Purchase”). The Purchased Assets include the rights to manufacture and sell CellerateRX Surgical Activated Collagen (Powder and Gel) (“CellerateRX Surgical”) and HYCOL Hydrolyzed Collagen (Powder and Gel) (“HYCOL”) products for human wound care use.

 

The Purchased Assets were purchased for an initial aggregate purchase price of $15.25 million, consisting of (i) $9.75 million in cash (the “Cash Closing Consideration”), (ii) 73,809 shares of the Company’s common stock, par value $0.001 per share (the “Stock Closing Consideration”), with an agreed upon value of $3.0 million and (iii) $2.5 million in cash (the “Installment Payments”), to be paid in four equal installments on each of the next four anniversaries of the closing of the Asset Purchase (the “Closing”).

 

Hymed is a contract manufacturer specializing in the research and development of natural, innovative products. Hymed utilizes collagen and glycosaminoglycan chemistry for the human and veterinary markets with applications in wound care, joint/tissue support, eye care, surgery, dental and dermatology. As a sister company to Hymed, Applied manufactures state-of-the-art products with formulas based on collagen, hyaluronic acid and glycosaminoglycan chemistry. The Company licenses certain of its products from Applied through a sublicense (the “Sublicense Agreement”) with CGI Cellerate RX, LLC (“CGI Cellerate RX”). Pursuant to the Sublicense Agreement, the Company has an exclusive, world-wide sublicense to distribute CellerateRX Surgical and HYCOL products into the surgical and wound care markets. The Company pays royalties based on the annual Net Sales (as defined in the Sublicense Agreement) of licensed products consisting of 3% of all collected Net Sales each year up to $12.0 million, 4% of all collected Net Sales each year that exceed $12.0 million up to $20.0 million, and 5% of all collected Net Sales each year that exceed $20.0 million. In connection with the Asset Purchase, Applied assigned its license agreement with CGI Cellerate RX to the Purchaser.

 

In addition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Purchase Agreement provides that the Sellers are entitled to receive up to an additional $10.0 million (the “Earnout”), which is payable to the Sellers in cash, upon the achievement of certain performance thresholds relating to the Purchaser’s collections from net sales of a collagen-based product currently under development. Upon expiration of the seventh anniversary of the Closing, to the extent the Sellers have not earned the entirety of the Earnout, the Purchaser shall pay the Sellers a pro-rata amount of the Earnout based on collections from net sales of the product, with such amount to be due credited against any Earnout payments already made by the Purchaser (the “True-Up Payment”). The Earnout, minus the True-Up Payment and any Earnout payments already made by the Purchaser, may be earned at any point in the future, including after the True-Up Payment is made.

 

The Purchase Agreement contains customary representations, warranties and obligations of the parties, including, among others, certain confidentiality and nonsolicitation covenants. The parties each have customary indemnification obligations and rights under the terms of the Purchase Agreement, including with respect to breaches of certain representations and warranties and failure to observe and perform certain covenants.

 

The foregoing description of the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (this “Current Report”) and is incorporated by reference into this Item 1.01.

 

The Purchase Agreement attached as Exhibit 2.1 hereto is included to provide investors and security holders with information regarding its terms, and it is not intended to provide any other factual information about the Company, the Sellers, the Owner, the Purchaser or their respective subsidiaries and affiliates. The representations, warranties and covenants contained in the Purchase Agreement were made only for the purposes of the Purchase Agreement and only as of the date of the Purchase Agreement or such other date as is specified in the Purchase Agreement and are qualified by information in confidential disclosure schedules provided by the Purchaser and the Sellers in connection with the signing of the Purchase Agreement. These confidential disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties and certain covenants set forth in the Purchase Agreement. Moreover, certain representations and warranties in the Purchase Agreement were used for the purpose of allocating risk between the Company, the Sellers, the Purchaser and the Owner rather than establishing matters as facts. Information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. Accordingly, the representations and warranties in the Purchase Agreement should not be relied upon as characterizations of the actual state of facts about the Company, the Sellers, the Purchaser or the Owner, and the Purchase Agreement should be read in conjunction with the Company’s Forms 10-K, Forms 10-Q and other documents that are filed with the Securities and Exchange Commission (the “SEC”).

 

 

Professional Services Agreement

 

In connection with the Asset Purchase and pursuant to the Purchase Agreement, effective August 1, 2023 (the “Effective Date”), the Company entered into a professional services agreement (the “Services Agreement”) with the Owner, pursuant to which the Owner, as an independent contractor, agreed to provide certain services to the Company, including, among other things, assisting with the development of products already in development and assisting with research, development, formulation, invention and manufacturing of any future products (the “Services”). As consideration for the Services, the Owner is entitled to receive: (i) a base salary of $12,000 per month during the term of the Services Agreement, (ii) a royalty payment equal to three percent (3%) of the actual collections from net sales of certain products the Owner develops or co-develops that reach commercialization, (iii) a royalty payment equal to five percent (5%) for the first $50.0 million in aggregate collections from net sales of certain future products and a royalty payment of two and one-half percent (2.5%) on aggregate collections from net sales of certain future products on any amounts exceeding $50.0 million but up to $100.0 million, (iv) $500,000 in cash in the event that 510(k) clearance is issued for any future product accepted by the Company and (v) $1.0 million in cash in the event that a U.S. patent is issued for a certain product; provided that with respect to the incentive payments described in (iv) and (v) of the foregoing, the Owner shall not earn more than $2.5 million.

 

The Services Agreement has an initial term of three years and is subject to automatic successive one-month renewals unless earlier terminated in accordance with its terms. The Services Agreement may be terminated upon the Owner’s death or disability or by the Company or the Owner “For Cause” (as defined in the Services Agreement); provided, however, that the base salary described in (i) of the foregoing paragraph shall survive termination through the three-year initial term and the royalty payments and incentive payments described in (ii)-(v) of the foregoing paragraph shall survive termination of the Services Agreement. The Services Agreement contains customary representations, warranties and obligations of the parties, including, among others, certain confidentiality, indemnification, noncompetition and nonsolicitation covenants.

 

The foregoing summary of the Services Agreement is a summary only and does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Services Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report and is incorporated by reference into this Item 1.01.

 

Loan Agreement

 

In connection with the entry into the Purchase Agreement, on August 1, 2023, the Purchaser, as borrower, and the Company, as guarantor, entered into a Loan Agreement (the “Loan Agreement”) with Cadence Bank (the “Bank”) providing for, among other things, an advancing term loan in the aggregate principal amount of $12.0 million (the “Term Loan”), which was evidenced by an advancing promissory note (the “Advancing Term Note”). Pursuant to the Loan Agreement, the Bank agreed to make, at any time and from time to time prior to February 1, 2024, one or more advances to the Purchaser.

 

The proceeds of the advances under the Loan Agreement will be used for working capital and for purposes of financing up to one hundred percent (100%) of the Cash Closing Consideration and Installment Payments for the Asset Purchase and related fees and expenses, including any subsequent payments that may be due to the Sellers after the Closing. On the Effective Date, the Bank, at the request of the Purchaser, made an advance for $9.75 million. The proceeds from the advance were used to fund the Cash Closing Consideration for the Asset Purchase.

 

Advances under the Term Loan will begin amortizing in monthly installments commencing on August 5, 2024. All remaining unpaid balances under the Term Loan are due and payable in full on August 1, 2028 (the “Maturity Date”). The Purchaser may prepay amounts due under the Term Loan. All accrued but unpaid interest on the unpaid principal balance of outstanding advances is due and payable monthly, beginning on September 5, 2023 and continuing monthly on the fifth day of each month thereafter until the Maturity Date. The unpaid principal balance of outstanding advances bears interest, subject to certain conditions, at the lesser of the Maximum Rate (as defined in the Loan Agreement) or the Base Rate, which is for any day, a rate per annum equal to the term secured overnight financing rate (Term SOFR) (as administered by the Federal Reserve Bank of New York) for a one-month tenor in effect on such day plus three percent (3.0%).

 

The obligations of the Purchaser under the Loan Agreement and the other loan documents delivered in connection therewith are guaranteed by the Company and are secured by a first priority security interest in substantially all of the existing and future assets of the Purchaser.

 

The Loan Agreement contains customary representations and warranties and certain covenants that limit (subject to certain exceptions) the ability of the Purchaser and the Company to, among other things, (i) create, assume or guarantee certain liabilities, (ii) create, assume or suffer liens securing indebtedness, (iii) make or permit loans and advances, (iv) acquire any assets outside the ordinary course of business, (v) consolidate, merge or sell all or a material part of its assets, (vi) pay dividends or other distributions on, or redeem or repurchase, interest in an obligor, (vii) cease, suspend or materially curtail business operations or (viii) engage in certain affiliate transactions. In addition, the Loan Agreement contains financial covenants that require the Purchaser to maintain (i) a minimum Debt Services Coverage Ratio and (ii) a maximum Cash Flow Leverage Ratio, in each case, as defined and calculated according to the procedures set forth in the Loan Agreement. Pursuant to the Loan Agreement, in the event that the Purchaser fails to comply with the financial covenants described above, the Company is required to contribute cash to the Purchaser in an amount equal to the amount required to satisfy the financial covenants.

 

 

The Loan Agreement also contains customary events of default. If such an event of default occurs, the Bank would be entitled to take various actions, including the acceleration of amounts due under the Loan Agreement and actions permitted to be taken by a secured creditor.

 

The foregoing summary of the Loan Agreement is a summary only and does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Loan Agreement, a copy of which is filed as Exhibit 10.2 to this Current Report and is incorporated by reference into this Item 1.01.

 

Item 2.01

Completion of Acquisition or Disposition of Assets.

 

The information set forth in Item 1.01 regarding the Asset Purchase is incorporated by reference into this Item 2.01.

 

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information set forth in Item 1.01 regarding the Loan Agreement and the Advancing Term Note is incorporated by reference into this Item 2.03.

 

Item 3.02

Unregistered Sales of Equity Securities.

 

The information set forth under Item 1.01 with respect to the issuance of the Stock Closing Consideration to the Owner pursuant to the Purchase Agreement is incorporated herein by reference. The issuance of the Stock Closing Consideration was undertaken in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder.

 

Item 7.01

Regulation FD Disclosure.

 

On August 2, 2023, the Company issued a press release announcing the Asset Purchase. A copy of the press release is furnished as Exhibit 99.1 to this Current Report and is incorporated by reference herein.

 

The information included under Item 7.01 (including Exhibit 99.1) is furnished pursuant to Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.		Description
2.1*		Asset Purchase Agreement, dated August 1, 2023, by and among Sanara MedTech Inc., Sanara MedTech Applied Technologies, LLC, The Hymed Group Corporation, Applied Nutritionals, LLC and Dr. George D. Petito.
10.1**		Professional Services Agreement, dated August 1, 2023, by and between Sanara MedTech Inc. and Dr. George D. Petito.
10.2**		Loan Agreement, dated August 1, 2023, between Sanara MedTech Applied Technologies, LLC, Sanara MedTech Inc. and Cadence Bank.
99.1		Press Release of Sanara MedTech Inc., issued August 2, 2023 (furnished pursuant to Item 7.01).
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

* Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC or its staff upon request. Certain confidential information has been excluded pursuant to Item 601(b)(2)(ii) of Regulation S-K. Such excluded information is not material and is the type that the Company treats as private or confidential.

 

** Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC or its staff upon request. Certain confidential information has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K. Such excluded information is not material and is the type that the Company treats as private or confidential.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:	August 2, 2023
		Sanara MedTech Inc.
		By:	/s/ Michael D. McNeil
			Name: Michael D. McNeil
			Title: Chief Financial Officer

 

 

 

Exhibit 2.1

 

CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT, MARKED AT THE APPROPRIATE PLACE WITH FIVE ASTERISKS [*****], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) THE TYPE THAT THE REGISTRANT TREATS AS CONFIDENTIAL.

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is dated as of August 1, 2023, by and among SanARA MEDTECH Applied technologies, llc, a Texas limited liability company (“Purchaser”), SANARA MEDTECH INC., a Texas business corporation entering herein for the sole purpose of guaranteeing the performance and obligations of Purchaser (“Guarantor”), and THE HYMED GROUP CORPORATION, a Delaware corporation (“Hymed”), APPLIED NUTRITIONALS, LLC, a Delaware limited liability company (“Applied”) (Hymed and Applied each referred to as “Seller” and collectively as “Sellers”), and DR. GEORGE D. PETITO (“Owner”) entering solely for Sections 1.2(b) and 1.3, Article 2, Sections 7.3 and 7.4, and Article 8.

 

RECITALS

 

WHEREAS, Hymed develops certain products for use in human and veterinary markets with applications in wound care, joint/tissue support, eye care, surgery, dental and dermatology (“Hymed Business”), and Applied develops products based on collagen, hyaluronic acid and glycosaminoglycan chemistry (the “Applied Business,” and together with the Hymed Business, the “Businesses”);

 

WHEREAS, Owner is the owner, directly or indirectly, of Hymed and Applied;

 

WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to purchase from Sellers, certain assets used or held for use in the operation or conduct of the Businesses on the terms and conditions set forth in this Agreement (the “Acquisition”);

 

WHEREAS, certain capitalized terms used in this Agreement are defined in Article 9.

 

NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, the parties agree as follows:

 

ARTICLE 1

PURCHASE OF RIGHTS AND ASSETS

 

1.1 Agreement to Purchase and Sell. Subject to the terms and conditions set forth herein and except for the Retained Assets, at the Closing, but effective as of the Effective Time, Sellers and Owner shall sell, convey, transfer, assign, and deliver to Purchaser, and Purchaser shall acquire, all right, title, and interest in and to the following itemized listing of properties and rights owned by Sellers and specified in this Agreement (collectively, the “Rights and Assets”), free and clear of all Liens whatsoever:

 

(a) inventory used or held for use in the operation of the Businesses with respect to the Products (as later defined herein), as further described in Section 1.2(d);

 

(b) title to all manufacturing and related equipment related to collagen human wound care, and products and associated usages as set forth on Schedule 1.1(b) (each the “Current Products” and “Future Products” as noted on Schedule 1.1(b), and collectively the “Products”),

 

(c) certain intangible assets relating to the operation of the Businesses, specifically, all patents, patent applications, regulatory 510(k)s, trademarks, tradenames and intellectual properties set forth on Schedule 1.1(c) hereto, and, proprietary rights, going concern value, and the goodwill in or arising from the operation thereof (including, without limitation, goodwill associated with all trademarks and tradenames listed in Schedule 1.1(c) collectively, the “Transferred IP”). Purchaser shall have primary responsibility for transfer of UDI codes and similar regulatory information and Seller shall reasonably cooperate in furtherance of said process; and

 

 

(d) assignment of that certain Exclusive License Agreement dated May 18, 2018 by and between Applied and CGI Cellerate Rx, LLC (the “License Agreement”).

 

Notwithstanding the foregoing, the transfer of the Rights and Assets shall not include the assumption of any Liability related to the Rights and Assets unless expressly assumed by Purchaser in Section 1.6.

 

1.2 Closing Consideration and Post-Closing Payments.

 

(a) Closing Consideration. The initial aggregate purchase price for the Rights and Assets shall be Fifteen Million Two Hundred Fifty Thousand Dollars ($15,250,000) (the “Purchase Price”). On the Closing Date, Purchaser shall deliver to Sellers and Owner, as applicable, an amount equal to the following; (i) Nine Million Seven Hundred Fifty Thousand Dollars ($9,750,000) in cash by wire transfer of immediately available funds to such account or accounts specified in writing by Sellers less any amounts required to satisfy all third party indebtedness for purposes of releasing any Liens, and (ii) Three Million Dollars ($3,000,000) of common stock of Guarantor (Trading Symbol - SMTI), the number of shares to be computed as of the Effective Time based upon the simple average closing price of such common stock quoted on the Nasdaq Capital Market for the twenty (20) trading days immediately preceding the Effective Time and rounded up to the nearest whole number to avoid the issuance of a fractional share (collectively the “Closing Payment”). The balance of the Purchase Price shall be paid in four (4) equal annual installments of Six Hundred Twenty Five Thousand Dollars ($625,000) with the first installment due on the first anniversary of the Effective Time and annually thereafter (collectively the “Installment Payments”).

 

(b) Common Stock Sale Restrictions. The number of Guarantor shares granted to Owner in Section 1.2(a)(ii) shall be subject to the following restrictions:

 

(i) Only ten percent (10%) of the total shares received may be sold only after twelve (12) months from the Effective Time;

 

(ii) An additional forty percent (40%) of the total shares received may only be sold after eighteen (18) months from the Effective Time; and

 

(iii) The remaining fifty percent (50%) of the total shares received may only be sold after twenty four (24) months from the Effective Time.

 

(c) Earnouts. Sellers shall also receive earnout payments in addition to the Purchase Price as follows; (i) Two Million Five Hundred Thousand Dollars ($2,500,000) if and when Purchaser’s collections from net sales of the Future Product [*****] which was developed in conjunction with the Transferred IP (“[*****]”) equal Twenty Five Million Dollars ($25,000,000), (ii) Two Million Five Hundred Thousand Dollars ($2,500,000) if and when Purchaser’s collections from net sales of [*****] equal Fifty Million Dollars ($50,000,000), (iii) Two Million Five Hundred Thousand Dollars ($2,500,000) if and when Purchaser’s collections from net sales of [*****] equal Seventy Five Million Dollars ($75,000,000), and (iv) Two Million Five Hundred Thousand Dollars ($2,500,000) if and when Purchaser’s collections from net sales of [*****] equal One Hundred Million Dollars ($100,000,000) (collectively the “Earnouts”). Upon expiration of the seventh (7^th) anniversary from the Effective Date, to the extent Sellers have not earned the entirety of the Earnouts, Purchaser shall pay Sellers a pro-rata amount of the Earnouts based on collections from net sales of [*****], with such amount to be due credited with any payments of Earnouts already made by Purchaser. By way of example, if collections from net sales at the 7^th anniversary from the Effective Date equal Thirty Five Million Dollars ($35,000,000), Sellers will have already received the payment in subsection (c)(i), therefore the pro-rata payout would equal One Million Dollars ($1,000,000) [$10,000,000/$25,000,000 x $2,500,000]. The calculation and payment shall be performed and made by Purchaser within sixty (60) days after expiration of the seventh (7^th) anniversary from the Effective Date.

 

 

(d) Inventory and Products. Within three (3) business days after Sellers produce a balance sheet prepared in accordance with GAAP for the most recent month-end prior to Closing, Purchaser shall deliver a payment to Sellers equal to the net book value of inventory and Current Products not reasonably deemed obsolete upon inspection by Purchaser. Prior to Closing, representatives of Purchaser shall work with Sellers to obtain an estimate and quality of the inventory and Current Products. For purposes of clarity, the payment made for inventory and Current Products shall exclude any and all amounts for which Purchaser or its Affiliates have prepaid for any such inventory and/or Current Products owned by Sellers.

 

1.3 Retained Assets. Notwithstanding the generality of any other provision herein to the contrary, the parties expressly agree that Sellers shall retain all assets not otherwise identified for purchase in Section 1.1, and shall maintain the exclusive right to utilize the Rights associated with the Products for all other purposes (except for collagen based human wound care) including, without limitation, nutritional supplements, food, dental and non-collagen based human wound care (the “Retained Assets”). Sellers may hereafter sell, transfer, license or assign any interest in the Retained Assets to any third party, without limitation. Further, the parties agree that certain dual use equipment, supplies and inventory shall be shared between the parties as set forth in Schedule 1.3.

 

1.4 Allocation of Consideration. With respect to each trade or business (within the meaning of Code Section 1060 and the treasury regulations promulgated thereunder) acquired under this Agreement, all amounts constituting consideration within the meaning of, and for the purposes of, Code Section 1060 and the treasury regulations thereunder shall be allocated among the Rights and Assets in the manner required by Code Section 1060 and the treasury regulations issued thereunder and all applicable laws. Within one hundred eighty (180) calendar days after the Closing Date, Purchaser shall prepare and provide Sellers with a schedule (the “Allocation Schedule”) allocating all such consideration in the manner described by the preceding sentence. Sellers shall have thirty (30) days following receipt of the Allocation Schedule during which to notify Purchaser of any dispute of any item contained therein, which notice shall set forth in detail the basis for such dispute. In the event Sellers fail to notify Purchaser of any dispute during such thirty (30)-day period, the Allocation Schedule delivered by Purchaser shall be final and binding upon the parties. Purchaser and Sellers shall cooperate in good faith to resolve any such dispute as promptly as possible. Upon such resolution, a revised Allocation Schedule shall be prepared in accordance with the agreement of Purchaser and Sellers and the allocation of consideration based thereon shall be final and binding on the parties. If, however, Purchaser and Sellers are unable to resolve any dispute with respect to the Allocation Schedule within fifteen (15) days of Sellers’ notice of objection, such dispute shall be resolved by an independent valuation firm selected by Purchaser (the “Allocation Referee”). In resolving any such dispute, the Allocation Referee shall consider only those items or amounts in the Allocation Schedule as to which the parties have disagreed. The Allocation Referee’s determination of the disputed items and the resulting Allocation Schedule shall be final and binding on the parties to this Agreement. The Allocation Referee shall use commercially reasonable efforts to complete its work within thirty (30) days following its engagement. The fees and expenses of the Allocation Referee shall be borne equally by Purchaser and Sellers. Each of the parties hereto shall (a) prepare and timely file all Tax Returns, including, without limitation, Form 8594 (and all supplements thereto) in a manner consistent with the final and binding Allocation Schedule and (b) otherwise act in accordance with the final and binding Allocation Schedule for all income Tax purposes. Purchaser shall prepare a revised Allocation Schedule to the extent necessary to reflect any post-Closing payment made pursuant to or in connection with this Agreement, and provide such revised Allocation Schedule to Sellers, as applicable.

 

 

1.5 Retained Liabilities. Sellers shall retain all Liabilities of Sellers and all Liabilities directly or indirectly arising out of or related to the operation of the Businesses prior to the Effective Time including any and all short and long term debt, and any payables and accrued expenses, including but not limited to payables tied to any inventory or Current Products, if such Liabilities are known disclosed or undisclosed, matured or unmatured, accrued, absolute, or contingent on and as of the Effective Time (collectively, the “Retained Liabilities”). Without limiting the generality of the preceding sentence, Purchaser shall not assume or become liable for any obligations or Liabilities of Sellers not specifically described in Section 1.6.

 

1.6 Assumed Liabilities. Purchaser shall assume any liabilities of Sellers, as may be created after the Effective Date arising out of or related to the Rights and Assets (the “Assumed Liabilities”), but not any assets unrelated to the Rights and Assets or known before the Effective Date. Purchaser shall be liable for any cause of action by any party and/or any regulatory compliance fee, fine, cost or penalty due to the Products arising after the Effective Date, even if based in whole or in parts on facts existing prior to the Effective Date, including without limitation anything arising from the notices referenced in Section 2.7(b) below. Additionally, Purchaser shall be liable for anticipated expenses related to the Future Products and testing and regulatory approval thereof, which have been ordered but are not yet payable or invoiced. At this time, a reasonable estimate of said expenses is One Hundred Ten Thousand Dollars ($110,000.00), with such amount subject to changes based on interim results of said testing and processes. Purchaser shall pay the final amount when due and payable. Seller initiated an investigation for patent defense referenced in 2.5 below, and Purchaser shall reimburse Seller for such expense up to $10,000.00 for any subsequent successful defense in the form of a non-appealable judgment obtained by Purchaser.

 

1.7 Time and Place of Closing.

 

(a) The parties shall consummate the Acquisition (the “Closing”) via the electronic exchange of documents and signature pages and other required documentation, in no event later than ten (10) days after the date specified in the header of this Agreement (the date on which the Closing actually occurs is hereinafter referred to as the “Closing Date”).

 

(b) The parties hereto agree that the effective time and date of the transactions shall be 12:01 a.m., local time for the Businesses on the Closing Date (the “Effective Time”).

 

1.8 Deliveries. All deliveries, payments, and other transactions and documents relating to the Closing (a) shall be independent and shall not be effective unless and until all are effective (except to the extent that the party entitled to the benefit thereof has waived satisfaction or performance thereof as a condition precedent to the Closing), and (b) shall be deemed to be consummated simultaneously.

 

1.9 Termination of Existing Contracts. As of the Effective Time, any and all agreements currently in effect and set forth on Schedule 1.9 between the parties and/or its Affiliates shall terminate effective immediately notwithstanding any other terms or conditions set forth therein.

 

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF SELLERS AND OWNER

 

Sellers and Owner jointly and severally represent and warrant the following to Purchaser:

 

2.1 Organization, Qualification, and Ownership. Hymed is duly incorporated and validly existing as a business corporation under the laws of the state of Delaware. Applied is duly organized and validly existing as a limited liability company under the laws of the state of Delaware. Each Seller is duly qualified to do business and is in good standing in its state of organization and in each other state or other jurisdictions in which either ownership or use of the rights, assets, and properties of each Seller (including the Rights and Assets), as they are currently being used, or the conduct of the businesses of each Seller (including the Businesses) as currently conducted, requires such qualification.

 

2.2 Authority and Validity.

 

(a) Each Seller has the full power and authority necessary to (i) execute, deliver, and perform its obligations under the Acquisition Documents to be executed and delivered by it, (ii) carry on the Businesses as it has been and is now being conducted, and (iii) own and lease the rights, properties, and assets which it now owns or leases (including the Rights and Assets). The execution, delivery, and performance of the Acquisition Documents have been duly authorized by all necessary action of the governing body or owners of each Seller. The Acquisition Documents to which each Seller is a party have been or will be, as the case may be, duly executed and delivered by duly authorized officers of each Seller and constitute or will constitute the legal, valid, and binding obligations of each Seller, enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, or other laws affecting creditors’ rights generally, or by the effect of rules of law and equitable limitations on the availability of specific remedies (regardless of whether such enforceability is considered in a proceeding at law or in equity) (the “Enforceability Exceptions”).

 

(b) Owner has the full power and authority necessary to execute, deliver, and perform its obligations under the Acquisition Documents to be executed and delivered by it. The Acquisition Documents to which Owner is a party have been or will be, as the case may be, duly executed and delivered and constitute or will constitute the legal, valid, and binding obligations of Owner and enforceable in accordance with their respective terms, except as may be limited by the Enforceability Exceptions.

 

2.3 Absence of Conflicting Agreements or Required Consents. The execution, delivery, and performance by Sellers and the Owner of the Acquisition Documents to be executed and delivered by it (a) will not require the consent of or notice to any Governmental Authority or any other third party, (b) will not conflict with any provision of either Seller’s organizational documents (including articles of organization or operating agreements), (c) will not conflict with or result in a violation of any Law, ruling, judgment, order, or injunction of any court or Governmental Authority to which each Seller or the Owner is subject or by which each Seller and the Owner, or any of its rights, assets, or properties, (including the Rights and Assets) are bound, (d) will not conflict with, constitute grounds for termination of, result in a breach of, constitute a default under, require any notice under, or accelerate or permit the acceleration of any performance required by the terms of any contract, agreement, instrument, license, or permit to which each Seller or such Owner is a party or by which each Seller or such Owner or any of its rights, assets, or properties (including the Rights and Assets), are bound, and (e) will not create any Lien upon any of the Rights and Assets, or otherwise result in the acceleration of the maturity of any payment date of any of the Assumed Liabilities.

 

 

2.4 No Undisclosed Liabilities. Sellers have no Liabilities with respect to the Businesses, or any of the Rights and Assets except as incurred in the ordinary course of operating the Businesses.

 

2.5 Litigation and Claims. Except as listed on Schedule 2.5, (a) there are no claims, lawsuits, actions, arbitrations, or administrative or other proceedings pending by or against Sellers or the Owner with respect or related to the Businesses or the Rights and Assets, (b) to the Knowledge of each Seller, no such claim, lawsuit, action, arbitration, or administrative or other proceeding is threatened, (c) to the Knowledge of each Seller, there are no governmental or administrative investigations or inquiries pending that specifically involve the Businesses or the operation thereof, or the Rights and Assets, (d) there are no judgments against or consent decrees binding on either Seller or the Owner with respect to the Businesses or the Rights and Assets, or, to the Knowledge of either Seller, any licensed professional employed by or contracted for, or otherwise relating to the Businesses, (except for attorney investigation for defense of patent tied to one of the Products) and (e) no basis for any such matter exists that could reasonably be expected to have a material adverse effect on the Businesses.

 

2.6 No Violation of Law.

 

(a) With respect to the Rights and Assets, neither Sellers nor the Owner has been within the previous three (3) years or is not currently in violation of any applicable Law, order, injunction, or decree, or any other requirement of any Governmental Authority or court binding on it.

 

(b) With respect to the Rights and Assets, neither Sellers nor the Owner is currently subject to any Liability or disability as the result of a failure to comply with any requirement of a Law, order, injunction, or decree, or any other requirement of any Governmental Authority or court, and neither Sellers nor the Owner has received any notice of such noncompliance.

 

2.7 Licenses, Authorizations and Patents.

 

(a) Sellers and Owner, as applicable, are the holder of all valid licenses and other rights, permits, and authorizations required by Law or any Governmental Authority necessary to operate the Businesses, including any patents, and FDA approvals related to Current Products. Sellers and Owner, as applicable, have supplied a correct and complete list of all licenses, permits, patents for Current Products, authorizations, and FDA approvals for Current Products, and true, complete, and correct copies of any documentation evidencing the foregoing have been provided to Purchaser.

 

(b) No violation, default, order, or deficiency exists with respect to any of the items described in this Section 2.7. Neither Sellers nor Owner have received any notice of any action pending or recommended by any Governmental Authority having jurisdiction over the items described in this Section 2.7, either to revoke, limit, withdraw, or suspend any license, right, or authorization of Sellers, Owner or the Businesses.

 

2.8 Securities Matters.

 

(a) Owner acknowledges that the information supplied by Owner in the warranties contained herein will be relied upon by Purchaser in concluding that the common stock issued to Owner pursuant to Section 1.2(a)(ii) (“Stock Consideration”) has been issued pursuant to Section 4(a)(2) of the Securities Act or another exemption from the registration requirement of the Securities Act.

 

 

(b) Owner is:

 

(i) an “accredited investor” as defined in Rule 501(a) of Regulation D;

 

(ii) not receiving the Stock Consideration as a result of any “general solicitation” or “general advertising” (as those terms are defined in Regulation D); and

 

(iii) receiving the Stock Consideration for his own account with no intention of distributing the Stock Consideration or an amount thereof, or any arrangement or understanding with any other Person regarding the distribution of such Stock Consideration or otherwise.

 

(c) Owner is sufficiently aware of Purchaser’s business affairs and financial condition to reach an informed and knowledgeable decision to receive the Stock Consideration. Owner acknowledges that information regarding Purchaser is publicly available via the SEC’s website (www.sec.gov). Owner has made his own investment decision to receive the Stock Consideration based on his own knowledge and information which is publicly available, including Purchaser SEC documents, with respect to the Stock Consideration of Purchaser.

 

2.9 Inventories. All items of inventory and Products of Sellers consist, and will consist at the Closing, of items of a quality and quantity usable and saleable in the ordinary course of business, and shall not be subject to any prepaid orders by third parties.

 

2.10 Statements True and Correct. No representation or warranty made by Sellers or Owner in this Agreement or in any statement, certificate, or instrument to be furnished to Purchaser by Sellers pursuant to any Acquisition Document contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make these statements contained herein and therein not misleading.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to Sellers and Owner as follows:

 

3.1 Organization, Authority, and Capacity. Purchaser is a limited liability company organized, validly existing, and in good standing under the laws of the state of Texas. Purchaser has the full power and authority necessary to (i) execute, deliver, and perform its obligations under the Acquisition Documents to be executed and delivered by it and (ii) carry on its business as it has been and is now being conducted and to own and lease the rights, properties, and assets which it now owns or leases. Purchaser is duly qualified to do business and is in good standing in each jurisdiction in which a failure to be so qualified or in good standing would have a material adverse effect on its ability to perform its obligations under the Acquisition Documents to be executed and delivered by it.

 

3.2 Authorization and Validity. The execution, delivery, and performance of the Acquisition Documents to be executed and delivered by Purchaser have been duly authorized by all necessary action by Purchaser. The Acquisition Documents to be executed and delivered by Purchaser have been or will be, as the case may be, duly executed and delivered by Purchaser and constitute or will constitute the legal, valid, and binding obligations of Purchaser, enforceable in accordance with their respective terms, except as may be limited by the Enforceability Exceptions.

 

 

3.3 Absence of Conflicting Agreements or Required Consents. The execution, delivery, and performance by Purchaser of the Acquisition Documents to be executed and delivered by Purchaser (i) do not require the consent of or notice to any Governmental Authority or any other third party, (ii) will not conflict with any provision of Purchaser’s organizational documents, and (iii) will not conflict with or result in a violation of any Law, ruling, judgment, order, or injunction of any Governmental Authority to which Purchaser is subject or by which Purchaser or any of its rights, assets, or properties are bound.

 

3.4 Transferred IP. At all times after Closing, Purchaser and Guarantor shall use “Commercially Reasonable Efforts” efforts to keep any and all of the Transferred IP specified on Schedule 1.1(c) fully paid and recognized by applicable Governmental Agencies as the proper title holder of the foregoing with no limitations on use or loss of rights to same. For these purposes, “Commercially Reasonable Efforts” shall mean the exercise of prudent scientific and business judgment and a level of effort and resources consistent with the judgment, efforts and resources that the party who bears the performance obligation or a comparable third party in the industry would employ for assets of similar strategic importance and commercial value that result from its own research efforts taking into consideration conditions in effect at the time the party’s obligations are carried out. The obligations of Purchaser and Guarantor under this Section shall continue for the duration of the maximum period permitted by law applicable to each such item of Transferred IP (including any renewal thereof). In the event of a breach of this Section, Sellers and Owners shall be entitled to seek all remedies available under this Agreement, in law or in equity. The time limits under Article 8 below shall not apply to this Section.

 

ARTICLE 4

ADDITIONAL AGREEMENTS

 

4.1 Access to Information. At all times prior to the Closing, Sellers will afford the authorized representatives of Purchaser and its Affiliates access upon reasonable notice and during normal business hours to all of Sellers’ properties, assets, books, and records that relate to or concern the Rights and Assets. Sellers will also furnish such parties with such additional financial, operating, and other information relating to the Rights and Assets as such parties may from time to time reasonably request. Purchaser and its Affiliates shall also be allowed access, upon reasonable notice, to consult with the officers, employees, accountants, counsel, and agents of Sellers in connection with such investigation of the Rights and Assets. No such investigation shall diminish or otherwise affect any of the representations, warranties, covenants, or agreements of any party under this Agreement.

 

4.2 No-Shop. Unless and until this Agreement is terminated pursuant to Article 7, Sellers and Owner shall not directly or indirectly through any officer, director, employee, agent, intermediary, or otherwise, (a) solicit, initiate, or encourage submission of proposals or offers from any Person relating to any purchase of an interest in the Rights and Assets, or (b) participate in any discussions or negotiations regarding, or furnish to any other Person, any information with respect to, or otherwise respond to, cooperate or encourage, any effort or attempt by any other Person to purchase any interest in Sellers, in the Rights and Assets, or (c) approve or undertake any of the foregoing transactions without the prior written consent of Purchaser. If any Seller or any of its agents or intermediaries receives an offer or proposal relating to any purchase of an interest in Sellers, of the Rights and Assets, the recipient shall notify Purchaser of the receipt of such offer and shall disclose the terms thereof.

 

4.3 Affirmative Covenants of Sellers and Owner. From the date hereof until the earlier of the Closing Date or the termination of this Agreement, unless the prior written consent of Purchaser shall have been obtained, and except as otherwise expressly contemplated herein, Sellers and the Owner shall:

 

(a) use commercially reasonable efforts to preserve intact the rights, assets, properties, licenses, permits, patents, and FDA approvals,

 

 

(b) keep and maintain the Rights and Assets in their present condition, repair, and working order, except for normal depreciation and wear and tear, and maintain all insurance, rights, and licenses therein,

 

(c) keep in full force and effect present insurance policies or other comparable insurance coverage insuring the Rights and Assets, and

 

(d) notify Purchaser of (i) any event or circumstance which is reasonably likely to have a material adverse effect on the Rights and Assets or would reasonably be likely to cause or constitute a breach of any of either Seller’s representations, warranties, or covenants contained herein, (ii) any unexpected change in the normal course of business or in the operation of the Rights and Assets, and (iii) any governmental complaints, investigations, or hearings (or communications indicating that the same may be contemplated), adjudicatory proceedings, budget meetings, or submissions involving any aspect of the Rights and Assets, and keep Purchaser fully informed of such events and permit representatives of Purchaser and its affiliates to have prompt access to all materials prepared in connection therewith.

 

4.4 Negative Covenants of Sellers and Owner. From the date hereof until the earlier of the Closing Date or the termination of this Agreement, Sellers and the Owner will not do any of the following without the prior written consent of Purchaser, which consent shall not be unreasonably withheld:

 

(a) take any action that would (i) adversely affect the ability of any party to the Acquisition Documents to obtain any consents required for the transactions contemplated thereby, (ii) adversely affect the ability of any party hereto to perform their covenants and agreements under the Acquisition Documents, or (iii) adversely affect the ability of any party to consummate the transactions contemplated by the Acquisition Documents,

 

(b) impose, or suffer the imposition, on the Rights and Assets of any Lien, or permit any such Lien to exist,

 

(c) incur any Liability, except in the ordinary course of business and consistent with past practices,

 

(d) except for sales of inventory in the ordinary course of business and other than pursuant to the Acquisition Documents, sell, or enter into any contract to sell, any interest in any of the Rights and Assets,

 

(e) take any action, or omit to take any action, which would cause any of the representations and warranties contained in Article 2 to be untrue or incorrect.

 

4.5 Confidentiality, Public Announcements. Each party hereto agrees (i) not to disclose any aspect of the discussions, negotiations, terms, status, or conditions relating to the transactions contemplated herein to any third party other than their respective officers, directors, authorized employees, and authorized representatives, and as necessary in order to obtain any consent required hereunder, and then only on a need to know basis, (ii) to cause and require all such persons to whom such information is disclosed to abide by the provisions of this Section 4.5, and (iii) not to issue any press release or other general public announcement (including in any trade journal or other publication) of the transactions, in any case, without the prior written consent of the other party, in each case except to the extent that disclosure may be required by Law, in which case the party required to made such disclosure will give the other party prior written notice and an opportunity to review and comment upon such disclosure or press release prior to its disclosure or issuance. Sellers acknowledge that only Purchaser may issue a press release after the execution of this Agreement that discloses the existence of this Agreement, and may issue another press release promptly after the consummation of the Acquisition. Sellers hereby consent to the issuance of such press releases. In the event that the Acquisition is not consummated, any information concerning Sellers and the Businesses that Purchaser and its representatives may acquire during the course of negotiations, conducting due diligence, and transition planning with respect to the Acquisition shall be treated as confidential, and in the event the Acquisition is not consummated, all such information shall, upon request, be returned to Sellers or destroyed, with such destruction certified in writing by Purchaser.

 

 

4.6 Bulk Transfer Act. The parties hereby waive compliance with the bulk transfer provisions of the Uniform Commercial Code, or any similar law enacted in any jurisdiction, to the extent that it may be applicable to the transactions contemplated hereby.

 

4.7 Retained Liabilities. Sellers shall promptly pay and discharge any and all Retained Liabilities, as and when due. Sellers further covenant and agree that it will not take any action that is likely to adversely affect Purchaser’s or its Affiliate’s relationship with any third-party related to the Rights and Assets.

 

4.8 Conditions to Closing. Sellers (with respect to Article 5) and Purchaser (with respect to Article 6) agree to use their commercially reasonable efforts to satisfy the conditions to the Closing by August 1, 2023, and if not by such time, as soon thereafter as possible.

 

4.9 Risk of Loss. Sellers shall retain all risk of condemnation, destruction, loss, or damage due to fire or other casualty from the date of this Agreement until the Closing. If the condemnation, destruction, loss, or damage is such that the Rights and Assets are materially affected, then Purchaser shall have the right to terminate this Agreement.

 

4.10 Certain Tax Matters. Purchaser, on the one hand, and Sellers, on the other hand, shall provide the other party to this Agreement, at the expense of the requesting party, with such assistance as may reasonably be requested by any of them in connection with the preparation of any Tax Return, any audit or other examination by any Governmental Authority, or any judicial or administrative proceedings relating to Liability for Taxes, and each will retain for the applicable statute of limitations, and to provide the requesting party, any records or information that may be relevant to any of the foregoing.

 

4.11 Reasonable Assistance. To the extent that any rights under any contract, permit, or other Rights and Assets to be assigned to Purchaser hereunder may not be assigned without the consent of another Person which, despite either Seller’s commercially reasonable efforts, has not been obtained prior to the Closing, and Purchaser has, in its sole discretion, waived the closing condition in Section 5.3, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful. Sellers, at the request and sole cost and expense of Purchaser, shall use its commercially reasonable efforts at all times from and after the Closing Date to assist Purchaser in obtaining any such required consent(s) as promptly as possible. If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair Purchaser’s rights under the Rights and Assets in question so that Purchaser would not in effect acquire the benefit of all such rights, Sellers, to the maximum extent permitted by Law and the specific Rights and Assets, and at the sole cost and expense of Purchaser, shall (a) act on and after the Closing Date as Purchaser’s agent in order to obtain the benefits thereunder, and (b) cooperate, to the maximum extent permitted by Law and the specific Rights and Assets, with Purchaser in any other reasonable arrangement designed to provide such benefits to Purchaser, including any sublease or subcontract or similar arrangement.

 

 

4.12 Retention of Rights by Sellers and Owner. Whereas Purchaser is obtaining certain Rights and Assets from Owner and Sellers, and whereas those Rights and Assets include certain patent rights that fall within a field of use that is of interest to Purchaser and that also fall within a field of use that is of interest to Owner and Sellers, Purchaser, Owner and Sellers agree that Purchaser’s field of use shall include “collagen compositions for human wound care” and that Purchaser shall provide to Sellers and Owner a fully paid up, irrevocable, transferrable, and exclusive license to all fields other than Purchaser’s desired field of use for all patent rights assigned to Purchaser pursuant to this Agreement (to include for example, use in treating non-human animals and the like). Said license to Sellers and Owner shall include a first right, but not an obligation, to take action in the prosecution, prevention, or termination of any infringement falling within the licensed field of use. The license shall provide that Sellers and Owner shall notify Purchaser of any such action in advance, and keep Purchaser reasonably informed of the progress of any such actions. However, such actions shall be undertaken and directed by Sellers and/or Owner’s sole discretion and at Sellers’ and/or Owner’s cost. Thus, any and all compensation from any action brought by Sellers and/or Owner to enforce these rights shall be the sole property of Sellers and/or Owner. The license shall further provide that Purchaser will cooperate fully in any action brought by Sellers and/or Owner seeking to enforce the patent rights licensed to Sellers and/or Owner.

 

ARTICLE 5

CONDITIONS TO OBLIGATION OF PURCHASER

 

The obligation of Purchaser to consummate the Acquisition is subject to the satisfaction or waiver by Purchaser, except as otherwise set forth below, at or prior to the Closing, of each of the following conditions:

 

5.1 Representations and Warranties. The representations and warranties of Sellers and the Owner set forth in this Agreement, or any document or instrument delivered to Purchaser hereunder, shall be true and correct in all material respects as of the Closing Date with the same force and effect as if such representations and warranties had been made at and as of the Closing Date; provided that, for purposes of this Section 5.1, if any representation or warranty made by Sellers and Owner includes within its terms a materiality qualifier, such representation or warranty shall be true and correct in all respects on and as of the Closing Date; provided further that, with respect to any of such representations and warranties referring to a state of facts existing on a specified date prior to the Closing Date, it shall be sufficient if at the Closing Date such representation and warranty continues to describe accurately the state of facts that existed on the date so specified.

 

5.2 Performance; Covenants. All of the terms, covenants, and agreements of the Acquisition Documents to be complied with or performed by Sellers at or prior to Closing shall have been complied with and performed in all material respects, including, but not limited to, the delivery of the following documents:

 

(a) a certificate of good standing for Sellers issued by the state or other jurisdiction of its formation or incorporation, and operation, as applicable, and dated within three (3) business days of the Closing Date,

 

(b) a Bill of Sale executed by Sellers, in the form attached hereto as Exhibit 5.2(b),

 

(c) an IP Assignment Agreement executed by Sellers, the forms of which are attached hereto as Exhibit 5.2(c) (the “IP Assignment and Assumption Agreement”)

 

(d) a certificate dated as of the Closing Date signed by a duly authorized officer of Sellers certifying the satisfaction of the conditions set forth in Section 5.1 and Section 5.4 and that Sellers have duly performed and complied in all material respects with all of the covenants and agreements of this Agreement to be performed by it prior to Closing,

 

 

(e) written consents of all third parties necessary for the consummation of the transactions contemplated by the Acquisition Documents,

 

(f) a professional services agreement executed by Owner, and a professional services agreement executed by Anita Petito, each in the forms substantially attached hereto as Exhibit 5.2(f);

 

(g) any documents needed to evidence the assignment and assumption of the License Agreement and contract cancellations contemplated by Section 1.9, forms of which are attached hereto as Exhibit 5.2(g); and

 

(h) such other documents as may be reasonably necessary to consummate the transactions contemplated by this Agreement, as requested by Purchaser or its counsel.

 

5.3 Necessary Consents and Approvals. To the extent required, Purchaser and Sellers shall have obtained all regulatory approvals, governmental licenses, consents of Governmental Authorities, and permits to which Purchaser shall be legally entitled to continue to use the Rights and Assets as currently used by the Businesses so long as it properly files necessary applications and cooperates with state regulatory bodies. The parties shall have provided all necessary notices under applicable Law, and all waiting periods required by Law shall have expired, necessary in order for Purchaser and Sellers to consummate the Acquisition.

 

5.4 No Material Adverse Change. There shall not have occurred any material adverse change in the Rights and Assets or in the Liabilities in each case between the date hereof and the Closing Date, and a certificate of a duly authorized officer of Sellers shall have been delivered to Purchaser to such effect.

 

5.5 No Injunction, Etc. No action, proceeding, investigation, or legislation shall have been instituted, threatened, or proposed before any court, Governmental Authority, or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to or arises out of, this Agreement or the consummation of the Acquisition, or which is related to or arises out of the business or operations of Sellers, if such action, proceeding, investigation, or legislation, in the reasonable judgment of Purchaser or its counsel, would make it inadvisable to consummate such transactions.

 

5.6 Due Diligence. Purchaser shall in all respects be reasonably satisfied with the results of its due diligence investigation of the Rights and Assets. Additionally, Purchaser shall in all respects be reasonably satisfied with its continuing review of matters contained in the Schedules.

 

5.7 Lien Releases. Purchaser shall have received evidence, satisfactory to it, that Sellers have identified the Liens on the Rights and Assets and discharged all such Liens.

 

 

ARTICLE 6

CONDITIONS TO OBLIGATION OF SELLERS AND OWNER

 

The obligation of Sellers and Owner to close the Acquisition is subject to the satisfaction or waiver by Sellers and Owner, except as otherwise set forth below, at or prior to the Closing, of each of the following conditions:

 

6.1 Representations and Warranties. The representations and warranties of Purchaser set forth in this Agreement, or any document or instrument delivered to any party hereunder, shall be true and correct in all material respects as of the Closing Date with the same force and effect as if such representations and warranties had been made at and as of the Closing Date; provided that, for purposes of this Section 6.1, if any representation or warranty made by Purchaser includes within its terms a materiality qualifier, such representation or warranty shall be true and correct in all respects on and as of the Closing Date; provided further that, with respect to any of such representations and warranties referring to a state of facts existing on a specified date prior to the Closing Date, it shall be sufficient if at the Closing Date such representation and warranty continues to describe accurately the state of facts that existed on the date so specified.

 

6.2 Performance; Covenants. All of the terms, covenants, and agreements of this Agreement to be complied with or performed by Purchaser at or prior to the Closing shall have been complied with and performed in all material respects, including, but not limited to delivery of the following documents:

 

(a) the Bill of Sale

 

(b) the IP Assignment and Assumption Agreement executed by Purchaser,

 

(c) a certificate dated as of the Closing Date signed by a duly authorized officer of Purchaser certifying the satisfaction of the conditions set forth in Section 6.1 and that Purchaser has duly performed and complied in all material respects with all of the covenants and agreements of this Agreement to be performed by Purchaser prior to Closing,

 

(d) a professional services agreement with Owner, and a professional services agreement with Anita Petito, executed by Purchaser, and

 

(e) such other documents as may be reasonably necessary to consummate the transactions contemplated by this Agreement, as reasonably requested by Sellers or its counsel.

 

6.3 No Injunction, Etc. No action, proceeding, investigation, or legislation shall have been instituted, threatened, or proposed before any court, Governmental Authority, or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to or arises out of, this Agreement or the consummation of the Acquisition, if such action, proceeding, investigation, or legislation, would lead a reasonable person to conclude that it would be inadvisable to consummate such transactions.

 

6.4 Payments. Purchaser shall have delivered the Closing Payment to Sellers and Owner in accordance with Section 1.2.

 

ARTICLE 7

TERMINATION AND POST-CLOSING COVENANTS

 

7.1 Right of Termination. This Agreement and the Acquisition may be terminated at any time prior to the Closing Date:

 

(a) by the mutual written consent of Purchaser and Sellers,

 

(b) by Purchaser in the event that the conditions set forth in Article 5 shall not have been satisfied or waived by August 1, 2023, unless such satisfaction shall have been frustrated or made impossible by any act or failure to act of Purchaser,

 

(c) By Sellers or Purchaser if the Closing shall not have occurred by August 1, 2023,

 

 

(d) By Purchaser in accordance with Section 4.9, or

 

(e) by either Purchaser or Sellers in the event (i) consent of any Governmental Authority required for consummation of the Acquisition and the other transactions contemplated hereby shall have been denied by final, non-appealable action of such authority or if any action taken by such authority is not appealed within the time limit for appeal or (ii) any Law or order permanently restraining, enjoining or otherwise prohibiting the consummation of the Acquisition shall have become final and non-appealable.

 

7.2 Effect of Termination. Except as set forth in this Section 7.2, in the event of termination in accordance with Section 7.1, this Agreement shall become void and of no further force or effect, without any liability on the part of any of the parties hereto or their respective owners, directors, officers, employees, heirs, estates, or agents, except the obligations of each party to preserve the confidentiality of documents, certificates, and information furnished to such party pursuant thereto and for any obligation or liability of any party based on or arising from any breach or default by such party with respect to its representations, warranties, covenants, or agreements prior to the effective date of termination. The provisions of Section 4.2, Section 7.2, Article 9 and Article 10 will survive any such termination.

 

7.3 Non-Competition.

 

(a) Sellers and Owner acknowledge that the Rights and Assets in its possession would enable it to establish goodwill with the patients, customers, potential customers, and suppliers who provide products and services on behalf of the Businesses or who receive products and services from the Businesses and that the Rights and Assets constitute a valuable asset of the Businesses. Sellers and Owner further acknowledge that they have developed relationships with certain of the Businesses’ suppliers, contractors or potential contractors, consultants or potential consultants, and sources or potential sources of product usage. Accordingly, Sellers and Owner agree that it and its Affiliates will comply with the terms within this Section 7.3 for the period beginning on the Effective Date and ending on the fifth (5th) anniversary thereof. During such five (5)-year period, Sellers and Owner agree that it and its Affiliates shall not, directly or indirectly, engage in, render services to or become interested in any manner, as manager, employee, officer, consultant, owner, or partner, or through stock ownership (other than holding less than two percent (2%) of the outstanding equity securities of a Person having securities that are listed for trading on a national securities exchange), or otherwise, either alone or in association with others, in any business that develops, provides and/or supplies collagen based products for human wound care use similar to those currently owned or under development by Purchaser as of the Effective Date in the United States (the “Restricted Territory”) with respect to the Market (as later defined). By way of example, and without limitation, Sellers and Owner may consult or contract with a company that participates in the Market, if such consultation or contract does not relate to the Market, such as veterinary or other markets related to the Retained Assets. The foregoing restrictive covenant shall not apply to any of the Retained Assets. During the five (5) year period beginning with the Effective Date, Purchaser and its Affiliates shall not, directly or indirectly, utilize any of the Transferred IP in any market included within the scope of the Retained Assets. For the avoidance of doubt, Purchaser and its Affiliates may utilize the Transferred IP on human wounds including below the skin wounds and damaged skin as these applications are considered by the parties to be inclusive within the general understanding of the term “wound” utilized within this Agreement and applied for human use only.

 

(b) Sellers and Owner acknowledge and agree that the restrictive covenants set forth above are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void, or unenforceable in any court of competent jurisdiction, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement.

 

 

(c) The parties hereto agree that it is their intention that the restrictive covenants be enforced in accordance with their terms to the maximum extent possible under applicable law. The parties further agree that, in the event any court of competent jurisdiction shall find that any of the foregoing provisions is invalid or unenforceable, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the parties in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws.

 

(d) Without limiting the remedies available to Purchaser, the parties hereto acknowledge that a breach of any of the covenants contained herein may result in material, irreparable injury for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof by Sellers, Owner or any Affiliate of Sellers and/or Owner, Purchaser shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Sellers and/or Owner from engaging in activities prohibited by this Agreement or such other relief as may be required to specifically enforce any of the covenants hereof without the necessity of posting any bond.

 

7.4 Agreements Regarding Guarantor Common Stock.

 

(a) Owner irrevocably agrees, in consideration of the benefit that the transactions contemplated hereby will confer, that following the Closing, Owner shall not transfer any shares of the common stock received as Stock Consideration (the “Lockup Securities”), at any time during the periods commencing on the Effective Time and ending on the timeframes set forth in Section 1.2(b) (the “Lockup Period”) without Guarantor’s prior written consent. For purposes of this Section 7.4, “transfer” (and all correlative terms) means, as to any Lockup Securities, a direct or indirect (including through the use of any derivative or swap instrument or arrangement) sale, assignment, conveyance, gift, exchange, pledge, encumbrance, contract to sell, lease or other disposition or transfer (or offer to do any of the foregoing) of such Lockup Securities, whether effected voluntarily, involuntarily or by operation of Law.

 

(b) Owner agrees and consents to the entry of stop transfer instructions with Guarantor’s transfer agent and registrar against the transfer of the Lockup Securities, except in compliance with the restrictions set forth in this Agreement. In furtherance of the foregoing, any book entries evidencing shares of Guarantor’s common stock subject to the provisions of this Agreement shall include legends legally required, including a legend to the effect that the shares of common stock have not been registered under the Securities Act and are subject to certain legal and contractual restrictions on transfer (including lockup restrictions), and similar instructions shall be provided to Guarantor’s transfer agent. Guarantor will provide reasonable cooperation to facilitate any transfer by Owner of the Lockup Securities (in accordance with the limitations and restrictions set forth herein).

 

(c) Each certificate or book-entry notation representing any common stock of Guarantor issued hereunder shall bear the following legends (in addition to any other legends required by law, Guarantor’s governing documents or any other agreement to which such holder of common stock in Guarantor is a party):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

 

ARTICLE 8

INDEMNIFICATION

 

8.1 Indemnification by Sellers and Owner.

 

(a) Subject to Sections 8.3 through 8.5, Owner (only as to the parts of this Agreement applicable to Owner as set forth in the preamble) and Sellers shall jointly and severally indemnify, hold harmless, and defend Purchaser, and its officers, directors, agents, and Affiliates, from and against any and all demands, claims, actions, or causes of action, assessments, losses, damages, recoupments and repayments, liabilities, costs, and expenses (including, but not limited to, reasonable attorneys’ fees and costs of investigation) (collectively, “Losses”), associated with, suffered, or incurred by reason of, or arising out of any of the following:

 

(i) the Retained Liabilities or the Retained Assets,

 

(ii) the inaccuracy in or breach of any representation or warranty of either Seller contained herein or in any Acquisition Document to be true and correct when made or deemed made under the terms hereof, or the breach by either Seller of any warranty contained herein or in any Acquisition Document,

 

(iii) the breach of any covenant or agreement of either Seller contained in this Agreement or any other Acquisition Documents,

 

(iv) any Liability arising out of Purchaser’s use of the Rights and Assets prior to the Effective Time, (subject to and except as provided in Section 1.6 above); and

 

(b) No claim for indemnification with respect to any alleged misrepresentation or breach of warranty may be made under Section 8.1(a)(ii) after the thirtieth (30th) month from of the Closing Date; provided that, the right to indemnification shall extend beyond such period (i) with respect to any specific claim for indemnification for which written notice, specifying in reasonable detail the nature of the claim, was given to Seller during such period but shall expire on the expiration of the applicable statutes of limitations unless an action has been brought with respect thereto, (ii) with respect to any claim brought for a misrepresentation or breach of Section 2.7, until the Liability to which any such claim may relate is barred by all applicable statutes of limitations, and (iii) indefinitely with respect to any claim brought for a misrepresentation or breach of Sections 2.1, 2.2, or 2.3.

 

8.2 Indemnification by Purchaser.

 

(a) Subject to Sections 8.3 through 8.5, Purchaser and Guarantor shall jointly and severally indemnify, hold harmless, and defend Sellers, and any of Sellers’ officers, directors, agents, and at all times after the date hereof from and against any and all Losses suffered or incurred by any such party by reason of, or arising out of any of the following:

 

(i) the Assumed Liabilities,

 

 

(ii) the failure of any representation or warranty contained in Article 3 hereof or in any Acquisition Document to be true and correct when made or deemed made or the breach by Purchaser of any warranty contained in Article 3 hereof in any Acquisition Document or any document or instrument delivered by Purchaser in connection therewith,

 

(iii) the breach of any covenant, payment term or agreement of Purchaser contained in this Agreement or the Acquisition Documents, and

 

(iv) any Liability arising out of Purchaser’s use of the Rights and Assets subsequent to the Effective Time. (subject to and except as provided in Section 1.6 above).

 

(b) No claim for indemnification with respect to any alleged misrepresentation or breach of warranty may be made under Section 8.2(a)(ii) after the thirtieth (30th) month from the Closing Date; provided that, the right to indemnification shall extend beyond such period (i) with respect to any specific claim for indemnification for which written notice was given to Purchaser during such period, but shall expire on the expiration of the applicable statutes of limitations unless an action has been brought with respect thereto, and (ii) indefinitely with respect to any claim brought for a misrepresentation or breach of Sections 3.1, 3.2, or 3.3.

 

8.3 Notice and Opportunity to Defend. If any party under this Agreement has notice of facts or circumstances that could reasonably result in a claim for indemnification under this Article 8 for the benefit of such party (an “Indemnified Party”), then such Indemnified Party promptly after obtaining notice thereof shall give the party from which indemnification may be sought (the “Indemnifying Party”) written notice of any such claim. No Indemnified Party shall be subject to any liability for a delay in the delivery of such notice to the extent such delay does not compromise or prejudice any right of the Indemnifying Party. Following receipt of such notice, the Indemnifying Party may undertake the defense of such claim if (i) the Indemnifying Party gives written notice to such Indemnified Party that the Indemnifying Party intends to undertake such defense and that the Indemnifying Party will indemnify the Indemnified Party against all Losses resulting from or relating to such claim pursuant to this Article 8 and (ii) the claimant making each claim does not seek an injunction or other equitable relief as a primary element of relief. If assumed by the Indemnifying Party, the defense of the claim will be conducted actively and diligently by legal counsel reasonably acceptable to the Indemnified Party or such Indemnified Party may re-undertake the defense thereof at the expense of the Indemnifying Party. If the Indemnifying Party assumes the defense of a claim, the Indemnified Party may, by counsel of its choice, participate in such defense at their own expense. The Indemnified Party shall furnish to the Indemnifying Party, in reasonable detail, such information as the Indemnified Party may have with respect to such claim, including all records and similar materials that are reasonably required in the defense of such claim. If, within ten (10) days after notice of any such claim, the Indemnifying Party has not notified the Indemnified Party of its intention to defend the claim, then each Indemnified Party will (without further notice to the Indemnifying Party) have the right to undertake the defense of such claim and the Indemnifying Party shall nonetheless bear the costs and Losses of the Indemnified Party to the extent the Indemnifying Party is responsible for such costs and loses pursuant to the terms hereof. The Indemnifying Party may elect to participate in such proceedings, negotiations, or defense at any time at its own expense. No Indemnified Party shall settle any such claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld. No Indemnifying Party shall settle any claim it is defending under this Section 8.3 without the consent of the Indemnified Party, which consent will not be unreasonably withheld, unless the settlement provides for (1) no relief other than monetary damages against which the Indemnified Party is fully indemnified and (2) an unconditional release of the Indemnified Party.

 

 

8.4 Indemnification Threshold and Right to Offset. To the extent permitted by Law, the parties agree that no Indemnifying Party shall be required to indemnify the Indemnified Party under Section 8.1(a)(ii) or 8.2(a)(ii) unless and until the amount of the Losses for which a right of indemnification is provided under the relevant Section, when aggregated with all other Losses for which indemnification is sought by any and all Indemnified Parties against any and all Indemnifying Parties, exceeds Twenty Five Thousand Dollars ($25,000), at which time rights to indemnification for Losses may be asserted for the full amount of any and all such Losses. To the extent Purchaser is the Indemnified Party, Purchaser may offset amounts owed for Losses incurred from the Installment Payments, Earnouts, and any royalties otherwise which may be owed to Owner pursuant to the professional services agreement attached in Exhibit 5.2(f).

 

8.5 Survival. The representations and warranties of the parties contained in the Acquisition Documents or in any document or instrument delivered in connection therewith shall survive the Closing, subject to the time limits on claims as provided in Sections 8.1(b) and 8.2(b), and shall not be extinguished thereby notwithstanding any investigation or other examination by any party.

 

8.6 Liability Cap. Purchaser and Guarantor collectively on the one hand, and Owner on the other hand, shall have a maximum liability under this Article 8 specifically and this Agreement generally of Three Million Dollars ($3,000,000), and Applied shall have a maximum liability under this Article 8 and this Agreement generally of Seven Million Dollars ($7,000,000) (as applied to each, the “Liability Cap”) for any and all damages reduced to final unappealable judgment. In no event shall any party hereto be liable for any damages (incidental, consequential, punitive or otherwise) in excess of the Liability Cap, and for purposes of clarity, Hymed shall not be obligated to fund any indemnification obligation which may otherwise be required pursuant to this Section. Further, Owner and Applied shall provide copies of insurance policies which are in place to cover their respective Liability Cap upon written request of Purchaser. Upon proof of said insurance, the collective Liability Cap of Purchaser and Guarantor under this Section shall increase to match the aggregate of the respective Liability Caps of Owner and Applied in an amount equal to said insurance coverage of Owner and Applied, respectively.

 

ARTICLE 9

CERTAIN DEFINITIONS

 

9.1 Definitions. Except as otherwise provided herein, the capitalized terms set forth below (and words of similar origin) have the following meanings:

 

“Acquisition” has the meaning set forth in the Recitals.

 

“Acquisition Documents” means this Agreement and the other documents and instruments to be delivered pursuant to this Agreement.

 

“Affiliate” means a Person controlling, controlled by, or under common control with another Person, with “control” having the meaning provided by Rule 405 of the Securities Act, as amended, as in effect on the date hereof.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Allocation Referee” has the meaning set forth in Section 1.4.

 

“Allocation Schedule” has the meaning set forth in Section 1.4.

 

“Assignment and Assumption Agreement” has the meaning set forth in Section 5.2(c).

 

 

“Assumed Liabilities” has the meaning set forth in Section 1.6.

 

“Businesses” has the meaning set forth in the Recitals.

 

“Closing” has the meaning set forth in Section 1.7(a).

 

“Closing Payment” has the meaning set forth in Section 1.2(a).

 

“Closing Date” has the meaning set forth in Section 1.7(a).

 

“Code” means the Internal Revenue Code of 1986, as amended, and its successor and the rules and regulations promulgated thereunder.

 

“Effective Time” has the meaning set forth in Section 1.7(b).

 

“Enforceability Exceptions” has the meaning set forth in Section 2.2(a).

 

“Exhibits” means the Exhibits so marked, copies of which are attached to this Agreement. Such Exhibits are hereby incorporated by reference herein and made a part hereof, and may be referred to in this Agreement and any other related instrument or document without being attached hereto.

 

“GAAP” means generally accepted accounting principles as employed in the United States of America, applied consistently with prior periods.

 

“Governmental Authority” means any federal, state, or local governmental agency, department, or division, including any entity contracting with any of the foregoing (such as carriers, fiscal intermediaries, and fiscal agents) with responsibility for regulating, licensing, certifying, surveying, authorizing, permitting, paying, recouping overpayments, fining, excluding, or taking any enforcement action against health care service providers providing the items and services that Sellers or the Businesses provide or otherwise having jurisdiction over the Acquisition.

 

“Indemnified Party” has the meaning set forth in Section 8.3.

 

“Indemnifying Party” has the meaning set forth in Section 8.3.

 

“Knowledge of Purchaser”, or words of similar import, means the actual knowledge of Purchaser’s CEO as of the date hereof or the Closing Date, and the knowledge that each such person would have reasonably obtained after making such inquiry with respect to the particular matter in question as a prudent businessperson would have made or exercised in the management of his or her business affairs.

 

“Knowledge of Sellers”, or words of similar import, means the actual knowledge of each of Dr. George D. Petito and Anita Petito as of the date hereof or the Closing Date, and the knowledge that each such person would have reasonably obtained after making such inquiry with respect to the particular matter in question as a prudent businessperson would have made or exercised in the management of his or her business affairs.

 

“Law” means any local, state, federal, or foreign code, law, ordinance, regulation, reporting, ruling or licensing requirement, rule, or statute applicable to a Person or its assets, Liabilities or business, including those promulgated, interpreted or enforced by any Governmental Authority.

 

 

“Liability” means any direct or indirect, primary or secondary, liability, indebtedness, obligation, fine, penalty, cost or expense (including costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute or contingent, known or unknown, liquidated or unliquidated, matured or unmatured, or otherwise.

 

“Lien” means any conditional sale agreement, covenant, default of title, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, right of way, security interest, title retention or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatsoever of, on, or with respect to any right, title or interest in or to any right, asset or property.

 

“Losses” has the meaning set forth in Section 8.1(a).

 

“Market” means collagen based human wound care products.

 

“Owner” has the meaning set forth in the Preamble.

 

“Person” means a natural person or any legal, commercial or governmental entity, including any Governmental Authority, such as, but not limited to, a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, business association, group acting in concert, or any person acting in a representative capacity.

 

“Purchase Price” has the meaning set forth in Section 1.2(a).

 

“Purchaser” has the meaning set forth in the Preamble.

 

“Representative” means, with respect to any Person, any director, manager, officer, employee or agent of such Person.

 

“Retained Assets” has the meaning set forth in Section 1.3.

 

“Retained Liabilities” has the meaning set forth in Section 1.5.

 

“Rights and Assets” has the meaning set forth in Section 1.1.

 

“Schedules” means the Schedules so marked, copies of which are attached to this Agreement.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933 and all regulations promulgated thereunder.

 

“Sellers” has the meaning set forth in the Preamble.

 

“Stock Consideration” has the meaning set forth in Section 2.8(a).

 

 

“Tax” means any federal, state, county, local, or foreign taxes, charges, fees, levies, imposts, duties, or other assessments, including income, gross receipts, excise, employment, sales, use, transfer, recording license, payroll, franchise, severance, documentary, stamp, occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital stock, paid-up capital, profits, withholding, Social Security, single business, unemployment, disability, real property, personal property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax or governmental fee of any kind whatsoever, imposed or required to be withheld by the United States or any state, county, local or foreign government or subdivision or agency thereof, whether disputed or not, including any interest, penalties, and additions imposed thereon or with respect thereto, and including any Liability for Taxes of another Person pursuant to a contract, as a transferee or successor, under Treasury Regulation Section 1.1502-6 or analogous state, local, or foreign law or otherwise.

 

“Tax Return” means any return, report, filing, declaration or statement relating to Taxes that are required to be filed, recorded, or deposited with any Governmental Authority, including any attachment thereto or amendment thereof.

 

9.2 Use of Singular and Plural. Any singular term in this Agreement shall be deemed to include the plural and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.”

 

ARTICLE 10

MISCELLANEOUS PROVISIONS

 

10.1 Notices. Any notice sent in accordance with the provisions of this Section 10.1 shall be deemed to have been received on the date which is (a) the date of proper posting, if sent by certified U.S. mail or by Express U.S. mail or recognized overnight courier or (b) the date on which sent, if sent by electronic mail, with confirmation and with the original to be sent by certified U.S. mail or recognized overnight courier, addressed as follows:

 

If to Sellers:

The Hymed Group Corporation

Applied Nutritionals, LLC

1817 Apple Tree Lane

Bethlehem, Pennsylvania 18015

Attention: Dr. George D. Petito

 

Copy to Counsel (which shall not constitute notice):

Corriere and Andres, LLC

433 E. Broad Street

Bethlehem, Pennsylvania 18016

Attention: Edward J. Andres, Esq.

 

If to Purchaser:

Sanara MedTech Applied Technologies, LLC

1200 Summit Avenue, Suite 414

Fort Worth, Texas 76102

Attention: Zachary Fleming, CEO

 

 

Copy to Counsel
(which shall not constitute notice):	Gachassin Law Firm (A limited liability company)

400 E. Kaliste Saloom Road, Suite 6100

Lafayette, Louisiana 70508

Attention: Benjamin Gaines, Esq.

 

Any party hereto may change its address specified for notices herein by designating a new address by notice in accordance with this Section 10.1.

 

10.2 Expenses. Each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder. Each party represents and warrants to the other parties that neither it nor any of its employees, Affiliates, agents or other representatives has incurred any Liability for brokerage or finders’ fees or agents’ commissions or any similar payment in connection with the Acquisition.

 

10.3 Further Assurances. Each party covenants that at any time, and from time to time, after the Closing, it will execute such additional instruments and take such actions as may be reasonably requested by the other parties to confirm or perfect or otherwise to carry out the intent and purposes of this Agreement.

 

10.4 Waiver; Remedies Cumulative. Any failure on the part of any party to comply with any of its obligations, agreements, or conditions hereunder may be waived by any other party to whom such compliance is owed only by an agreement in writing signed by the parties against whom enforcement of such waiver is sought. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative.

 

10.5 Assignment. This Agreement shall not be assignable by any of the parties hereto without the written consent of all other parties; provided that, Purchaser may assign its rights and obligations under this Agreement without the consent of the other parties to any direct or indirect subsidiary or Affiliate of Purchaser or to any party that acquires (directly or indirectly) substantially all of the assets or interests of Purchaser or any successor entity resulting from a merger or consolidation of or with Purchaser. No such assignment shall relieve Purchaser or Guarantor of its obligations hereunder.

 

10.6 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, executors, administrators, successors, and permitted assigns. This Agreement shall survive the Closing and not be merged therein.

 

10.7 Headings. The Section and other headings in this Agreement are inserted solely as a matter of convenience and for reference, and are not a part of this Agreement.

 

10.8 Entire Agreement. All Schedules and Exhibits attached to this Agreement are by reference made a part hereof. For purposes of this Agreement, items disclosed on each Schedule must specifically reference the provision within the Agreement to which each disclosure relates. This Agreement and the Exhibits, Schedules, certificates, and other documents delivered pursuant hereto or incorporated herein by reference, contain and constitute the entire agreement among the parties and supersede and cancel any prior agreements, representations, warranties, or communications, whether oral or written, among the parties relating to the transactions contemplated by this Agreement. Neither this Agreement nor any provision hereof may be changed, discharged, or terminated orally, but only by an agreement in writing signed by the party against whom or which the enforcement of such change, discharge or termination is sought.

 

 

10.9 Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the Laws of the state of Delaware, without regard to any applicable conflicts of Laws. The provisions of this Agreement are severable and the invalidity of one or more of the provisions herein shall not have any effect upon the validity or enforceability of any other provision.

 

10.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[SIGNATURE PAGE TO IMMEDIATELY FOLLOW.]

 

[REMAINDER OF PAGE INTENTIONALLY BLANK.]

 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf as of the day and year first above written.

 

	PURCHASER:
	SANARA MEDTECH APPLIED TECHNOLOGIES, LLC
	By:	Sanara MedTech Inc., its Manager
	By:	/s/ Zachary Fleming
		Zachary Fleming, CEO
	GUARANTOR:
	SANARA MEDTECH INC.
	By:	/s/ Zachary Fleming
		Zachary Fleming, CEO
	SELLERS:
	THE HYMED GROUP CORPORATION
	By:	/s/ Dr. George D. Petito
		Dr. George D. Petito, President
	APPLIED NUTRITIONALS, LLC
	By:	/s/ Dr. George D. Petito
		Dr. George D. Petito,
		Managing Director
	OWNER:
		/s/ Dr. George D. Petito
		Dr. George D. Petito

 

 

INDEX OF SCHEDULES

 

Schedule 1.1(b)	Products
Schedule 1.1(c)	Transferred Intellectual Property
Schedule 1.3	Retained Assets
Schedule 1.9	Terminated Agreements
Schedule 2.5	Litigation and Claims

 

 

INDEX OF EXHIBITS

 

Exhibit 5.2(b)	Bill of Sale
Exhibit 5.2(c)	IP Assignment and Assumption Agreement
Exhibit 5.2(f)	Dr. George D. Petito Agreement; Anita Petito Agreement
Exhibit 5.2(g)	Assignment and Assumption Agreement (Contracts) and Contract Cancellations

 

 

Exhibit 10.1

 

CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT, MARKED AT THE APPROPRIATE PLACE WITH FIVE ASTERISKS [*****], HAS BEEN OMITTED IN RELIANCE ON REGULATION S-K, ITEM 601(B)(10)(IV) BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) THE TYPE THAT THE REGISTRANT TREATS AS CONFIDENTIAL.

 

PROFESSIONAL SERVICES AGREEMENT

 

THIS PROFESSIONAL SERVICES AGREEMENT (the “Agreement”) is signed by the Parties and to become effective as of the 1st day of August, 2023 (the “Effective Date”), by and between SANARA MEDTECH INC., a Texas Corporation (“Company”), and DR. GEORGE D. PETITO (“Inventor”). Company and Inventor are sometimes referred to herein, individually as “Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, pursuant to that certain Asset Purchase Agreement between Company, Sanara MedTech Applied Technologies, LLC (“SMAT”), entities owned by Inventor, and Inventor individually, dated August 1st, 2023 (“Asset Purchase Agreement”), SMAT has purchased the rights to certain products that were owned, and were under development, by Inventor; and

 

WHEREAS, Company desires to utilize Inventor’s services to provide professional services, to continue development of products already in development, and for the research, development, formulation, invention, and manufacturing of any future products (“Services”); and

 

WHEREAS, Inventor desires to be so engaged by Company.

 

NOW, THEREFORE, for and in consideration of the mutual covenants in this Agreement, Company and Inventor agree and contract as follows:

 

ARTICLE I

PURPOSE OF AGREEMENT

 

1.1 Purpose. The purpose of this Agreement is to define the relationship between Company and Inventor. It is agreed and understood by and between the Parties hereto that Inventor is associated with Company only for the purposes and to the extent set forth herein, and Inventor shall be an independent contractor and not an employee of Company. This Agreement shall not be construed as an agreement of employment, a partnership or any other form of business entity. It is further agreed that Inventor is responsible for the payment of all taxes due and any other statutory obligations which may be created as a result of this Agreement, and Company shall have no obligation whatsoever to provide any salaries, benefits or privileges of any kind or nature to Inventor or Inventor’s employees or contractors save and except for the compensation paid to Inventor in accordance with the terms of this Agreement.

 

ARTICLE II

INVENTOR OBLIGATIONS AND DUTIES

 

2.1 Services. Inventor shall provide Services to and on behalf of Company and as requested by Company, and the time, manner, and nature of such services shall be as mutually agreed in advance by the parties for the purposes set forth in the Recitals. Inventor shall provide Services in a prompt and professional manner, using personnel of required skill, experience, and qualification, in accordance with the terms and conditions of this Agreement.

 

 

2.2 Rules and Regulations. Inventor agrees to abide by all rules, regulations and guidelines provided by Company. Company may from time to time amend, add or delete rules, regulations or guidelines at the Company’s sole discretion and such amendment will not affect the enforceability or terms of this Agreement. In the event of a conflict between this Agreement and the rules, regulations and guidelines provided by Company, the terms of this Agreement shall control.

 

ARTICLE III

TERM AND TERMINATION

 

3.1 Term. The term of this Agreement shall be for three (3) years, beginning on the Effective Date (“Initial Term”). Thereafter, this Agreement shall automatically renew for successive period(s) of one (1) month unless otherwise terminated herein (the “Renewal Term(s)”). (The Initial Term and the Renewal Term(s) collectively being the “Term”).

 

3.2 Termination.

 

(a) This Agreement shall terminate upon the occurrence of any of the following:

 

(1) Death of Inventor;

 

(2) Inventor’s inability to provide Services on account of disability and/or incapacity for a period of time greater than six (6) months;

 

(3) Termination by Company “For Cause” (as defined herein);

 

(4) Termination by Inventor “For Cause” (as defined herein).

 

(b) After the Initial Term, either Party may terminate this Agreement at any time, without cause or penalty, by providing at least ninety (90) days advance written notice.

 

(c) “For Cause” shall mean the following:

 

(1) Applied by Company, shall mean; (i) gross negligence by Inventor in the performance of Services; or (ii) breach of this Agreement and/or any term and/or provision of this Agreement and failure to cure such breach after reasonable notice.

 

(2) Applied by Inventor, shall mean; (i) Company’s failure to pay the consideration as set forth in this Agreement, (ii) Company’s breach of this Agreement and/or any term and/or provision of this Agreement and its failure to cure after reasonable notice.

 

3.3 Obligations Upon Termination. Upon termination of this Agreement, Inventor shall be entitled to receive compensation accrued through the date of termination, but not yet paid by Company. The provisions of Article 5 and Article 6, and any other rights or obligations which by their nature survive termination or expiration of this Agreement, shall survive the expiration or earlier termination of this Agreement. Upon the termination or expiration of this Agreement for any reason, Inventor shall (1) immediately return and deliver to Company any and all Confidential Information (as defined below); (2) deliver to Company all documents, materials, and work product, whether or not complete, prepared by or on behalf of Inventor in the course of performing the Services; (3) return to Company all Company-owned property, equipment, or materials in his possession, and (4) certify in writing to Company he has complied with the requirements in this Section 3.3. If at any time after termination of Inventor’s relationship with Company, for any reason, Company or Inventor determines that Inventor has any Confidential Information in Inventor’s possession or control, Inventor shall immediately return to Company all such Confidential Information in Inventor’s possession or control, including all copies and portions thereof.

 

 

ARTICLE IV

COMPENSATION

 

4.1 Base Compensation. Company shall pay to Inventor base compensation of Twelve Thousand and 00/100 Dollars ($12,000.00) per month (“Base Compensation”) during the Term of this Agreement.

 

4.2 Royalties.

 

(a) Company acknowledges that Inventor has an ongoing relationship with the Rochal Technologies, LLC team (“Rochal”), and other businesses whereby Rochal provides research and regulatory compliance services for products currently in development (“Co-developed Products”). Company will pay to Inventor a three percent (3%) royalty on the actual collections from net sales of all products Inventor develops within the scope of this Agreement and Co-developed Products that reach commercialization. The foregoing shall not apply to any Products as such term is defined in the Asset Purchase Agreement.

 

(b) Company will also compensate Inventor for the sale of [*****], [*****], and [*****] each of which was developed in conjunction with the Transferred IP as defined in the Asset Purchase Agreement (each a “Future Product”, and collectively referred to herein as the “Future Products”). Company will pay to Inventor a five percent (5%) royalty for the first $50,000,000 in aggregate collections from net sales of the Future Products, and a two and one-half percent (2.5%) royalty on aggregate collections from net sales of the Future Products on any amounts exceeding $50,000,000 but up to $100,000,000. For purposes of clarity, no royalty shall be due to Inventor for any aggregate collections from net sales of the Future Products in excess of $100,000,000.

 

4.3 Incentives. Company will pay $500,000 in cash to Inventor in the event that 510(k) clearance is issued for any Future Product accepted by the Company, and Company will pay $1,000,000 in cash to Inventor in the event that a US Patent is issued for [*****] (regardless of the date the patent is issued) (“Incentive Payments”). The aggregate Incentive Payments which Contractor may earn shall not exceed Two Million Five Hundred Thousand Dollars and No/100 ($2,500,000).

 

 

4.4 Expense Reimbursement. Company shall reimburse Inventor for any reasonable travel expenses pre-approved by Company which are incurred while providing Services.

 

4.5 Survival. Section 4.1 of this Agreement shall survive termination of this Agreement for a period of time through the end of the Initial Term only, and Sections 4.2 and 4.3 shall survive termination or expiration of this Agreement whether during the Initial Term or any Renewal Term (under Section 3.2 or otherwise) for any reason, and each such section shall inure to the benefit of Inventor’s heirs in the event of death of Inventor.

 

ARTICLE V

INDEMNIFICATION

 

5.1 Indemnification.

 

(a) Inventor shall indemnify, defend, and hold harmless Company and its officers, directors, employees, agents, affiliates, successors, and permitted assigns against any and all losses, damages liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind, including attorneys’ fees, fees and the costs of enforcing any right to indemnification under this Agreement incurred by Indemnified Party (collectively, “Losses”), relating to or arising out of any third party claim, action, or proceeding arising out of or occurring in connection with Inventor’s or any of its employees’ or contractors’ negligence, willful misconduct, or breach of this Agreement.

 

(b) Company shall indemnify, defend, and hold harmless Inventor and his employees, agents, affiliates, successors, and permitted assigns against any and all Losses relating to or arising out of any third-party claim, action, or proceeding arising out of or occurring in connection with Company’s or any of its employees’ or contractors’ negligence, willful misconduct, or breach of this Agreement.

 

ARTICLE VI

CONFIDENTIALITY, NONCOMPETITION & NONSOLICITATION

 

6.1 Confidentiality. As used in this Agreement, the term “Confidential Information” shall mean and/or include all business information and trade secrets of any nature and in any form which at the time or times concerned is not generally known to those persons engaged in the business of Company (other than by the act or acts of any employee or subcontractor not authorized by Company to disclose such information) and which relates to any of the aspects of the past, present, or future business of Company. The term “Confidential Information” includes, without limitation: financial information, budgets, plans, data, trade secrets, computer software, technical information, research and development, product information, processes, customer lists, customer data, pricing information, sales information, marketing information, bid information, job or project information, contracts, purchasing information, data processing, processes, formulas, designs, drafts, drawings, systems, specifications, means, techniques, compilations, intellectual property, inventions and improvements, research and development, operational methods, protocols, business plans and strategies, market information, supplier information, personnel matters and records, and matters that are sensitive, business related, proprietary and confidential in nature.

 

 

6.2 Prohibitions. With respect to Confidential Information of Company learned, generated, obtained, received, accessed, and/or conceived or developed by Inventor in connection with Inventor’s Services to Company, whether before or after the Effective Date of this Agreement, Inventor agrees that, commencing on the Effective Date of this Agreement, and for so long hereafter as any Confidential Information shall remain, wholly or partially, confidential or otherwise protectable:

 

(a) Inventor shall not use or disclose any such Confidential Information, directly or indirectly, to any person not employed with Company;

 

(b) Inventor shall not use any such Confidential Information for the benefit of Inventor or any other person or entity in any way that may be competitive with, or could be detrimental to, Company; and

 

(c) Upon request by Company, and/or upon termination of this Agreement, Inventor shall promptly return any and all records, materials, memoranda, data, Company issued computers, computer disks and programs, documents and/or things constituting, containing, or pertaining to any Confidential Information.

 

6.3 Noncompetition. Inventor acknowledges that the Confidential Information in his possession would enable him to establish goodwill with the patients, customers, potential customers, and suppliers who provide to and/or consume products and services from Company and that the Confidential Information constitutes a valuable asset of the Company. Inventor further acknowledges that he has developed relationships with certain of the Company’s suppliers, contractors or potential contractors, consultants or potential consultants, and sources or potential sources of product usage. Accordingly, Inventor agrees that he will comply with the provisions of this Section 6.3 for the period beginning on the Effective Date and ending twenty four (24) months after expiration or termination of this Agreement for any reason (the “Restricted Period”), and that Inventor shall not, directly or indirectly, engage in, render Services to or become interested in any manner, as manager, employee, officer, consultant, owner, or partner, or through stock ownership (other than holding less than two percent (2%) of the outstanding equity securities of a person having securities that are listed for trading on a national securities exchange), or otherwise, either alone or in association with others, in any business that develops, provides and/or supplies collagen based products for human wound care use similar to those owned or under development by Company as of the Effective Date in the United States (the “Restricted Territory”), if it relates to the Products as defined under the Asset Purchase Agreement). By way of example, and without limitation, Inventor may consult or contract with a company if such consultation or contract does not relate to collagen based human wound care, such as veterinary or other markets related to the Retained Assets (as defined in Asset Purchase Agreement).

 

 

6.4 Nonsolicitation. Inventor further agrees that during the Restricted Period, he shall not, without the prior written consent of Company, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away any customer having business relations with the Company for the purpose of providing products owned and/or under development by the Company within the Restricted Territory that are similar to and competitive with the Products (as defined in the Asset Purchase Agreement) . Inventor further agrees that, during the Restrictive Period, he shall not, directly or indirectly, induce or attempt to induce any customer or supplier or anyone else having business with the Company to breach an existing contract with the Company or take any other action intended to damage the relationship between any customer, supplier, or other person having business relations with the Company.

 

6.5 Right to Enforcement and Remedies.

 

(a) Inventor acknowledges and agrees that the restrictive covenants set forth above are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void, or unenforceable in any court of competent jurisdiction, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement.

 

(b) The Parties hereto agree that it is their intention that the restrictive covenants be enforced in accordance with their terms to the maximum extent possible under applicable law. The Parties further agree that, in the event any court of competent jurisdiction shall find that any of the foregoing provisions is invalid or unenforceable, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the parties in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws.

 

(c) Without limiting the remedies available to Company, the Parties hereto acknowledge that a breach of any of the covenants contained herein may result in material, irreparable injury for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof by Inventor, Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Inventor from engaging in activities prohibited by this Agreement or such other relief as may be required to specifically enforce any of the covenants hereof without the necessity of posting any bond.

 

(d) Inventor also specifically acknowledges and agrees that Company shall be entitled to seek monetary damages and other remedies at law for breaches of this Agreement in addition to any injunctive or other equitable relief. The rights and remedies hereunder are cumulative and not alternative.

 

 

ARTICLE VII

MISCELLANEOUS PROVISIONS

 

7.1 Notices. Any notice or other communication required by this Agreement shall be in writing and signed by the Party giving such notice. Such notice may either be served personally on the party entitled thereto or may be mailed registered, or certified mail, postage prepaid, addressed to such party at such party’s last known mailing address. Such notice or other communication shall be deemed to have been given when so personally served, or upon mailing, as the case may be as follows:

 

COMPANY:

 

Sanara MedTech Inc.

1200 Summit Avenue, Suite 414

Fort Worth, Texas 76102

Attn: Zachary Fleming, CEO

 

INVENTOR:

 

1817 Apple Tree Lane

Bethlehem, PA 18015

Attn: Dr. George Petito

 

7.2 Assignment. Inventor acknowledges the services they provide are unique and personal. Accordingly, Inventor may not assign any of his rights or obligations under this Agreement without consent of Company.

 

7.3 Waiver. Any waiver by Company or Inventor of a breach of any provision of this Agreement shall not be deemed to be a waiver of any preceding or subsequent breach of the same or any other provision.

 

7.4 Resolution of Disputes. Except for any injunctive relief which may be sought by Company, any controversy, dispute, disagreement or claim which arises out of or relates to this Agreement, or the breach thereof, if said dispute cannot be settled through direct discussions, shall be settled by binding arbitration in accordance with the rules and procedures of alternative dispute resolution and arbitration established by the Alternative Dispute Resolution Service of the American Health Lawyers Association (“AHLA”), and judgment upon any award rendered may be entered in any court having jurisdiction thereof. Such arbitration shall be conducted before a single AHLA arbitrator selected jointly by the parties, or in the event the parties are unable to agree, designated by the AHLA. In addition to any other appropriate damages, the prevailing party in the arbitration shall be entitled to reasonable attorney’s fees and the other fees, costs, and expenses of the arbitration. The arbitration shall be held in Fort Worth, Texas.

 

7.5 Amendments. This Agreement contains the entire agreement and understanding of the Parties with respect to the subject matter hereof. No alterations, amendments or modifications of this Agreement shall be binding on either Party unless first reduced to writing and signed by both Parties.

 

 

7.6 Severability. Should any part of this Agreement for any reason be declared invalid, such shall not affect the validity of any remaining portions hereof, which remaining portions shall continue in force and effect as if this Agreement has been executed with such invalid portion eliminated. The intention of the Parties is they would have executed the remaining portions of this Agreement without including any such part, parts or portion which may for any reason hereafter be declared invalid.

 

7.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Pennsylvania, without regard to the conflict of laws thereof. In the event of any litigation arising hereunder, the prevailing party shall be entitled to recover reasonable attorney’s fees as awarded by the court, together with all costs of any such action.

 

7.8 Entire Agreement. This Agreement constitutes the Parties’ entire agreement and understanding concerning the subject matter hereof and supersedes and replaces all earlier or contemporaneous agreements, written or oral, between the parties concerning the same. For purposes of clarity, under no circumstance shall any terms contained herein alter, nullify, and/or reduce the applicability of any terms as set forth in the Asset Purchase Agreement.

 

7.9 Authority. Inventor represents and warrants that (i) it has the full right, power and authority to enter into this Agreement, to grant the rights granted under this Agreement, and to perform their respective obligations under this Agreement; (ii) when executed and delivered, this Agreement will constitute the legal, valid, and binding obligation of Inventor, enforceable against Inventor in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors’ rights generally or the effect of general principles of equity; and (iii) it is not currently bound by any agreement or arrangement that includes a noncompete or similar restrictive covenant, and does not anticipate becoming bound by such an agreement or arrangement, that would prevent or hinder it from entering into or fulfilling its obligations and responsibilities under this Agreement.

 

7.10 No Third-Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of the parties hereto and their respective permitted successors or assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other person or entity.

 

7.11 Counterparts and Facsimile Signatures. This Agreement may be executed in two or more counterparts with the same effect as if all Parties hereto had signed the same document. All counterparts shall be constructed together and shall constitute one agreement. Facsimile signatures on this Agreement shall be deemed to be original signatures for all purposes.

 

[Signature Page to Follow]

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be effective as of the Effective Date.

 

	COMPANY:
	SANARA MEDTECH INC.
	By:	/s/ Zachary Fleming
		Zachary Fleming, CEO
	INVENTOR:
	DR. GEORGE D. PETITO
	By:	/s/ Dr. George D. Petitio
		Dr. George D. Petito

 

 

Exhibit 10.2

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT (this “Agreement”) is executed effective as of August 1, 2023, by SANARA MEDTECH APPLIED TECHNOLOGIES, LLC, a Texas limited liability company (“Borrower”), whose address for purposes hereof is 1200 Summit Avenue, Suite 414, Fort Worth, Texas 76102, CADENCE BANK, a Mississippi state banking corporation (“Bank”), whose address for purposes hereof is 1333 West Loop South, Suite 1700, Houston, Texas 77027, and SANARA MEDTECH INC., a Texas corporation (“Parent”), whose address for purposes hereof is 1200 Summit Avenue, Suite 414, Fort Worth, Texas 76102.

 

W I T N E S S E T H:

 

WHEREAS, Borrower has requested that Bank extend to Borrower an advancing term loan in the principal amount of Twelve Million and No/100 Dollars ($12,000,000.00), which advancing term loan is to be guaranteed by Guarantor on the terms set forth herein and in the Guaranty, and Bank is willing to extend such advancing term loan to Borrower on the terms and subject to the conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in reliance upon the representations and warranties of Obligors hereinafter set forth, the parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

For purposes of this Agreement, the following terms shall have the respective meanings assigned to them.

 

Acquisition Installment Payments: The “Installment Payments” as such term is defined in Subsection 1.2(a) of that certain Asset Purchase Agreement dated August 1, 2023, executed by Borrower, as Purchaser, The Hymed Group Corporation and Applied Nutritionals, LLC, as Sellers, and Dr. George D. Petito, as Owner, as amended from time to time, and any payments in substitution therefor.

 

Advance: Any advance by Bank to, or for the benefit of, Borrower.

 

Advancing Term Loan: That certain advancing term loan made available to Borrower in the principal amount of Twelve Million and No/100 Dollars ($12,000,000.00) and being more particularly described in Section 2.1 of this Agreement.

 

Advancing Term Loan Drawdown Termination Date: February 1, 2024.

 

Advancing Term Loan Maturity Date: August 1, 2028.

 

Advancing Term Loan Rate: The Base Rate.

 

 

Advancing Term Note: That certain Promissory Note dated of even date with the effective date hereof, executed by Borrower and payable to the order of Bank in the principal amount of the Advancing Term Loan, together with all modifications, renewals, extensions, amendments and restatements thereof and substitutions therefor, and being more particularly described in Section 2.1 of this Agreement.

 

Affiliate: With respect to any Person (a) a Person that, directly or indirectly or through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person; (b) any Person of which such Person or such Person’s spouse, sibling, parent or child is an officer, director, shareholder, member, manager, securities holder, partner, or, in the case of a trust, a beneficiary or trustee; and (c) any Person that is an officer, director, shareholder, member, manager, securities holder, partner, or, in the case of a trust, a beneficiary or trustee of such Person.

 

Base Rate: For any day, a rate per annum equal to the Term SOFR for a one-month tenor in effect on such day plus three percent (3.0%); provided that in no event shall the Base Rate be greater than the Maximum Rate. Any change in the Base Rate due to a change in Term SOFR shall be effective from and including the effective date of such change in the Term SOFR.

 

Base Rate Term SOFR Determination Day: As defined in the definition of “Term SOFR”.

 

Beneficial Ownership Certification: A certification regarding beneficial ownership required by the Beneficial Ownership Regulation, which certification shall be in form and substance satisfactory to Bank, and shall contain no information objectionable to Bank.

 

Beneficial Ownership Regulation: 31 C.F.R. § 1010.230.

 

Borrower Security Agreements(s): Individually or collectively, as applicable, all security agreements, pledges and collateral assignments executed herewith or hereafter by Borrower in order to create or evidence a security interest of Bank in any assets owned or to be acquired by Borrower, and all modifications, renewals, extensions, amendments, restatements and rearrangements thereof, and substitutions therefor.

 

Business Day: Any day that is not a Saturday, Sunday or other day on which commercial banks in Houston, Texas are authorized or required to remain closed.

 

Cash Flow Leverage Ratio: The ratio of all Funded Debt (which for avoidance of doubt includes all Acquisition Installment Payments during the following twelve (12) month period) to EBITDA during the preceding twelve (12) month period; provided however, that for purposes of calculating the “Cash Flow Leverage Ratio,” EBITDA shall be calculated as follows: (i) for the fiscal quarter ending September 30, 2023, EBITDA for the 2-month period ending on that date multiplied by 6; (ii) for the fiscal quarter ending December 31, 2023, EBITDA for the 5-month period ending on that date multiplied by 12/5; (iii) for the fiscal quarter ending March 31, 2024, EBITDA for the 8-month period ending on that date multiplied by 1.5; (iv) for the fiscal quarter ending June 30, 2024, EBITDA for the 11-month period ending on that date multiplied by 12/11; and (v) for the fiscal quarter ending September 30, 2024, and for each fiscal quarter thereafter, EBITDA for the twelve (12) month period ending on that date.

 

 

Change in Law: The adoption or taking effect of, or any change in, any law, or any change in the interpretation, administration or application of any law by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or application thereof, or compliance by Bank with any request, guideline or directive (whether or not having the force of law) of any such authority, central bank or comparable agency occurring after the effective date hereof, provided, however, that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and all requests, rules, guidelines or directives promulgated by Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted or issued.

 

Collateral: “Collateral” as defined in any Security Agreement, any of the Financing Statements or any other Security Instruments.

 

Compliance Certificate: A certificate prepared by Borrower and delivered to Bank in conformity with Exhibit A to this Agreement.

 

Control: The possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

 

Corporate Guarantor(s): Individually or collectively, as applicable, Parent and any other Person which is not an individual hereafter executing a Guaranty.

 

Corporate Obligor(s): Individually or collectively, as applicable, Borrower and Corporate Guarantors.

 

Debt Service Coverage Ratio: The ratio of (a) the sum of the following during the preceding twelve (12) month period: (i) EBITDA minus (ii) capital expenditures, minus (iii) cash taxes, minus (iv) dividends and distributions, to (b) the sum of (i) the current portion of long term debt plus, (ii) Acquisition Installment Payments during the following twelve (12) month period, (iii) interest expense during the preceding twelve (12) month period; provided however , that for purposes of calculating the “Debt Service Coverage Ratio” EBITDA and interest expense (collectively, the “Annualized Components”) shall be calculated as follows: (i) for the fiscal quarter ending September 30, 2023, the Annualized Components for the 2-month period ending on that date multiplied by 6; (ii) for the fiscal quarter ending December 31, 2023, the Annualized Components for the 5-month period ending on that date multiplied by 12/5; (iii) for the fiscal quarter ending March 31, 2024, the Annualized Components for the 8-month period ending on that date multiplied by 1.5; (iv) for the fiscal quarter ending June 30, 2024, the Annualized Components for the 11-month period ending on that date multiplied by 12/11; and (v) for the fiscal quarter ending September 30, 2024, and for each fiscal quarter thereafter, the Annualized Components for the twelve (12) month period ending on that date.

 

 

Debtor Relief Laws: Any applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar laws, whether state or federal, affecting the rights or remedies of creditors generally, as in effect from time to time.

 

Default: The occurrence of any event which, with the giving of notice, lapse or expiration of time, or both, or other condition precedent, will constitute an “Event of Default” under Section 7.1 of this Agreement, regardless of whether any requirement for the giving of notice, the lapse or expiration of time, or any other condition precedent to an Event of Default, if any, has been satisfied.

 

Default Rate: A per annum rate equal to the lesser of (a) the Base Rate plus five percent (5.0%), or (b) the Maximum Rate.

 

EBITDA: The sum of earnings before interest, taxes, depreciation, amortization, stock compensation expense and gains or losses on sales of assets outside the ordinary course of business, each of these components being calculated in accordance with GAAP.

 

Environmental Laws: Any and all Governmental Requirements relating to the environment or public or worker health or safety, including ambient air, surface water, land surface or subsurface strata, or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes (including solid wastes, hazardous wastes or hazardous substances) or noxious noise or odor into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, recycling, removal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes (including petroleum, petroleum distillates, asbestos or asbestos-containing material, volatile organic compounds or polychlorinated biphenyls).

 

ERISA: The Employee Retirement Income Security Act of 1974, as amended from time to time.

 

Event of Default: Any event specified as an “Event of Default” in Section 7.1 of this Agreement.

 

Financial Statements: Such balance sheets, income statements, profit and loss statements, reconciliations of capital and surplus, and statements of cash flows of a Person, all of which shall be prepared in a manner consistent with prior periods and the historical customs and practices of such Person, and in the case of each Corporate Obligor in accordance with GAAP.

 

Financing Statements: The financing statements filed or to be filed with the appropriate offices for the perfection of a security interest in any of the Collateral, including those assigned to Bank heretofore, concurrently herewith or hereafter, together with any continuation statements or other amendments filed or to be filed in connection therewith.

 

 

Floor: A rate of interest equal to one half percent (0.50%).

 

Forbidden Activities. The use, sale, possession, cultivation, manufacture, distribution or marketing of any controlled substances or other contraband, including marijuana (whether for commercial, medical, or personal purposes).

 

Funded Debt: The sum of all Acquisition Installment Payments during the following twelve (12) month period and all Indebtedness for borrowed money (including, without limitation, capital lease and synthetic lease obligations, subordinated debt (including Subordinated Debt), and unreimbursed drawings under letters of credit), or any other monetary obligation evidenced by a note, bond, debenture or other agreement or similar instrument.

 

GAAP: Generally accepted accounting principles in the United States of America consistently applied.

 

Governmental Authority: The government of the United States of America or any other nation or any political subdivision thereof in which an Obligor or any of the Collateral is located, and any other political subdivision, agency, or instrumentality exercising jurisdiction over an Obligor or an Obligor’s property or assets, including without limitation any state, county or city and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

Governmental Requirements: All statutes, laws, ordinances, rules, and regulations of any Governmental Authority applicable to an Obligor or an Obligor’s property or assets, or any site owned or operated by an Obligor.

 

Guarantor(s): Individually or collectively, as applicable, Individual Guarantors and Corporate Guarantors.

 

Guarantor Security Agreement(s): Individually or collectively, as applicable, all security agreements, pledges and collateral assignments executed herewith or hereafter by a Guarantor in order to create or evidence a security interest of Bank in any assets owned or to be acquired by such Guarantor, and all modifications, renewals, extensions, amendments, restatements and rearrangements thereof, and substitutions therefor.

 

Guarant(y/ies): Individually or collectively, as applicable, all guaranties of the Obligations, or any portion thereof, executed by any Person herewith or hereafter, and all modifications, renewals, extensions, amendments, restatements, replacements and rearrangements thereof, and substitutions therefor.

 

Indebtedness: The total liabilities of Borrower, including the indebtedness evidenced by the Note(s) and any subordinated indebtedness, calculated in accordance with GAAP, and in a manner consistent with prior periods and Borrower’s historical customs and practices.

 

 

Index Cessation Event: In respect of Term SOFR:

 

(a) a public statement or release by or on behalf of the Term SOFR Administrator that it has ceased or will cease to provide Term SOFR rates permanently or indefinitely, provided that there is no successor administrator that will continue to provide Term SOFR, or

 

(b) a public statement or release by any regulatory supervisor with the relevant authority that Term SOFR will no longer be provided by any administrator, or it has been deemed to no longer be a representative rate.

 

Individual Guarantor(s): Individually or collectively, as applicable, any Person who is an individual hereafter executing a Guaranty.

 

Individual Obligor(s): Individually or collectively, as applicable, Individual Guarantors.

 

Loan(s): Individually or collectively, as applicable, the Advancing Term Loan and all modifications, renewals, extensions, amendments, restatements and rearrangements thereof, and substitutions therefor.

 

Material Adverse Effect: A material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of an Obligor, (b) the ability of an Obligor to perform any of its obligations under this Agreement or any other Security Instrument or (c) the rights of or benefits available to Bank under this Agreement or any other Security Instrument.

 

Maximum Rate: On any day, the maximum non-usurious rate of interest permitted for that day by whichever of applicable federal or Texas (or any jurisdiction whose usury laws are deemed to apply to the Loan(s) or any documents executed in connection therewith despite the intention and desire of the parties to apply the usury laws of the State of Texas) laws permit the higher interest rate, stated as a rate per annum. On each day, if any, that the Texas Finance Code establishes the Maximum Rate, the Maximum Rate shall be the “weekly ceiling” (as defined in Section 303 of the Texas Finance Code) for that day. Bank may from time to time, as to current and future balances, implement any other ceiling under the Texas Finance Code by notice to Borrower, if and to the extent permitted by the Texas Finance Code. Without notice to Borrower or any other Person, the Maximum Rate shall automatically fluctuate upward and downward as and in the amount by which such maximum nonusurious rate of interest permitted by applicable law fluctuates.

 

Note(s): Individually or collectively, as applicable, the Advancing Term Note and all modifications, renewals, extensions, amendments, restatements and rearrangements thereof, and substitutions therefor.

 

 

Obligations: The obligations and liabilities of Borrower to Bank evidenced by this Agreement, the Note(s) or any other Security Instrument, and any and all other Indebtedness, liabilities and obligations whatsoever of Borrower to Bank, whether direct or indirect, absolute or contingent, primary or secondary, liquidated or unliquidated, due or to become due, whether now existing or hereafter arising, and whether in connection with this or another transaction, and howsoever evidenced or acquired, whether joint or several or joint and several, including derivative-foreign exchange transactions or any treasury management or other services provided by Bank or its Affiliates, successors or assigns (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate network services), and whether evidenced by note, draft, acceptance, guaranty, open account, commercial credit card, stored value card, merchant card, letter of credit, surety agreement, Rate Management Agreement or otherwise; it being contemplated by the parties hereto that Borrower may become indebted to Bank in additional sums. The term “Obligations” shall expressly include any and all obligations, contingent or otherwise, whether now existing or hereafter arising, of Borrower and of Borrower’s Affiliates to Bank, or to any of its Affiliates or successors, arising under or in connection with any Rate Management Agreement or Rate Management Transaction; provided, however, that the definition of “Obligations” shall not create any guarantee by a Guarantor or Borrower of (or grant of security interest by a Guarantor or Borrower to support, as applicable) any Excluded Swap Obligations (as defined in Section 2.16 hereof) of such Guarantor or Borrower for purposes of determining any obligations of such Guarantor or Borrower.

 

Obligor(s): Individually or collectively, as applicable, Borrower and Guarantor(s).

 

Organizational Documents: The Certificate of Formation, Certificate or Articles of Incorporation, Bylaws, Articles of Organization, Company Agreement or Regulations, Certificate of Limited Partnership, Agreement of Limited Partnership, Partnership Agreement or other organizational document of a Person.

 

Overline: “Overline” as defined in Section 2.6 of this Agreement.

 

Periodic Term SOFR Determination Day: As specified in the definition of “Term SOFR”.

 

Person: Any corporation, partnership, joint venture, limited liability company, association, trust, trustee, estate, individual, unincorporated business entity or governmental department, administrative agency or instrumentality, or other entity.

 

Plan: Any plan subject to Title IV of ERISA and maintained by a Corporate Obligor or any such plan to which such Corporate Obligor is required to contribute on behalf of its employees.

 

Rate Management Agreement: Each agreement between Borrower or any of its Affiliates, on the one hand, and Bank or any of its Affiliates or their successors, on the other hand, including but not limited to any ISDA Master Agreement, whether now existing or hereafter entered into, which provides for a Rate Management Transaction.

 

 

Rate Management Transaction: Any transaction (including an agreement with respect thereto) now existing or hereafter entered into between Borrower or any of its Affiliates, on the one hand, and Bank or any of its Affiliates or their successors, on the other hand, which is (i) a rate swap, swap option, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap, floor, collar, currency swap, cross-currency rate swap, currency option, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, weather index transaction or forward purchase or sale of a security, commodity or other financial instrument or interest (including an option with respect to any of these transactions), or (ii) any type of transaction that is similar to any transaction referred to in clause (i) above that is currently, or in the future becomes, recurrently entered into in the financial markets and which is a forward, swap, future, option or other derivative on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, economic indices or measures of economic risk or value, or other benchmarks against which payments or deliveries are to be made, or any combination of the foregoing transactions.

 

Regulation U: Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto.

 

Regulation X: Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto.

 

Request for Advance: A written request, in form and content acceptable to Bank, given by Borrower to Bank not later than 10:00 a.m. (Houston, Texas time) on the Business Day of the proposed Advance, specifying the requested date and amount of such Advance, and including a certificate of such individual responsible for financial and accounting matters as Bank may designate, certifying (a) that no Default has occurred, and (b) such other matters as Bank may require.

 

Security Agreement(s): Individually or collectively, as applicable, the Borrower Security Agreements and the Guarantor Security Agreements, and all modifications, renewals, extensions, amendments, restatements and rearrangements thereof, and substitutions therefor, and all security agreements, pledges and collateral assignments hereafter executed in order to create or evidence a security interest of Bank in any assets owned or to be acquired by any Person.

 

Security Instrument(s): Individually or collectively, as applicable, this Agreement, the Note(s), the Security Agreements, the Financing Statements, any Guaranties, any Subordination Agreements and such other documents, instruments or agreements evidencing, securing, guaranteeing, or otherwise pertaining to the Loan(s) as may be, from time to time (whether heretofore, contemporaneously herewith or hereafter), executed and delivered by an Obligor or any other Person to Bank, and all modifications, renewals, extensions, rearrangements, ratifications, restatements and replacements of any of the foregoing. Notwithstanding the foregoing, or any provision of any “Security Instrument” to the contrary, the term “Security Instruments” shall not include a Rate Management Agreement nor any swap agreement (as defined in 11 U.S.C. Section 101, as in effect from time to time).

 

 

SOFR: A rate equal to the secured overnight financing rate as administered by the SOFR Administrator.

 

SOFR Administrator: The Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

 

Subject Property: Any real estate owned or leased by Borrower.

 

Subordinated Debt: Subordinated indebtedness issued by Borrower on terms and conditions approved in writing by Bank, and subject to an enforceable Subordination Agreement under which no party is in default.

 

Subordination Agreements: Any subordination agreements or intercreditor agreements executed concurrently herewith or hereafter by Bank with any third Person, in order (a) to subordinate any debt or obligation of Borrower owed to such third Person to any debt or obligation of Borrower owed to Bank, or (b) to agree on priority in rights of payment or lien position, all as same may be modified, amended, renewed or extended from time to time.

 

Subsidiary: With respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated Financial Statements if such Financial Statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other Person (a) of which securities or other ownership interests representing more than fifty percent (50%) of the equity or more than fifty percent (50%) of the ordinary voting power or, in the case of a partnership, more than fifty percent (50%) of the general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more Subsidiaries of the parent or by the parent and one or more Subsidiaries of the parent.

 

Term SOFR: For any calculation with respect to a Base Rate Loan on any day, the forward-looking term rate based on SOFR for a tenor of one month on the day (such day, the “Base Rate Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that (a) if as of 5:00 p.m. (New York City time) on any Base Rate Term SOFR Determination Day the forward-looking term rate based on SOFR for the applicable tenor has not been published by the Term SOFR Administrator, then Term SOFR will be the forward-looking term rate based on SOFR for such tenor as published by the Term SOFR Administrator on the first preceding Business Day for which such forward-looking term rate based on SOFR for such tenor was published by the Term SOFR Administrator so long as such first preceding Business Day is not more than three (3) Business Days prior to such Base Rate Term SOFR Determination Day; (b) if the relevant Term SOFR is not available, for any reason whatsoever including any Index Cessation Event, then Bank in its sole discretion will select a commercially reasonable alternative for Term SOFR, provided that if an industry Term SOFR Recommended Rate alternative exists then Bank shall use such industry alternative; and (c); if Term SOFR determined as provided above shall ever be less than the Floor, then Term SOFR shall be deemed to be the Floor.

 

 

Term SOFR Administrator: CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by Bank in its reasonable discretion).

 

Term SOFR Recommended Rate: The rate (inclusive of any spreads or adjustments) recommended as the replacement for Term SOFR by:

 

(a) the Term SOFR Administrator or

 

(b) a committee officially endorsed or convened, by the Federal Reserve Board, or the Federal Reserve Bank of New York, or the regulatory supervisor of the Term SOFR Administrator, for the purpose of recommending a replacement for Term SOFR.

 

Term SOFR Reference Rate: The forward-looking term rate based on SOFR.

 

U.S. Government Securities Business Day: Any day except for a Saturday, Sunday or day on which the Securities Industry and Financial Markets Association (SIFMA), or successor entity recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in the U.S. Government Securities.

 

ARTICLE II

THE LOAN(S)

 

2.1 Advancing Term Loan. Subject to, and upon the terms, conditions, covenants and agreements contained herein, and in reliance upon the covenants, agreements, representations and warranties of Obligor(s) set forth herein, and provided that at the time of any proposed borrowing hereunder no Default exists, Bank agrees to make, at any time and from time to time prior to the Advancing Term Loan Drawdown Termination Date, one or more Advances to Borrower up to the aggregate maximum principal amount of Twelve Million and No/100 Dollars ($12,000,000.00), which Advances shall be evidenced by the Advancing Term Note. In no event shall the aggregate of all Advances under the Advancing Term Note exceed Twelve Million and No/100 Dollars ($12,000,000.00). Principal amounts evidenced by the Advancing Term Note which are repaid may not be reborrowed. Bank’s business records shall be prima facie evidence of the unpaid principal amount of the Advancing Term Note, and the amount of accrued but unpaid interest. The principal of and interest to accrue on the Advancing Term Note shall be due and payable as follows:

 

(a) Accrued but unpaid interest on the unpaid principal balance of the Advancing Term Note shall be due and payable monthly as it accrues, beginning on September 5, 2023, and continuing regularly and monthly on the fifth (5th) day of each month thereafter until the Advancing Term Loan Maturity Date; and

 

(b) Beginning on August 5, 2024, the unpaid principal balance of the Advancing Term Note shall be due and payable in equal monthly installments in an amount equal to the unpaid principal balance of the Advancing Term Note outstanding on the Advancing Term Loan Drawdown Termination Date divided by eighty-four (84), the first such installment to be due and payable on August 5, 2024, and a like installment to be due and payable on the fifth (5th) day of each month thereafter until and including July 5, 2025; and

 

 

(c) Beginning on August 5, 2025, the unpaid principal balance of the Advancing Term Note shall be due and payable in equal monthly installments in an amount equal to the unpaid principal balance of the Advancing Term Note outstanding on the Advancing Term Loan Drawdown Termination Date divided by sixty (60), the first such installment to be due and payable on August 5, 2025, and a like installment to be due and payable on the fifth (5th) day of each month thereafter until the Advancing Term Loan Maturity Date; and

 

(d) On the Advancing Term Loan Maturity Date all remaining unpaid principal, together with all accrued but unpaid interest, shall mature and become due and payable.

 

Each Advance under the Advancing Term Note, and all renewals, extensions, modifications and rearrangements of the Advancing Term Note, if any, shall be deemed to have been made pursuant to this Agreement and, accordingly, shall be subject to the terms, conditions and provisions hereof, and Borrower shall be deemed to have ratified, as of the date of each Advance under the Advancing Term Note, and any renewal, extension, modification or rearrangement thereof, all the representations, covenants, warranties, promises and agreements set forth herein. Bank shall never be required to modify, renew, extend or rearrange the Advancing Term Note, regardless of whether any Default has ever occurred.

 

2.2 Advances by Bank; Automatic Debit; Proceeds.

 

(a) Purpose and Use of Advances. Subject to the further terms and conditions hereof, Bank will advance the proceeds of the Loan(s) as necessary for the purposes set out in Section 6.6 below.

 

(b) No Default. Bank may, but shall never be required to, make or continue any Advance after a Default which has not been cured to the satisfaction of Bank.

 

(c) Request for Advance. Notwithstanding the foregoing or any provision hereof to the contrary, Bank may require that each Advance be made pursuant to a Request for Advance.

 

(d) Automatic Debit. To effectuate any payment due under this Agreement, the Note(s), any other Security Instrument or a Rate Management Agreement, Bank is hereby authorized to initiate debit entries to any deposit account of Borrower maintained with Bank, and to debit the same to such account. This authorization to initiate debit entries shall remain in full force and effect until Bank has received written notification of its termination in such time and in such manner as to afford Bank a reasonable opportunity to act on it. The parties hereto acknowledge and agree (i) that such debit entries may cause an overdraft of any such account which may result in Bank’s refusal to honor items drawn on any such account until adequate deposits are made to any such account; (ii) that Bank is under no duty or obligation to initiate any debit entry for any purpose; and (iii) that if a debit is not made because any such account does not have a sufficient available balance, or otherwise, the payment may be late or past due.

 

 

(e) Sweep; Application of Payments. Bank is hereby authorized to sweep the collected balance of good funds from Borrower’s accounts periodically for application to (i) the outstanding principal balance of each Loan, at such times and in such manner as Bank, in its sole discretion, deems appropriate, and (ii) any payments due under any Rate Management Agreement with Bank or its Affiliates or their successors. Bank may apply any payments received from any source against any portion of the Obligations in such priority and fashion as Bank may deem appropriate; provided, however, that any amounts received from any source that is not a Qualified ECP Guarantor, as defined in Section 2.16 hereof, shall not be applied to any portion of the Excluded Swap Obligations.

 

2.3 Interest.

 

(a) Advancing Term Loan. Subject to Subsection (b) below, the unpaid principal balance of the Advancing Term Note shall bear interest at the lesser of the Advancing Term Loan Rate or the Maximum Rate.

 

(b) Default Rate. Notwithstanding any provision of this Agreement to the contrary, (i) while an Event of Default pursuant to Section 7.1(a) is continuing or (ii) (A) while any Event of Default other than pursuant to Section 7.1(a) is continuing and (B) Bank has given Borrower notice that Bank has exercised its right to increase the rate of interest, the unpaid principal balance of each Note shall bear interest at the Default Rate.

 

2.4 Place and Timing of Payments. All payments shall be made to Bank at its office set forth in the preamble of this Agreement, without offset or deduction. Payments received after Bank’s cut-off times established from time to time or on a day that is not a Business Day will be credited as of the next Business Day. Whenever any payment under a Note becomes due and payable on a day that is not a Business Day, if no Event of Default then exists, the maturity of the payment shall be extended to the next succeeding Business Day, except that if the result of the extension would be to extend the payment into another calendar month, the payment must be made on the immediately preceding Business Day.

 

2.5 Late Payments. If any payments due under a Note or this Agreement are not timely made, Borrower shall also pay to Bank, upon demand, a late charge equal to five percent (5.0%) of each payment past due for ten (10) or more days. This late charge shall not apply to payments due at maturity or by acceleration of a Note.

 

 

2.6 Optional and Mandatory Prepayments.

 

(a) Fees and Prepaid Charges Fully Earned. All loan fees and other prepaid charges are earned fully as of the date of the applicable Loan and will not be subject to refund, except as required by law.

 

(b) Advancing Term Note to Remain in Effect. Borrower may pay all or a portion of the Advancing Term Note before it is due; provided, however, that each Note shall remain in full force and effect until, at a time when no amounts, principal, interest or otherwise, are then owing, Borrower releases Bank in writing from any obligation to make Advances pursuant thereto.

 

(c) Application of Prepayments. Prepayment of a Note in full shall consist of payment of the remaining unpaid principal balance together with all accrued but unpaid interest and all other amounts, costs and expenses for which Borrower is responsible under such Note or any other agreement with Bank pertaining to such Note before such amounts are due, whether such prepayment arises from a voluntary or involuntary prepayment, acceleration of maturity, or any other cause or reason. Prepayment in part shall consist of payment of any portion of the unpaid principal balance before it is due, whether such prepayment arises from a voluntary or involuntary prepayment, acceleration of maturity, or any other cause or reason. Unless otherwise agreed by Bank in writing and provided that Borrower is current on all amounts due, payments applied to a Note before Bank’s creation of a billing statement for the next payment due will be applied entirely to principal, and payments applied to a Note after the creation of such billing statement will be applied according to that billing statement. Unless otherwise agreed by Bank in writing and provided that Borrower is current on all amounts due, payments applied to a Note before Bank’s creation of a billing statement for the next payment due shall not relieve Borrower of the obligation to continue making uninterrupted payments under such Note. All payments of principal are to be applied to the outstanding principal balance of each Note at such times and in such manner as Bank, in its sole discretion, deems appropriate.

 

(d) Rate Management Agreements Independent. All Rate Management Agreements, if any, between Borrower and Bank or its Affiliates are independent agreements governed by the written provisions of such Rate Management Agreements, which will remain in full force and effect, unaffected by any repayment, prepayment, acceleration, reduction, increase or change in the terms of any Note, except as otherwise expressly provided in such Rate Management Agreements, and any payoff statement from Bank relating to a Note shall not apply to such Rate Management Agreements except as otherwise expressly provided in such payoff statement. Any prepayment shall be without prejudice to Borrower’s obligations under any Rate Management Agreement, which shall remain in full force and effect subject to the terms of such Rate Management Agreement (including provisions that may require a reduction, modification or early termination of a Rate Management Transaction, in whole or in part, in the event of such prepayment, and may require Borrower to pay any fees or other amounts for such reduction, modification or early termination), and no such fees or amounts shall be deemed a penalty hereunder or otherwise.

 

 

(e) Overlines. If at any time the then outstanding principal under the Advancing Term Note exceeds the face amount of the Advancing Term Note, Borrower agrees to pay the excess amount (each an “Overline”) immediately upon demand by Bank. Overlines shall bear interest at the rate set forth in Section 2.3. If not sooner paid, interest on Overlines shall be paid on the fifth (5^th) day of each month, until the Advancing Term Loan Maturity Date. Upon request of Bank, Borrower shall execute a promissory note payable to the order of Bank to represent the amount of any Overline; however, Borrower acknowledges and agrees that the records of Bank and this Agreement shall constitute conclusive evidence of any Overline and the obligation of Borrower to repay any Overline, with interest. All Overlines for which Bank has not demanded payment earlier, and all unpaid and accrued interest on Overlines not due and payable earlier, shall be due and payable on the Advancing Term Loan Maturity Date. Borrower acknowledges and agrees that Bank is not obligated to fund any Advance that would create an Overline.

 

2.7 Upfront Fee. In consideration of Bank’s agreement, subject to the terms and conditions hereof, to make Advances hereunder, both on or about the date hereof and in the future, Borrower shall pay to Bank upon the execution hereof an upfront fee in the amount of Thirty Thousand Dollars ($30,000). In no event shall this fee be, or be deemed to be, compensation for the use, forbearance or detention of money. Further, in no event shall this fee, together with all amounts constituting interest under applicable laws and payable in connection with this Agreement and the other Security Instruments, exceed the Maximum Rate.

 

2.8 Interest Computation. All interest hereunder shall be computed on the basis of a year of 360 days, and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on any Loan shall be computed on a daily basis based upon the outstanding principal amount of such Loan as of the applicable date of determination. The Term SOFR shall be determined by Bank, and such determination shall be conclusive absent manifest error.

 

2.9 Security. Payment of the Obligations and performance of the covenants set forth in the Security Instruments will be guaranteed according to the terms of the Guaranties, and secured by the Collateral, subject only to security interests in favor of Bank or as otherwise permitted hereunder. As any Collateral is sold or otherwise disposed of, Obligor(s) will faithfully and promptly deposit the proceeds thereof in Obligor(s)’ accounts at Bank.

 

2.10 Additional Security Instruments. Obligor(s) agree to execute, acknowledge and deliver to Bank, or to cause to be executed, acknowledged and delivered to Bank, such instruments, Security Agreements, deeds of trust, assignments of rents and leases, control agreements, lockbox agreements, blocked account agreements, assignments of insurance and proceeds, Guaranties, statements, and assignments, in form and substance acceptable to Bank, as in the discretion of Bank or counsel for Bank may be deemed necessary to enforce and grant to Bank, and to perfect in the appropriate jurisdictions, the security interests, liens, assignments and mortgages on the Collateral, including without limitation, any machinery or equipment or other goods purchased with the proceeds of a Loan. Borrower hereby authorizes Bank to file, at Borrower’s expense, financing statements and amendments thereto and other records, without the signature of Borrower thereon, to the maximum extent permitted by applicable law, in order to perfect, amend or continue Bank’s interest in the Collateral. With respect to any Collateral for which a certificate of title is issued, upon Bank’s request, the original negotiable certificate of title shall be delivered to Bank, and Bank’s security interest shall be duly noted thereon.

 

 

2.11 Cross Collateralization. Subject to Section 2.12, all Collateral now or hereafter securing any of the Obligations hereunder also shall secure any and all other Obligations now or hereafter owing by Borrower to Bank or its Affiliates or successors, including without limitation any and all obligations, contingent or otherwise, whether now existing or hereafter arising, of Borrower and its Affiliates to Bank, or to any of its Affiliates or successors, arising under or in connection with any Rate Management Agreements or Rate Management Transactions.

 

2.12 Cross-Collateralized Loans Secured by Property in Special Flood Hazard Area. The parties covenant and agree that if any prior, current, or future loans or debts, other than the Notes, between Borrower and Bank (herein, the “Other Debts”), are cross-collateralized and secured through this Agreement, and such Other Debts are also secured by any means by a building, structure, or by real estate (herein, the “Secured Property”) located in an area designated as a special flood hazard area (SFHA”) by the Administrator of the Federal Emergency Management Agency (herein, the “SFHA Debts”), the following provisions of this Section 2.12 become effective immediately upon such Secured Property becoming located in a SFHA (the “SFHA Date”).

 

(a) Collateral Release. Notwithstanding any language to the contrary in this Agreement or any other Security Instrument, Bank releases and disclaims in full that portion of its security interest securing the Notes that is comprised of collateral secured by a SFHA Debt document or a SFHA Debt contract or agreement between Borrower and Bank. As of the SFHA Date, Bank shall not retain, via a cross-collateralization provision in any Security Instrument or otherwise, a security interest for the Notes in any SFHA Debt or the collateral securing any SFHA Debt.

 

(b) No Other Changes to the Scope of the Collateral. Beyond the changes to the scope of Bank’s security interest for the Notes rendered by the preceding Subsection 2.12(a), no other aspect of Bank’s collateral or security interest for the Notes, as defined or established by the Security Instruments, is modified by this Section 2.12. The provisions of this Section 2.12 do not affect, to any extent, the scope of the collateral or security interest securing the Notes, other than the changes set forth in Subsection 2.12(a).

 

(c) This Section 2.12 Shall Control for All Conflicts. To the extent that the scope of Bank’s security interest for the Notes, as modified by the provisions of this Section 2.12, does not align with the scope of the security interest as defined by any other provision of the Security Instruments, the parties agree that the provisions of this Section 2.12 shall control for all purposes in any conflicts regarding the scope of the Bank’s security interest taken for the Notes after the date this Agreement is executed by the parties.

 

(d) No Other Rights or Remedies Affected. Except as modified herein, nothing shall otherwise impair, alter or diminish the effect, lien or encumbrance of this Agreement or any other Security Instrument or any of the rights and remedies of the holder thereof.

 

 

(e) Effective Date of this Section. The provisions of this Section 2.12 shall not become effective prior to the SFHA Date.

 

2.13 Other Collateral. Collateral securing other loans from Bank to Borrower may also secure a Loan. To the extent collateral previously has been given to Bank by any Person that may secure a Loan, whether directly or indirectly, it is specifically agreed that, to the extent prohibited by law, all such collateral consisting of household goods will not secure any Loan. In addition, if any collateral requires the giving of a right of rescission under the Truth in Lending Act for any Loan, such collateral also will not secure any Loan unless and until all required notices of that right have been given.

 

2.14 Capital Adequacy Charge. If Bank shall have determined that any Change in Law does or shall have the effect of reducing the rate of return on Bank’s capital as a consequence of its obligations hereunder to a level below that which Bank could have achieved but for such Change in Law (taking into consideration Bank’s policies with respect to capital adequacy) by a material amount, then from time to time, after submission by Bank to Borrower of a written demand therefor together with the certificate described below, Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction, such written demand to be made with reasonable promptness following such determination. A certificate of Bank claiming entitlement to payment as set forth above shall be conclusive in the absence of manifest error. Such certificate shall set forth the nature of the occurrence giving rise to such reduction, the amount of the additional amount or amounts to be paid to Bank, and the method by which such amount was determined. In determining such amount, Bank may use any reasonable averaging and attribution method, applied on a non-discriminatory basis. Borrower shall pay Bank the amount shown as due on any such certificate within ten (10) days after receipt thereof. Failure or delay on the part of Bank to demand compensation pursuant to this section shall not constitute a waiver of Bank’s right to demand such compensation; provided that Borrower shall not be required to compensate Bank pursuant to this section for any increased costs or reductions incurred more than two hundred seventy (270) days prior to the date that Bank notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

 

2.15 Taxes.

 

(a) No Deduction for Certain Taxes. Any and all payments to Bank shall be made, in accordance with the provisions of this Agreement, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges, or withholdings and all liabilities with respect thereto, excluding, in the case of Bank, taxes imposed on its income and franchise taxes imposed on it by the jurisdiction under the laws of which Bank is organized or any political subdivision of such jurisdiction (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as “Taxes”). If an Obligor shall be required by law to deduct any Taxes from or in respect of any sum payable to Bank, (i) the sum payable shall be increased as may be necessary so that, after making all required deductions, Bank receives an amount equal to the sum it would have received had no such deductions been made; (ii) such Obligor shall make such deductions; and (iii) such Obligor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

 

(b) Other Taxes. In addition, each Obligor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies which arise from any payment made by such Obligor, or from the execution, delivery, or registration of, or otherwise with respect to, this Agreement, a Note or any other Security Instrument, or any documents, instruments or agreements executed in connection herewith (hereinafter referred to as “Other Taxes”).

 

(c) Indemnification. OBLIGORS INDEMNIFY BANK FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES PAID BY BANK AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST, AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED. EACH PAYMENT REQUIRED TO BE MADE IN RESPECT OF THIS INDEMNIFICATION SHALL BE MADE BY AN OBLIGOR TO BANK WITHIN THIRTY (30) DAYS FROM THE DATE SUCH OBLIGOR RECEIVES WRITTEN DEMAND THEREFOR.

 

2.16 Provisions Relating to Excluded Swap Obligations.

 

(a) Excluded Swap Obligation. “Excluded Swap Obligation” means, with respect to a Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, as applicable, such Swap Obligation (or any guarantee thereof) is or becomes illegal or unlawful under the Commodity Exchange Act or any rule, regulation, or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof), by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant,” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guaranty of such Guarantor, or the grant of such security interest by such Guarantor becomes or would become effective with respect to such Swap Obligation or (ii) in the case of a Swap Obligation subject to a clearing requirement pursuant to Section 2(h) of the Commodity Exchange Act (or any successor provision thereto), because a Guarantor is a “financial entity,” as defined in Section 2(h)(7)(C)(i) of the Commodity Exchange Act (or any successor provision thereto), at the time the Guaranty of such Guarantor, or the grant of such security interest by such Guarantor becomes or would become effective with respect to such related Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one Swap Obligation, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to Swap Obligations for which such Guaranty or security interest or joint and several liability, as applicable, is or becomes illegal or unlawful.

 

 

(b) Swap Obligations. “Swap Obligations” means, with respect to any Person, any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Swap Agreements, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction.

 

(c) Commodity Exchange Act. “Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

(d) Qualified ECP Guarantor. “Qualified ECP Guarantor” means, in respect of any Swap Obligation, (i) each Corporate Obligor that has total assets exceeding $10,000,000 at the time the relevant obligation or Guaranty or grant of the relevant security interest becomes or would become effective with respect to such Swap Obligation or (ii) such entity as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act or () an Individual Obligor who meets the definition of “eligible contract participant” at such time under the Commodity Exchange Act or any regulations promulgated thereunder.

 

(e) Keepwell of Guarantors. Each Guarantor, at any and all times during which such Guarantor qualifies as a Qualified ECP Guarantor, hereby absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Guarantor who is not a Qualified ECP Guarantor at such time (a “Non-ECP Loan Guarantor”) to honor all of such Non-ECP Loan Guarantor’s obligations under any Guaranty in respect of Swap Obligations (provided, however, that a Guarantor, when a Qualified ECP Guarantor, shall only be liable under this section for the maximum amount of such liability that can be hereby incurred without rendering the obligations of such Guarantor, when a Qualified ECP Guarantor, under this section or otherwise under this Agreement or such Guarantor’s Guaranty, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of a Guarantor, when a Qualified ECP Guarantor, under this section shall remain in full force and effect until termination of such Guarantor’s Guaranty in accordance with the terms of such Guaranty. Each Guarantor, when a Qualified ECP Guarantor, intends that this section constitute, and this section shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Non-ECP Loan Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

 

(f) Swap Agreement. For purposes of this Section 2.16, “Swap Agreement” means any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act, including any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Borrower or any of its Subsidiaries shall be a “Swap Agreement.”

 

2.17 Accord and Satisfaction. Borrower agrees not to send Bank payments marked “paid in full,” “without recourse,” or similar language. If Borrower sends such payment, Bank may accept it without losing any of Bank’s rights under this Agreement, any Note or any other Security Instrument, and Borrower will remain obligated to pay any further amounts owed or that may become owed to Bank.

 

ARTICLE III

ADVANCES

 

During the term of this Agreement and until the Obligations have been paid and performed in full, unless compliance with the provisions of the following sections shall have been waived in writing by Bank, Obligors agree as follows:

 

3.1 Conditions Precedent to Initial Extension of Credit. Any obligation of Bank to make the initial Advance hereunder is subject to receipt by Bank of the following, in form and substance satisfactory to Bank:

 

(a) Documents. All of the documents, instruments and agreements required or contemplated hereunder from the appropriate parties, including without limitation this Agreement, the Notes, such Security Agreements, UCC Financing Statements, UCC Amendments and Releases of Liens encumbering the Collateral as Bank may reasonably request, and the other Security Instruments;

 

(b) Tax and Ownership Information. A completed and signed (i) W-9 Request for Taxpayer Identification Number and Certification for each Obligor, and (ii) Beneficial Ownership Certification for Borrower;

 

(c) Organizational Documents. Organizational Documents of each Corporate Obligor, and such certificates and other documents as Bank may reasonably request relating to the existence, good standing and authority to do business of each such Corporate Obligor or to the authorization, execution and delivery of this Agreement or the other Security Instruments, the Requests for Advances and other matters relevant hereto;

 

 

(d) Litigation. A list and summary of all pending or threatened litigation against each Obligor certified by such representative of such Obligor as Bank may request;

 

(e) Additional Information. Any and all additional information, documents, certificates or instruments as Bank may reasonably request, including without limitation all leases, insurance policies and/or certificates, liens searches, instruments evidencing or securing any subordinated indebtedness of an Obligor and such subordination agreements as Bank may request with respect to any outstanding indebtedness of an Obligor, all of which shall be in form and content reasonably acceptable to Bank; and

 

(f) Fees and Expenses. Payment or reimbursement, as applicable, of any fees payable to Bank and any expenses incurred by Bank in connection with the negotiation, preparation and completion of this Agreement, the other Security Instruments or any Rate Management Agreement.

 

3.2 Conditions Precedent to All Extensions of Credit. Any obligation of Bank to make any Advance hereunder (including the initial Advance) is subject to (a) Bank’s discretion, (b) the performance by Obligors of all of their respective obligations under this or any other agreement between any of them and Bank, (c) no Default existing or occurring, (d) Bank’s continued satisfaction, in Bank’s sole discretion, with the businesses, operations, or condition (financial or otherwise) of each Obligor, (e) no material adverse change occurring in the business, assets, operations, prospects or condition, financial or otherwise, of an Obligor, and (f) the satisfaction of the following further conditions (but no Advance made before receipt of all of such items shall be deemed to be a waiver of such conditions with respect to any subsequent Advance):

 

(i) Accuracy of Representations. Borrower representing and warranting, and acknowledging and agreeing that each application by Borrower for an Advance will be deemed to be a representation and warranty by Borrower as of the date of such application, that (i) the representations and warranties contained in this Agreement and the other Security Instruments are true and correct in all material respects on and as of the date hereof, and will be true and correct in all material respects on and as of the applicable date of each Advance; (ii) all conditions to Advances hereunder have been satisfied, except as set forth in writing by Borrower in any request for an Advance, and waived in writing by Bank; and (iii) no Default has occurred and is continuing hereunder.

 

(ii) Priority of Security Interests. The creation, attachment and perfection of liens and security interests in all of the Collateral in favor of Bank, and/or evidence satisfactory to Bank that Borrower has made arrangements for prompt delivery to Bank of the original negotiable certificates of title to any titled vehicles owned or to be acquired by Borrower so that Bank’s security interest may be duly noted thereon, and the maintenance of the Collateral free and clear of all liens, claims and encumbrances except those of Bank, and as otherwise expressly permitted hereunder.

 

 

(iii) Due Diligence and Related Items. Receipt by Bank of the following, in form and substance satisfactory to Bank:

 

(a) Request for Advance. If required by Bank, a Request for Advance;

 

(b) Collateral Audit. Results satisfactory to Bank of any audit of the Collateral; and

 

(c) Landlord Waivers and Access Agreements. If requested by Bank, to the extent not previously delivered, Landlord Waivers or Access Agreements from each owner of each location at which any of the Collateral is currently or hereafter located, in form and content acceptable to Bank.

 

3.3 Advance Not A Waiver. No Advance shall constitute a waiver of any condition to Bank’s obligation to make further Advances, nor, in the event Obligor(s) are unable to satisfy any condition, shall any Advance have the effect of precluding Bank from thereafter declaring such inability to be an Event of Default.

 

3.4 No Liability of Bank. Bank shall have no liability, obligation, or responsibility whatsoever with respect to any Obligor except to advance funds pursuant and subject to this Agreement and the conditions set forth herein. Bank shall not be obligated to inspect or review the Collateral, or the terms of any contracts or agreements constituting a portion of the Collateral, nor be liable for the performance or default of an Obligor, or any other party, or for the performance of any obligation of an Obligor whatsoever. Nothing, including without limitation any Advance or acceptance of any document or instrument, shall be construed as a representation or warranty, express or implied, to any Person by Bank.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

During the term of this Agreement and until the Obligations have been paid and performed in full, unless compliance with the provisions of the following sections shall have been waived in writing by Bank, Obligors agree as follows:

 

4.1 Financial Statements. Obligor(s) will furnish the following to Bank:

 

(a) Quarterly Financial Statements of Borrower. As soon as available, but in any event within sixty (60) days after the last day of each fiscal quarter of Borrower, including yearend, quarterly Financial Statements of Borrower, certified by such representative of Borrower as Bank may request, prepared in conformity with GAAP and consisting of at least a balance sheet as of the close of such period and profit and loss statements for the fiscal quarter then ended and for the period from the beginning of the fiscal year to the close of such period;

 

 

(b) Annual Financial Statements of Corporate Guarantor(s). As soon as available, but in any event within one hundred twenty (120) days after the last day of each fiscal year of each Corporate Guarantor, annual audited Financial Statements of such Corporate Guarantor (consisting of at least a balance sheet and related statements of income, retained earnings, and cash flows) prepared in conformity with GAAP, and certified (with an unqualified opinion) by an independent certified public accountant acceptable to Bank;

 

(c) Quarterly Financial Statements of Corporate Guarantor(s). As soon as available, but in any event within sixty (60) days after the last day of each fiscal quarter of each Corporate Guarantor, other than yearend, quarterly Financial Statements of such Corporate Guarantor, certified by such representative of such Corporate Guarantor as Bank may request, prepared in conformity with GAAP, similarly to the statements referred to in Subsection (b) above (subject to normal year-end adjustments), and consisting of at least a balance sheet as of the close of such period and profit and loss statements for the fiscal quarter then ended and for the period from the beginning of the fiscal year to the close of such period;

 

(d) Compliance Certificate. As soon as available, but in any event within sixty (60) days after the last day of each fiscal quarter, a Compliance Certificate in the form attached hereto as Exhibit A certified by such representative of Borrower as Bank may request, calculating the financial covenants required to be maintained pursuant to this Agreement; and

 

(e) Additional Information. Such other financial and other information concerning any Obligor or the Collateral as Bank shall reasonably request from time to time.

 

4.2 Financial Covenants.

 

(a) Minimum Debt Service Coverage Ratio. Subject to Subsections 4.2(c) and 4.2(d) hereof, commencing with the fiscal quarter ending September 30, 2023, Borrower will maintain a minimum Debt Service Coverage Ratio of 1.2 to 1.0. This covenant shall be calculated as of the last day of each fiscal quarter of Borrower.

 

(b) Maximum Cash Flow Leverage Ratio. Subject to Subsections 4.2(c) and 4.2(d) hereof, Borrower will maintain a maximum Cash Flow Leverage Ratio of not more than (a) 4.5 to 1.0 as of the last day of the fiscal quarter ending on September 30, 2023, (b) 4.0 to 1.0 as of the last day of each fiscal quarter ending on December 31, 2023, and March 31, 2024, (c) 3.5 to 1.0 as of the last day of each fiscal quarter ending on June 30, 2024, and September 30, 2024,and (d) 3.0 to 1.0 as of the last day of each fiscal quarter thereafter. This covenant shall be calculated as of the last day of each fiscal quarter of Borrower.

 

 

(c) Equity Covenant Cure Guaranty. Notwithstanding anything to the contrary contained in Subsections 4.2(a) and 4.2(b) and/or Section 7.1, in the event that Borrower fails to comply with the financial covenants in Subsections 4.2(a) and/or 4.2(b), no later than the tenth (10^th) Business Day subsequent to the date the Compliance Certificate calculating such covenants is required to be delivered pursuant to Subsection 4.1(d), Parent will contribute cash in the form of immediately available funds to the capital of Borrower in an amount equal to the amount required to satisfy the financial covenants in Subsections 4.2(a) and/or 4.2(b), and upon the receipt by Borrower of such cash amount (the “Covenant Cure Amount”), the covenants in Subsections 4.2(a) and 4.2(b) shall be recalculated by increasing EBITDA by an amount equal to the Covenant Cure Amount. If, after giving effect to the foregoing recalculations, Borrower shall then be in compliance with the requirements of such financial covenants, Borrower shall be deemed to have satisfied the requirements of such covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of any or all of such covenants that had occurred shall be deemed cured for the purposes of this Agreement.

 

(d) Equity Payment Cure Guaranty. Notwithstanding anything to the contrary contained in Section 7.1, in the event that Borrower fails to make a payment due under the Note or this Agreement, no later than the fifth (5^th) Business Day subsequent to the date such payment was due, Parent will contribute cash in the form of immediately available funds to the capital of Borrower in an amount equal to the amount of the missed payment, and upon the receipt by Borrower of such cash amount (the “Payment Cure Amount”), the Payment Cure Amount shall be paid to Bank for application to the missed payment. If the Payment Cure Amount is applied to the missed payment within five (5) Business Days after the date such payment was due, Borrower shall be deemed to have made the payment on the due date therefor with the same effect as though there had been no failure to make the payment on a timely basis, and the payment default that had occurred shall be deemed cured for the purposes of this Agreement.

 

4.3 Depository and Disbursement Relationship. Commencing within thirty (30) days after the effective date hereof and for so long as any Obligations remain outstanding and unpaid, or Bank has any obligation to advance funds hereunder, each Corporate Obligor will establish and maintain its primary banking depository and disbursement relationship with Bank. Each operating account established by a Corporate Obligor after the date hereof shall be established and maintained with Bank.

 

4.4 Insurance.

 

(a) Required Insurance. Borrower will maintain insurance with financially sound and responsible companies, in such form, in such amounts and against such risks (including, without limitation, public liability, worker’s compensation, commercial liability, casualty, hazard or property damage providing special form of loss coverage on Borrower’s assets, and business interruption insurance) as is customarily carried by companies engaged in the same or similar businesses, operating like properties and similarly situated, plus any additional insurance, including endorsements covering specific exclusions, required in the Security Instruments or requested by Bank. Bank shall have the right to specify the maximum amount of deductibles Bank deems acceptable for each insurance policy. Bank shall be named as loss payee, on a “lender’s loss payable” basis, on each policy of property insurance, and as an additional insured on each policy of liability insurance. Each policy of property insurance shall provide coverage on a replacement cost basis. Each policy of insurance shall provide that the insurer waives all rights of subrogation against Bank and that coverage under such policy is primary to any other insurance carried by Bank. Borrower will have the right to place any such insurance with any insurance carrier reasonably acceptable to Bank. Upon execution of this Agreement, Borrower will furnish to Bank (i) a summary of the insurance coverages of Borrower, together with certificates showing Bank as an additional insured or loss payee with waiver of subrogation provisions, as specified above, all such policies to be non-cancelable without thirty (30) days prior written notice to Bank, (ii) supplements to such summary from time to time as the amounts or terms of such insurance coverage change, and (iii) upon request, copies of the applicable policies and proof of payment of the premiums therefor. Borrower will provide Bank with immediate written notice of the cancellation of any insurance of Borrower.

 

 

(b) COLLATERAL PROTECTION INSURANCE. BORROWER IS REQUIRED TO (I) KEEP THE COLLATERAL INSURED AGAINST DAMAGE IN THE AMOUNT BANK SPECIFIES, (II) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER, AND (III) NAME BANK AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS. BORROWER IS REQUIRED TO DELIVER TO BANK A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS. IF BORROWER FAILS TO MEET ANY REQUIREMENT LISTED IN THIS SECTION, BANK MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF BORROWER AT BORROWER’S EXPENSE AND SUCH AMOUNTS SHALL BE ADDED TO THE OBLIGATIONS.

 

4.5 Field Audits and Appraisals; Inspection of Property, Books, Records and Collateral. At all reasonable times and as often as may be reasonably requested by Bank, each Corporate Obligor will permit Bank, and any person appointed by Bank to act for it and on its behalf, at Borrower’s sole cost and expense (a) to examine and make copies of each such Corporate Obligor’s corporate and financial books and records, and other books, records, and properties, specifically including but not limited to all contracts, statements, invoices, bills and claims for labor, material, and services, (b) to discuss such Corporate Obligor’s affairs, finances and accounts with the officers, agents and employees of such Corporate Obligor and such Corporate Obligor’s independent certified public accountants, (c) to enter upon any premises at which any Collateral is located and inspect the Collateral and all books and records related thereto, and (d) to conduct such appraisals of the Collateral as Bank or any Governmental Authority may reasonably require. In addition, Borrower shall conduct, and Bank is hereby authorized to conduct, in each case at Borrower’s sole cost and expense, such environmental site assessments, testing and monitoring, as may be requested by any Governmental Authority or by Bank.

 

4.6 Notice; Litigation. Each Obligor will promptly give written notice to Bank, in each case at Bank’s address set forth above, of (a) the occurrence of any Default or Event of Default, (b) any legal, judicial or regulatory proceedings affecting an Obligor, the Collateral, or any properties or assets of an Obligor, being commenced or threatened, (c) any dispute between an Obligor and any Governmental Authority, or between an Obligor and any other Person, which could reasonably be expected to have, or lead to, or result in, any Material Adverse Effect, (d) any material damage to the Collateral (including without limitation any fire or other casualty) affecting any material part of the Collateral, specifying the nature and extent of damage and whether such damage is being repaired in due course, (e) any notice of taking or eminent domain action or proceeding affecting any material part of the Collateral, (f) any other action, event or condition of any nature of which an Obligor has knowledge which could reasonably be expected to have, or lead to, or result in, any Material Adverse Effect, (g) any additions to or changes in the locations of an Obligor’s business, (h) any change in the Chairman of the Board of a Corporate Obligor, (i) any change in the ownership of Borrower which requires a change in the information included in the Beneficial Ownership Certification most recently delivered to Bank, (j) all actions taken in order to comply with Section 4.10 and to prevent Forbidden Activities, (k) the formation or acquisition by Borrower of any new Subsidiary, (l) any investment in or capital contribution to any Person, or (m) the voluntary or involuntary bankruptcy of, or any assignment for the benefit of creditors or the seeking of any relief under any Debtor Relief Law by, an Obligor.

 

 

4.7 Application of Advances. Borrower shall disburse all Advances for the purposes specified herein. Bank shall have the right, but not the obligation, to disburse and directly apply the proceeds of any Advance to the satisfaction of any of Borrower’s covenants, duties or agreements hereunder. Bank may disburse any portion of any Advance at any time, and from time to time, to Persons other than Borrower for the purposes specified in this Agreement irrespective of the provisions of Article II, and the amount of Advances to which Borrower shall thereafter be entitled shall be correspondingly reduced. Bank may advance and incur such expenses for the protection of the Collateral, at such times and in such amounts as Bank may reasonably determine.

 

4.8 Discharge of Liens and Encumbrances. Borrower will promptly pay or cause to be paid when due all costs and expenses incurred in connection with the Collateral and will keep the Collateral free and clear of any liens, charges, or claims other than the liens of Bank and other liens expressly permitted hereunder.

 

4.9 Subsidiary Guaranties and Pledges. (a) Subject to the provisions of Subsection 4.9(b), within five (5) Business Days after Bank’s written request, Borrower will (i) cause each present and future Subsidiary to execute a Guaranty in form and content acceptable to Bank, and pledge all of such Subsidiary’s assets (subject only to liens approved by Bank in its reasonable discretion) to secure payment of such Guaranty and the Obligations, and (ii) pledge or cause to be pledged one hundred percent (100%) of the equity interests in each such Subsidiary, free and clear of any liens, charges, or claims, to secure payment of the Obligations.

 

(b) Notwithstanding the provisions of Subsection 4.9(a), except as provided in the last sentence of this subsection, (i) no foreign Subsidiary shall become a Guarantor, and (ii) only sixty-five percent (65%) of the issued and outstanding equity interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and one hundred percent (100%) of the issued and outstanding equity interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each foreign Subsidiary directly owned by Borrower or any domestic Subsidiary shall be pledged. Upon the occurrence and during the continuance of any Event of Default Borrower will, upon the written request of Bank, cause each foreign Subsidiary (i) to execute a Guaranty in form and content acceptable to Bank, (ii) to pledge all of such Subsidiary’s assets (subject only to liens approved by Bank in its reasonable discretion) to secure payment of such Guaranty and the Obligations, and (iii) to have the balance of its equity interests pledged, free and clear of any liens, charges, or claims, to Bank.

 

 

4.10 Compliance with Laws; Forbidden Activities. Borrower shall not use or occupy any Subject Property or Collateral, or permit the use or occupancy of any Subject Property or Collateral, for any Forbidden Activities or otherwise in violation of any Governmental Requirements, regardless of whether such use or occupancy is permitted under any conflicting Governmental Requirements. Each lease, license, sublease or other agreement for use, occupancy or possession of any Subject Property or Collateral (each a “lease”) shall prohibit the use or occupancy of any Subject Property or Collateral for any Forbidden Activities. Promptly upon request, Borrower shall provide to Bank written certification of compliance with this Section including certification, to the best of Borrower’s knowledge after due inquiry, as to whether the Subject Property or any Collateral is being used or occupied for any Forbidden Activities. If Borrower becomes aware that any Subject Property or Collateral is being used or occupied for any Forbidden Activities, Borrower shall, subject to the terms of the applicable lease, terminate the applicable lease and take all commercially reasonable actions to discontinue such activities.

 

4.11 Additional Information. Each Obligor acknowledges that Bank is subject to federal and state regulations requiring Bank to obtain, verify, and record information that identifies Bank’s customers, including all Obligors. Promptly following any request therefor, each Obligor shall provide information and documentation reasonably requested by Bank for purposes of compliance with applicable “know your customer” requirements under the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Beneficial Ownership Regulation or other applicable anti-money laundering laws, including but not limited to a Beneficial Ownership Certification form acceptable to Bank. In addition, Borrower will promptly deliver to Bank an updated and signed Beneficial Ownership Certification upon any change in the ownership of Borrower which requires a change in the information included in the Beneficial Ownership Certification most recently delivered to Bank.

 

4.12 Errors and Omissions; Additional Documents. Each Obligor hereby agrees that immediately upon the written request of Bank, such Obligor will execute and/or deliver, and cause to be executed and/or delivered, such additional Notes, Guaranties, Security Agreements, or other Security Instruments as Bank may request, or will correct or cause to be corrected any Note, Guaranty, Security Agreement or other Security Instrument already executed or delivered. Any additional documents, instruments, agreements, revisions or corrections will be in conformity with the terms and conditions set forth in this Agreement. Any written request by Bank for additional documents, instruments or agreements or for revisions or corrections shall be conclusive evidence of the necessity for such additional documents, instruments, agreements, revisions or corrections.

 

4.13 Maintenance of Corporate Existence and Properties. Each Corporate Obligor will (a) engage solely in the business presently operated by it, without material change therein, (b) maintain its corporate existence, in its current form and current jurisdiction of organization, (c) maintain its good standing and authority to do business in each jurisdiction in which it is organized or required to be qualified to do business, and (d) keep and maintain all franchises, licenses, permits and properties useful or necessary in the conduct of its business in good order and condition.

 

 

4.14 Compliance with Governmental Requirements. Each Obligor shall timely comply with all Governmental Requirements (including without limitation all Environmental Laws) and shall promptly furnish to Bank true and complete copies of any official notice or claim by any Governmental Authority pertaining to the operation of the business of an Obligor or to the Collateral.

 

4.15 Payment of Taxes. Each Obligor will pay when due all taxes, assessments and other liabilities levied or assessed upon such Obligor’s income, assets and/or properties (real and personal) or upon such Obligor’s business, except those being contested in good faith and against which such Obligor has set up adequate reserves in accordance with GAAP.

 

4.16 ERISA Compliance. All Plans will be maintained in compliance with all applicable provisions of ERISA and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. All reports and other documents required to be filed with any Governmental Authority or distributed to Plan participants or beneficiaries will be filed or distributed in accordance with applicable law.

 

4.17 Accounts Receivable and Payable. Each Corporate Obligor will pay its accounts payable and will maintain its accounts receivable in a manner consistent with prudent business practices, including normal terms and conditions for payment for companies engaged in similar operations in similar jurisdictions.

 

4.18 Post-Closing Delivery of UCC Amendments. As of the date of execution of this Agreement by Bank, Obligors have not provided to Bank the following items (collectively, the “UCC Amendments”):

 

(i)

UCC Amendment releasing Guarantor as a Debtor from UCC Financing Statement No. 21-0030782649, filed by Go Fund Advance, as Secured Party; and

 

(ii)

UCC Amendment releasing Guarantor as a Debtor from UCC Financing Statement No. 21-005340432, filed by CT Corporation System, as Representative, as Secured Party.

 

Obligors represent and warrant that the secured parties named above were not authorized to file the UCC Financing Statements listed above as to Guarantor, and therefor such Financing Statements are not effective as to Guarantor under Subsection 9.510(a) of the Texas Business and Commerce Code.

 

 

Obligors will diligently pursue the UCC Amendments following the execution hereof, either by delivery from the named secured parties, or pursuant to the procedure for the filing by debtors of Termination Statements pursuant to Section 5.13 of the Texas Business and Commerce Code (although the UCC Amendments are only amendments to release Guarantor as a Debtor, and not Termination Statements). Obligors covenant and agree to deliver to Bank on or before September 1, 2023, file-stamped copies of each of the UCC Amendments, in form and content acceptable to Bank. If Obligors fail to deliver to Bank on or before September 1, 2023, each of the UCC Amendments, in form and content acceptable to Bank, such failure shall constitute an immediate Event of Default, and Bank shall be entitled to exercise any and all rights and remedies provided for in the Security Instruments without notice to Obligors or any other party, except such notice as is required by law. Bank may in its sole discretion extend the due date in this Section 4.18 upon written notice to Obligors.

 

4.19 Post-Closing Restructure of Licensing and Sublicensing Pledge Items. Obligors covenant and agree to deliver to Bank on or before August 11, 2023, each of the following (the “Post-Closing Items”), each in form and content acceptable to Bank:

 

	(i)	Certificate of Formation of CGI Cellerate Rx, LLC;
	(ii)	Certificate of Existence of CGI Cellerate Rx, LLC in its state of formation;
	(iii)	Certificate of Good Standing of CGI Cellerate Rx, LLC in its state of formation;
	(iv)	Company Agreement of CGI Cellerate Rx, LLC;
	(v)	UCC Lien Search for CGI Cellerate Rx, LLC in its state of formation;
	(vi)	Signed W-9 for CGI Cellerate Rx, LLC
	(vii)	IP Sublicense Agreement from CGI Cellerate Rx, LLC to Cellerate LLC
	(viii)	Security Agreement duly executed by CGI Cellerate Rx, LLC, substantially in the form of the Borrower Security Agreement executed in connection herewith;
	(ix)	Cellerate LLC Consent to Pledge of IP Sublicense Agreement
	(x)	Guarantor Guaranty to Bank of payment and performance under the License to CGI Cellerate Rx, LLC and the Sublicense to Cellerate LLC;
	(xi)	Certificate of Manager of CGI Cellerate Rx, LLC; and
	(xii)	Certificate of Secretary of Guarantor.

 

If Obligors fail to deliver to Bank on or before August 11, 2023, each of the Post-Closing Items, in form and content acceptable to Bank, such failure shall constitute an immediate Event of Default, and Bank shall be entitled to exercise any and all rights and remedies provided for in the Security Instruments without notice to Obligors or any other party, except such notice as is required by law. Bank may in its sole discretion extend the due date in this Section 4.19 upon written notice to Obligors.

 

 

ARTICLE V

NEGATIVE COVENANTS

 

During the term of this Agreement and until the Obligations have been paid and performed in full, unless compliance with the provisions of the following sections shall have been waived in writing by Bank, Obligor(s) agree as follows:

 

5.1 Limitations on Liens. No Corporate Obligor will create, assume or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance of any kind upon any of its properties or assets, whether now owned or hereafter acquired, except (a) liens created by this Agreement, the other Security Instruments or otherwise in favor of Bank, (b) liens for taxes, assessments and other governmental charges not yet due and payable, (c) deposits to secure the payment of workmen’s compensation, unemployment insurance or other social security benefits or obligations or other obligations of a like general nature incurred in the ordinary course of business and in accordance with such Corporate Obligor’s historical customs and practices, provided that the payment and performance of any such obligations are not past due or otherwise in default, (d) landlords’, warehousemen’s, carriers’, or other like liens arising by operation of law in the ordinary course of business securing obligations which are not past due or otherwise in default, (e) inchoate liens arising under ERISA to secure current service pension liabilities as they are incurred under the provisions of Plans from time to time in effect, provided such liabilities are not past due or otherwise in default, or (f) liens expressly permitted in the Security Instruments or otherwise consented to by Bank in writing on or after the date hereof.

 

5.2 Limitations on Liabilities. No Corporate Obligor will create, assume or suffer to exist any liabilities, contingent or otherwise, whether by guaranty, endorsement, agreement to purchase or repurchase, agreement to lease, agreement to supply or advance funds (including, without limitation, agreements to maintain working capital, solvency or other balance sheet conditions or agreements to purchase any equity interest or make capital contributions or otherwise) without Bank’s prior written consent, except (a) as expressly permitted hereunder, (b) for endorsements of instruments for collection in the ordinary course of business, and (c) trade accounts payable in the ordinary course of business.

 

5.3 Negative Pledges. No Corporate Obligor will enter into, incur, or permit to exist any agreement or other arrangement that prohibits, restricts, or imposes any condition upon the ability of a Corporate Obligor or any Subsidiary to create, incur, or permit to exist any mortgage, lien or security interest upon any of its property or assets.

 

5.4 Limitations on Fundamental Changes; Disposition of Assets. Borrower will not (a) form or acquire any new Subsidiary, (b) make an investment in or capital contribution to any Person, or (c) transfer any equity interests held by Borrower. No Corporate Obligor will (a) acquire any assets outside the ordinary course of business, (b) enter into any merger or consolidation, (c) liquidate or dissolve itself (or suffer any liquidation or dissolution), (d) convey, sell, lease, charter or otherwise dispose of all or any material part of its property, assets or business (other than the sale of inventory in the ordinary course of business), (e) cease, suspend or materially curtail business operations, (f) enter into any arrangement, directly or indirectly, whereby a Corporate Obligor would sell or transfer any real or personal property either now owned or hereafter acquired, and then or thereafter lease as lessee such properties or any part thereof or any other property to be used for substantially the same purpose, (g) acquire, or agree to acquire, during any fiscal year, in any transaction or series of transactions, assets or properties of an aggregate purchase price which could reasonably be expected to result in an Event of Default, (h) change its form or jurisdiction of organization, or (i) amend its Organizational Documents.

 

 

5.5 Restricted Payments. Borrower will not pay any dividend or distribution, nor purchase, acquire, retire, or redeem any interest in a Corporate Obligor, whether now or hereafter issued or outstanding, without prior written consent of Bank

 

5.6 Loans and Advances. No Corporate Obligor will make or permit to remain outstanding any loans, advances or extensions of credit to any Person or Persons, other than trade credit extended to customers who are not Affiliates of any Obligor, on standard terms in the ordinary course of business and in accordance with such Corporate Obligor’s historical customs and practices.

 

5.7 Nature of Business. No Corporate Obligor will, without the prior written consent of Bank, (a) engage in any lines of business or business ventures other than those in which it is presently engaged or that are directly related thereto, (b) change in any material respect its methods of operation or accounting or manner of doing business, or (c) change its name, tax identification number, corporate form or jurisdiction of organization.

 

5.8 Transactions with Affiliates. No Corporate Obligor will engage in any transaction with an Affiliate on terms less favorable to such Corporate Obligor than would be obtainable at the time in comparable transactions with Persons not affiliated with such Corporate Obligor.

 

5.9 ERISA. No Corporate Obligor will engage in any transaction prohibited by ERISA. No Plan will incur an accumulated funding deficiency. No Corporate Obligor will incur any liability for excise tax or penalty due to the Internal Revenue Service or any liability to the Pension Benefit Guaranty Corporation; and no “reportable events” (as that phrase is defined in Section 4043 of ERISA) will occur with respect to any Plan.

 

5.10 Subordinated Indebtedness. Except as expressly permitted herein and in any Subordination Agreement, no Corporate Obligor will amend, modify or obtain or grant a waiver of any provision of any document or instrument evidencing or securing any subordinated indebtedness of an Obligor, nor purchase, redeem, retire or otherwise acquire for value, deposit any monies with any Person with respect to, or make any payment or prepayment of the principal of or any other amount owing in respect of, any subordinated indebtedness of an Obligor, except to the extent permitted under the applicable Subordination Agreement.

 

5.11 Government Regulation. No Obligor will (a) be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control) that prohibits or limits Bank from making any Advance or extension of credit to Borrower or from otherwise conducting business with any Obligor, or (b) fail to provide documentary and other evidence of any Obligor’s identity as may be requested by Bank at any time to enable Bank to verify such Obligor’s identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

 

 

5.12 Anti-Corruption. Neither any Obligor, nor, to the knowledge of Borrower, any director, officer, employee, agent, or Affiliate of any Obligor has (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (b) made any direct or indirect unlawful payment to any government official or employee from corporate funds, (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977 or the Bribery Act 2010 of the United Kingdom or similar law of the European Union or any European Union Member State or similar law of a jurisdiction in which any Obligor conducts business and to which any Obligor is lawfully subject or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

 

In order to induce Bank to enter into this Agreement, Obligor(s) hereby represent and warrant to Bank that the following representations and warranties are true and correct, and shall remain true and correct at all times prior to the full and final payment and performance of the Obligations:

 

6.1 Corporate Authority. Each Corporate Obligor (which for purposes of this Section 6.1 shall include each general partner of each Corporate Obligor) (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) is duly licensed, qualified to do business and in good standing in each jurisdiction in which the ownership of its assets or the conduct of its business requires such licensing and qualification, and (c) has all powers and all permits, licenses, consents and authorizations necessary to own and operate such Corporate Obligor’s assets and to carry on such Corporate Obligor’s business as presently conducted. The execution, delivery and performance of this Agreement by each Obligor, the borrowings hereunder and the execution, delivery and performance of this Agreement and the other Security Instruments (a) have been duly authorized by proper corporate proceedings, and (b) will not contravene, or constitute a default under, any provision of applicable law or regulation or of any Organizational Document of any Corporate Obligor, or of any note, mortgage, security agreement, pledge, indenture, contract, agreement or other instrument, or any judgment, order or decree, binding upon any Obligor or any Obligor’s property. Except for any consent or approval which has been duly obtained, no consent or approval of any shareholder, partner, member or other equity owner of any Corporate Obligor, or of any other Person, is required in connection with the execution, delivery or performance of this Agreement or any other Security Instrument, or the creation of any of the liens or security interests contemplated herein or therein. Each of this Agreement, the Note(s), the other Security Instruments and the several agreements and instruments contemplated hereby and thereby, when duly executed and delivered by the party or parties thereto, will constitute the legal, valid and binding obligation of each Obligor signatory thereto, and will be enforceable in accordance with its terms.

 

6.2 Financial Statements. The Financial Statements which have been delivered to Bank are true, complete and correct in all material respects, and fairly present the financial position of the applicable Obligor, as of the date(s) thereof, and such Obligor’s results of operations and cash flows for the period(s) then ended. The Financial Statements of each Corporate Obligor have been prepared in accordance with GAAP, and in a manner consistent with prior periods and the historical customs and practices of such Corporate Obligor.

 

 

6.3 Absence of Undisclosed Liabilities or Obligations. All material obligations, investments and liabilities, contingent or otherwise, of each Obligor are truly, completely and accurately disclosed in the Financial Statements. No adverse change has occurred in the business, assets, operations, prospects or condition, financial or otherwise, of an Obligor since the date of the most recent Financial Statements of such Obligor delivered to Bank. No Obligor is party to any agreement or a party to any litigation or proceeding (and no litigation or proceeding is threatened) or otherwise subject to any restriction that would prevent or impair the performance of such Obligor’s obligations under this Agreement or any Security Instrument. None of the information supplied by any Obligor contains a material misstatement of fact or omits any material fact.

 

6.4 Title. Borrower has, and until the Obligations are fully and finally paid will continue to have, good and indefeasible title to all of its assets and property (including without limitation the Collateral), free and clear of all liens, mortgages, security interests and other encumbrances, except those in favor of Bank, or as otherwise expressly permitted herein.

 

6.5 Liens and Security Interests; Pari Passu Obligations. The security interests, mortgages and liens attaching to the Collateral will constitute at all times valid, perfected and enforceable security interests, mortgages and liens in favor of Bank, subject to no other lien, mortgage, security interest or other encumbrance, except those of Bank or as otherwise expressly permitted in this Agreement. Before funding any Advance, Obligor(s) will have taken, or will have participated with Bank in taking, all necessary action (including making all necessary filings) to provide Bank with perfected security interests, mortgages and liens in the Collateral under the laws of all applicable jurisdictions, subject only to liens and security interests expressly permitted hereunder. The Obligations of Borrower hereunder rank at least pari passu with all other Indebtedness of Borrower.

 

6.6 Use of Proceeds. Each Loan is or will be for business, commercial, investment or other similar purposes, and not for personal, family, household or agricultural use. No Loan is or will be subject to Regulation Z issued by the Board of Governors of the Federal Reserve System, Title I (Truth-In-Lending Act) or Title V (General Provisions) of the Consumer Credit Protection Act, or the Real Estate Settlement Procedures Act of 1974 (RESPA), and no disclosures are or will be required to be given under such regulations and federal laws in connection with any Loan. The funds advanced by Bank under the Advancing Term Note will be used solely for working capital and to finance up to one hundred percent (100%) of the cash consideration for the acquisition from The Hymed Group Corporation, Applied Nutritionals, LLC and George Petito of certain intellectual property, copyrights, processes, rights, trade dress, necessary 510(k)s, products, inventory, equipment, tooling and records, and related fees and expenses including subsequent payments that may be due to the sellers after closing under the purchase agreement. Borrower represents and warrants that no portion of the proceeds of any Loan shall be used directly or indirectly to purchase ineligible securities, as defined by applicable regulations of the Federal Reserve Board, underwritten by Bank or any Affiliate of Bank during the underwriting period and for thirty (30) days thereafter.

 

 

6.7 Litigation. Except as set forth on Schedule 6.7, there is no action, suit or proceeding pending, or to the knowledge of any Obligor threatened, against any Obligor or before any court, governmental department, administrative agency or instrumentality which, if such action, suit or proceeding were adversely determined, (a) would subject an Obligor to any liability not fully covered by insurance, or (b) could reasonably be expected to result in a Material Adversely Effect.

 

6.8 Solvency. Each Obligor (a) is solvent with assets of a value that exceeds the amounts of such Obligor’s liabilities, (b) is able to meet such Obligor’s debts as they mature, and (c) in such Obligor’s reasonable opinion, has adequate capital to conduct the businesses in which such Obligor is engaged.

 

6.9 Subsidiaries and Investments. Except as set forth on Schedule 6.9, no Corporate Obligor has any Subsidiaries or investments in any Person.

 

6.10 No Event of Default. No Default or Event of Default has occurred and is continuing. No Obligor is in default of any of its obligations under any agreements with any Person.

 

6.11 Tax Returns. Each Obligor has filed all United States tax returns and all city, state and foreign tax returns required to be filed by such Obligor and has paid all taxes which have become due pursuant to any such return or pursuant to any assessment received by such Obligor. All such returns properly reflect any United States income tax, foreign tax, state tax and city tax of the applicable Obligor for the periods covered thereby.

 

6.12 Insurance. Each Corporate Obligor has maintained and now maintains (a) insurance of such types (including, without limitation, public liability, worker’s compensation, commercial liability, casualty, hazard or property damage providing all risk coverage on such Corporate Obligor’s assets, and business interruption insurance), and in such amounts as is customary in the industry, and (b) adequate insurance protection against all liabilities, claims and risks against which it is customary to insure.

 

6.13 Real Property / Collateral Locations. Set forth Schedule 6.13 is a true, complete and correct list of (a) each location owned or leased by a Corporate Obligor, and (b) each location at which any Collateral is stored. Until the Obligations have been fully and finally paid, all of the Collateral will be located at one of the locations set forth on Schedule 6.13.

 

6.14 Intellectual Property. Each Corporate Obligor owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by such Corporate Obligor does not infringe upon the rights of any other Person, except for any such infringements that could not reasonably be expected to result in a Material Adverse Effect. Set forth on Schedule 6.14, is a true, complete and correct list of all trademarks, tradenames, copyrights, patents and other intellectual property material to the business of each Corporate Obligor.

 

 

6.15 Environmental Matters. Each Obligor has complied, and remains in compliance, in all material respects with the provisions of all Environmental Laws applicable to such Obligor or any of such Obligor’s owned or operated facilities, sites or other properties, businesses and operations, including those which relate to the reporting by such Obligor of all sites owned or operated by such Obligor where solid wastes, hazardous or toxic wastes or hazardous or toxic substances have been treated, stored, disposed of or otherwise handled. No release (as defined under applicable Environmental Laws) at, from, in or on any site owned or operated by an Obligor has occurred which, if all relevant facts were known to the relevant Governmental Authorities (a) would require remediation to avoid deed record notices, restrictions, liabilities or other duties, or (b) would result in other consequences that would not be applicable if that release had not occurred. Neither an Obligor nor any agent or contractor of an Obligor has transported or arranged for the transportation of any solid wastes, hazardous or toxic wastes or hazardous or toxic substances to, or disposed or arranged for the disposition of any solid wastes, hazardous or toxic wastes or hazardous or toxic substances at, any off-site location that could lead to any claim against an Obligor, as a potentially responsible party or otherwise, for any fines, clean-up costs, remedial work, damage to natural resources, personal injury or property damage.

 

6.16 Compliance with Laws. No Obligor (a) is in violation of any law, ordinance, statute, or governmental rule or regulation to which such Obligor is subject, or (b) has failed to obtain any license, permit, franchise, or other governmental authorization necessary in connection with the ownership or operation of such Obligor’s assets, property, business or operations. In furtherance and not in limitation of the foregoing, Obligor(s) represent and warrant that each Plan is in compliance in all material respects with the applicable provisions of ERISA and, to the best of each Obligor’s knowledge, no “reportable event,” as such term is defined in Section 4043 of ERISA, has occurred with respect to any Plan. Each Obligor, and each Subsidiary or Affiliate of an Obligor, is in compliance in all material respects with all federal, state and local laws, rules and regulations applicable to its properties, operations, business, and finances, including, without limitation, any federal or state laws relating to liquor (including 18 U.S.C. § 3617, et seq.) or narcotics (including 21 U.S.C. § 801, et seq.) and/or any commercial crimes. Neither any Obligor, nor any Subsidiary or Affiliate of an Obligor, nor any of their directors, officers, brokers or other agents acting or benefiting in any capacity in connection with a Loan or any other capital raising transaction involving Bank or Bank’s Affiliates, is a Designated Person. Borrower shall not, directly or indirectly, use the proceeds of a Loan, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person (a) to fund any activities or business of or with any Designated Person, or in any country or territory, that at the time of such funding is the subject of any sanctions under any Sanctions Laws and Regulations, or (b) in any other manner that would result in a violation of any Sanctions Laws and Regulations by any party to this Agreement. None of the funds or assets that are used to pay any amount due pursuant to this Agreement or any other Security Instrument shall constitute funds obtained from transactions with or relating to Designated Persons or countries which are the subject of sanctions under any Sanctions Laws and Regulations. As used above, “Sanctions Laws and Regulations” means (a) any sanctions, prohibitions or requirements imposed by any executive order (an “Executive Order”) or by any sanctions program administered by the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) and/or (b) any sanctions measures imposed by the United Nations Security Council, European Union or the United Kingdom. “Designated Person” means a person or entity (a) listed in the annex to, or otherwise the subject of the provisions of, any Executive Order, (b) named as a “Specially Designated National and Blocked Person” (“SDN”) on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list, or is otherwise the subject of any Sanctions Laws and Regulations, or (c) in which an entity or person on the SDN list has 50% or greater ownership interest or that is otherwise Controlled by an SDN.

 

 

6.17 Governmental Approvals. No approvals of any governmental department, administrative agency, instrumentality or authority having jurisdiction over an Obligor, or an Obligor’s property, are necessary in connection with the execution, delivery or performance of the Security Instruments, the perfection of the liens and security interests provided for thereby, or the consummation of the transactions contemplated hereby.

 

6.18 Regulations U and X. No Advance will be used, directly or indirectly, for the purpose of purchasing or carrying, or for payment in full or in part of Indebtedness which was incurred for the purpose of purchasing or carrying, any “margin stock,” as such term is defined in Regulation U. No part of the proceeds of a Loan will be used for any purpose which violates Regulation X.

 

6.19 Investment Company Act of 1940. No Corporate Obligor is an investment company within the meaning of the Investment Company Act of 1940.

 

6.20 Assumed Names. Except as set forth on Schedule 6.20, (a) within the past five (5) years no Obligor has conducted its business under any corporate, trade, assumed, fictitious or other name, and (b) following the date hereof no Obligor will conduct its business under any other corporate, trade, assumed, fictitious or other name without thirty (30) days prior written notice to Bank, and execution and/or delivery of such additional documents as Bank may request.

 

6.21 Beneficial Ownership. As of the date of this Agreement, the information included in the Beneficial Ownership Certification is true and correct in all respects. The information included in any Beneficial Ownership Certification delivered to Bank after the date of this Agreement will be true and correct in all respects as of the date of delivery to Bank of such Beneficial Ownership Certification.

 

6.22 Execution Outside the State of Florida. This Agreement and all of the other Security Instruments executed in connection herewith have not been executed in the state of Florida.

 

 

ARTICLE VII

DEFAULT

 

7.1 Default. The occurrence of any of the following events or conditions shall constitute an “Event of Default” under this Agreement, and under each Note:

 

(a) Failure (i) to pay any principal of or interest on a Note, when due or declared due, or (ii) to pay any fee or any other amount (other than an amount referred to in clause (i) of this Subsection (a)) payable under this Agreement or any other Security Instrument, when and as the same shall become due and payable, or (iii) of an Obligor to pay when due any debt, liability or obligation owed to Bank, Bank’s parent, or any Affiliate or Subsidiary of Bank’s parent, or to perform any other obligation under any document, instrument or agreement evidencing or securing any debt, liability or obligation to Bank, Bank’s parent, or any Affiliate or Subsidiary of Bank’s parent, or (iv) to make any other payment or required prepayment of any other Indebtedness of an Obligor, or (v) to comply with Section 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.18 or 4.19, or (vi) to comply with Article V, or (vii) by an Obligor or any other party to a Subordination Agreement to comply with the terms of any Subordination Agreement or any instrument evidencing or securing Subordinated Debt, or (viii) by an Obligor to comply with any real property lease or other agreement with respect to any facility at which any Collateral is located, which failure continues beyond any applicable cure period;

 

(b) Failure of an Obligor to observe or perform (or to furnish adequate evidence of performance of) any of the covenants, terms or agreements of this Agreement, any other Security Instrument or any other agreement with Bank;

 

(c) Any representation or warranty made by an Obligor in this Agreement, any other Security Instrument or any certificate, financial or other statement furnished to Bank is untrue, incorrect or misleading in any material respect as of the date made or furnished, or becomes untrue, incorrect or misleading at any time prior to the full and final payment of the Obligations, and the termination of any obligation by Bank to make Advances hereunder;

 

(d) Default occurring, or an Obligor seeking to disaffirm its obligations, under any of the Security Instruments;

 

(e) Any security interest, lien or assignment purported to be created by any Security Instrument shall (other than in accordance with the terms hereof and thereof) (i) cease to be in full force and effect, or (ii) cease to give Bank the liens, rights, powers and privileges purported to be created or granted under such Security Instrument (including a perfected first priority security interest in and lien on all of the Collateral thereunder), or (iii) be asserted by any Obligor not to be a valid, perfected, first priority security interest in or lien on any Collateral covered or purported to be covered thereby;

 

(f) An Obligor failing to observe or perform any term, condition or agreement with respect to any obligation for borrowed money or leased assets or in any instrument or agreement evidencing, securing or relating to any indebtedness of such Obligor, which failure continues beyond any applicable notice, grace or cure period;

 

 

(g) Ron Nixon (or any successor acceptable to Bank) shall cease to serve as Chairman of the Board of Directors of any Corporate Obligor, unless a successor acceptable to Bank is elected or appointed within ten (10) Business Days;

 

(h) Reserved;

 

(i) The entry of any judgment against an Obligor, or any attachment or other levy against the property of an Obligor;

 

(j) Dissolution, death, liquidation, termination of existence, insolvency, business failure or winding up of an Obligor;

 

(k) Failure of an Obligor to pay when due any debt, liability or obligation owed to Bank, Bank’s parent, or any Affiliate or subsidiary of Bank’s parent, or to perform any other obligation or otherwise default under any document, instrument or agreement evidencing or securing any debt, liability or obligation to Bank, Bank’s parent, or any Affiliate or subsidiary of Bank’s parent;

 

(l) The occurrence or existence of any default, event of default, termination event or other similar condition or event (however described) under any swap agreement (as defined in 11 U.S.C. Sec. 101, as in effect from time to time) to which Borrower is a party;

 

(m) Bank deems payment or performance of the Obligations to be insecure, or the Collateral taken as a whole becomes, in the judgment of Bank, impaired, unsatisfactory or insufficient in character or value, or Bank in good faith believes that the prospect of payment or performance of the Obligations is materially impaired;

 

(n) An involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of an Obligor or any Obligor’s debts, or of a substantial part of any Obligor’s assets, under any Debtor Relief Law now or hereafter in effect, or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for an Obligor or for a substantial part of any Obligor’s assets, and, in any such case, such proceeding or petition shall continue undismissed for thirty (30) days, or an order or decree approving or ordering any of the foregoing shall be entered; or

 

(o) Any Obligor shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner (not to exceed ten (10) Business Days), any proceeding or petition described in Subsection (n) of this section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for an Obligor or for a substantial part of any Obligor’s assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) admit in writing its inability to pay its debts as they mature, or (vii) take any action for the purpose of effecting any of the foregoing;

 

 

Bank may remedy any Default, without waiving same, or may waive any Default without waiving any prior or subsequent Default.

 

7.2 Termination of Obligation to Fund. Any obligation of Bank to extend credit or make Advances shall immediately terminate upon (a) the occurrence of any event, fact or circumstance that could reasonably be expected to result in a Material Adverse Effect, (b) Bank deeming payment or performance of any of the Obligations to be impaired or insecure, or (c) any Default.

 

7.3 Optional Acceleration. Upon the occurrence of any Event of Default set forth in Section 7.1 (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l) or (m), Bank, at its option, without notice to an Obligor or to any other Person, may declare the Obligations (including without limitation all unpaid principal and accrued but unpaid interest, but expressly excluding any Obligations related to any Rate Management Agreement or Rate Management Transaction) to be forthwith due and payable, whereupon the same (other than Obligations related to any Rate Management Transaction) shall become due and payable without any presentment, demand, protest, notice of protest, notice of intent to accelerate, notice of acceleration, or notice of any kind (except notice required by law which cannot be waived), all of which are hereby waived.

 

7.4 Automatic Acceleration. Upon the occurrence of any Event of Default set forth in Section 7.1 (n) or (o), the Obligations (including without limitation all unpaid principal and accrued but unpaid interest, but expressly excluding any Obligations related to any Rate Management Agreement or Rate Management Transaction) shall be immediately and automatically due and payable without any presentment, acceleration, demand, protest, notice of protest, notice of intent to accelerate, notice of acceleration, or notice of any kind (except notice required by law which cannot be waived), all of which are hereby waived.

 

7.5 Rate Management Agreements. Each Obligor understands, acknowledges and agrees that any Event of Default hereunder shall also constitute an Event of Default under each Rate Management Agreement, and Bank shall have all rights and remedies following the occurrence of an Event of Default under this Agreement and under each Rate Management Agreement.

 

7.6 Right of Setoff. Upon the occurrence and during the continuance of any Event of Default, Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Bank to or for the credit or the account of Borrower against any and all of the Obligations now or hereafter existing or arising, irrespective of whether Bank shall have made any demand under this Agreement or any other Security Instrument, and although such Obligations may be unmatured. Bank agrees promptly to notify Borrower after any such setoff and application made by Bank, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of Bank under this Section 7.6 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Bank may have.

 

 

7.7 Performance by Bank. If Borrower shall fail to perform any covenant, duty or agreement contained in any Security Instrument, Bank may perform or attempt to perform such covenant, duty or agreement on behalf of Borrower. In such event, Borrower shall, at the request of Bank, promptly pay any and all amounts expended by Bank in such performance or attempted performance to Bank, together with interest thereon at the Default Rate from the date of such expenditure until paid. Notwithstanding the foregoing, it is expressly agreed that Bank shall not have any liability or responsibility for the performance of any obligation of Borrower under this Agreement or any other Security Instrument.

 

ARTICLE VIII

MISCELLANEOUS

 

8.1 Indemnification; Release of Bank. Obligor(s), jointly and severally, shall indemnify and hold Bank and each Affiliate of Bank, and their respective officers, directors, employees, counsel, agents, representatives, Controlling persons and attorneys-in-fact (each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including attorneys’ fees) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Obligations) be imposed on, incurred by or asserted against any such Indemnified Person (including, but not limited to, those incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any other action or proceeding, including any insolvency proceeding or appellate proceeding) in any way relating to or arising out of this Agreement, any document contemplated hereby or referred to herein, or the transactions contemplated hereby or entered into by the parties hereto, or any action taken or omitted by any such Indemnified Person under or in connection with any of the foregoing, including any use by Borrower or any other Person of any Subject Property or Collateral for any Forbidden Activities; and the foregoing indemnity shall apply to any investigation, litigation or proceeding (including any insolvency proceeding or appellate proceeding) related to or arising out of this Agreement, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”). For avoidance of doubt, the “Indemnified Liabilities” expressly include any claim by any Governmental Authority, including any governmental action for seizure or forfeiture of any Subject Property or Collateral (with or without compensation to Bank, and whether or not any Subject Property or Collateral is taken free of or subject to Bank’s lien or security interest). The Indemnified Liabilities shall also include all negligent acts and omissions of each Indemnified Person; provided, that Obligor(s) shall not have any obligation hereunder to any Indemnified Person for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused (as determined by a final, nonappealable judgment in a court of competent jurisdiction) by the willful misconduct or gross negligence of the Person seeking indemnification. Obligor(s) hereby release the Indemnified Persons for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the negligence of any Indemnified Person. The obligations under this section are all payable on demand, and shall survive satisfaction of all other Obligations, and the termination, release or expiration of this Agreement and the documents executed in connection herewith.

 

 

8.2 Interest. It is the intention of the parties hereto to comply with applicable usury laws; accordingly, it is agreed that notwithstanding any provision to the contrary in this Agreement, a Note, the other Security Instruments or any of the documents securing payment thereof or otherwise relating thereto, in no event shall this Agreement or such instruments or documents require the payment or permit the collection of interest, as defined under applicable usury laws, in excess of the Maximum Rate. If any such excessive interest is contracted for, charged or received under this Agreement, a Note, the other Security Instruments or the terms of any of the documents securing payment thereof or otherwise relating thereto, or if the maturity of any Obligations to Bank is accelerated in whole or in part, or in the event that all or part of the principal of or interest on a Note shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Agreement, a Note, the other Security Instruments or any of the documents securing payment thereof or otherwise relating thereto, on the amount of principal actually outstanding from time to time under a Note, shall exceed the Maximum Rate, then in any such events (a) the provisions of this section shall govern and control, (b) no Obligor shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted to be contracted for by, charged to or received from the Person obligated thereon under applicable usury laws, (c) any such excess which may have been collected either shall be applied as a credit against the then unpaid principal amount on a Note or refunded to the Person paying the same, at the holder’s option, and (d) the effective rate of interest shall be automatically reduced to the Maximum Rate. It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under this Agreement, the Note(s), the other Security Instruments or such other documents which are made for the purpose of determining whether such rate exceeds the Maximum Rate shall be made, to the extent permitted by applicable usury laws, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the applicable Note, all interest at any time contracted for, charged or received from an Obligor or otherwise by the holder or holders of such Note in connection with the Note(s), the other Security Instruments or this Agreement.

 

8.3 Expenses. Borrower will pay on demand (a) all costs and expenses of Bank and its Affiliates (including fees, expenses and disbursements of counsel for Bank and its Affiliates) in connection with the preparation, negotiation, interpretation, operation and administration of this Agreement, the Note(s), any other Security Instrument or any Rate Management Agreement, or any waiver, modification, renewal, extension or amendment of any provision of any of the foregoing, and (b) all costs and expenses of enforcement of this Agreement, the Note(s), any other Security Instrument or any Rate Management Agreement, and collection of the Obligations (including fees, expenses and disbursements of counsel for Bank and its Affiliates). Borrower agrees to pay on demand and to indemnify Bank from and hold it harmless against any filing or recording fees, taxes, assessments, or charges made by any Governmental Authority by reason of the execution, delivery, recordation or filing by Borrower or Bank of this Agreement, any other Security Instrument and any document, instrument or agreement executed or delivered in connection therewith.

 

 

8.4 No Waiver; Cumulative Remedies. No failure by Bank to exercise, and no delay by Bank in exercising, any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided herein and under the Security Instruments are cumulative and not exclusive of any rights or remedies provided by law or in any other agreement, and may be pursued separately, successively or concurrently against Obligor(s) (or any of them) and/or the Collateral, at the sole discretion of Bank.

 

8.5 Successors. This Agreement shall be binding upon Obligor(s) and their respective successors and assigns and shall inure to the benefit of Bank and its successors and assigns. No Obligor may assign any rights or obligations under this Agreement or any other Security Instrument without the prior written consent of Bank.

 

8.6 Notices. All notices, requests and demands shall be given to or made to Bank or an Obligor, as applicable, at such party’s address set forth in the preamble of this Agreement, as such address may be updated from time to time in writing from one party to another. All notices and other communications given under the provisions of this Agreement shall be deemed to have been given (a) when sent, if sent by registered or certified mail or overnight courier, or (b) when actually received, if sent by hand delivery, in each case addressed to such party as provided herein or according to the most recent records of the notifying party. Notwithstanding the foregoing, actual notice to Borrower shall always be effective no matter how given or received.

 

8.7 Form and Substance. All documents, certificates, insurance policies, and other items required under this Agreement to be executed and/or delivered to Bank shall be in form and substance satisfactory to Bank, in Bank’s sole and absolute discretion.

 

8.8 Survival of Agreements. All agreements, covenants, representations and warranties made herein shall survive the execution and delivery of the Note(s) and the other Security Instruments and the modification, renewal, extension or rearrangement thereof, shall continue in full force and effect until the Loan(s) have been paid in full and any obligation of Bank to make any additional Advance has terminated, and shall not be affected by any investigation made by any party.

 

8.9 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective, valid and enforceable under applicable law, but if any provision of this Agreement shall be prohibited by, or invalid or unenforceable under, applicable law, then (i) the parties hereto agree that they will amend such provisions by the minimal amount necessary to bring such provisions within the ambit of enforceability, and (ii) the court may, at the request of any party, revise, reform or reconstruct such provisions in a manner sufficient to cause them to be enforceable. Bank is relying and is entitled to rely upon each and all of the provisions of this Agreement. In no event shall any prohibition against, or the invalidity or unenforceability of, any provision hereof affect the validity or enforceability of any other provision hereof, and if any provision or provisions of this Agreement should be held to be invalid or ineffective, then all other provisions hereof shall continue in full force and effect.

 

 

8.10 Controlling Document. In the event of actual conflict in the terms and provisions of this Agreement, a Note or any other Security Instrument, the terms and provisions of this Agreement will control. Further, in the event of actual conflict in the terms and provisions of Section 2.12 of this Agreement and any other term or provision of this Agreement, the terms and provisions of Section 2.12 shall control.

 

8.11 Amendment. This Agreement may not be amended except in writing signed by the parties hereto.

 

8.12 Descriptive Headings. Descriptive headings of the several articles and sections of this Agreement are inserted for convenience of reference only, and shall in no way alter, modify, define or be used in construing, and do not constitute a part of, this Agreement.

 

8.13 Sharing of Information; Participations. Each Obligor agrees that Bank may provide information or knowledge Bank may have about each Obligor, this Agreement, the Note(s), or the other Security Instruments to Bank’s parent, or any of such parent’s Subsidiaries or Affiliates or their successors, or to any one or more purchasers or potential purchasers of the Note(s) or any interest or participation therein or in the other Security Instruments. Each Obligor acknowledges and agrees that Bank may at any time sell, assign or transfer one or more interests or participations in all or any part of its rights or obligations in the Note(s) or this Agreement to one or more purchasers or participants, whether or not related to Bank.

 

8.14 Governing Law; Venue; Jurisdiction. THIS AGREEMENT, THE NOTE(S) AND THE OTHER SECURITY INSTRUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES), AND THE LAWS OF THE UNITED STATES OF AMERICA APPLICABLE IN TEXAS, EXCEPT TO THE EXTENT TO WHICH TEXAS LAW DICTATES THAT THE LAWS OF ANOTHER STATE ARE TO GOVERN CERTAIN PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO THE CREATION, PERFECTION AND/OR FORECLOSURE OF THE LIENS AND SECURITY INTERESTS CREATED HEREIN OR IN THE OTHER SECURITY INSTRUMENTS, OR TO THE ENFORCEMENT OF BANK’S RIGHTS AND REMEDIES AGAINST THE COLLATERAL, IN WHICH EVENT THE LAWS OF SUCH OTHER STATE SHALL GOVERN. VENUE FOR ANY LITIGATION BETWEEN OR AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE HARRIS COUNTY, TEXAS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO PERSONAL JURISDICTION IN TEXAS AND WAIVES ALL OBJECTIONS TO PERSONAL JURISDICTION IN TEXAS AND VENUE IN HARRIS COUNTY FOR PURPOSES OF SUCH LITIGATION.

 

 

8.15 Waiver of Jury. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY, UNCONDITIONALLY AND INTENTIONALLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE NOTE(S) OR THE OTHER SECURITY INSTRUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE FINANCING CONTEMPLATED HEREIN. EACH OBLIGOR HEREBY CERTIFIES THAT NEITHER ANY REPRESENTATIVE OR AGENT OF BANK NOR BANK’S COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER.

 

8.16 Waiver of Special Damages. TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, EACH PARTY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE NOTE(S) OR THE OTHER SECURITY INSTRUMENTS ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.

 

8.17 USA Patriot Act Notification. The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

 

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for a Borrower: When a Borrower opens an account, if such Borrower is an individual, Bank will ask for such Borrower’s name, taxpayer identification number, residential address, date of birth, and other information that will allow Bank to identify such Borrower, and, if such Borrower is not an individual, Bank will ask for such Borrower’s name, taxpayer identification number, business address, and other information that will allow Bank to identify such Borrower. Bank may also ask, if such Borrower is an individual, to see such Borrower’s driver’s license or other identifying documents, and, if such Borrower is not an individual, to see such Borrower’s legal organizational documents or other identifying documents.

 

 

8.18 Electronic Signatures and Electronic Records. Delivery of an executed signature page of this Agreement and each other Security Instrument by facsimile or other electronic mail transmission shall be effective as delivery of a manually executed counterpart hereof. Each party to this Agreement consents to the use of electronic and/or digital signatures by one or more parties on this Agreement and each other Security Instrument. This Agreement and any other Security Instruments may be signed electronically or digitally in a manner specified solely by Bank. Delivery of an executed counterpart of a signature page of this Agreement and any other Security Instrument(s) by electronic means shall be effective as delivery of a manually executed counterpart of this Agreement or such Security Instrument(s). The parties agree not to deny the legal effect or enforceability of any Security Instrument solely because (a) the Security Instrument is entirely in electronic or digital form, including any use of electronically or digitally generated signatures or (b) an electronic or digital record was used in the formation of the Security Instrument or (c) the Security Instrument was subsequently converted to an electronic or digital record by one or more parties. The parties agree not to object to the admissibility of any Security Instrument in the form of an electronic or digital record, or a paper copy of an electronic or digital document, or a paper copy of a document bearing an electronic or digital signature, on the grounds that the record or signature is not in its original form or is not the original of the Security Instrument or the Security Instrument does not comply with Chapter 26 of the Texas Business and Commerce Code. Each Obligor represents and warrants that such Obligor has executed each Security Instrument to which it is a party manually in person, and that such Obligor will deliver to Bank a manually signed original “wet signature” counterpart of each such Security Instrument upon Bank’s request and/or as soon as reasonably possible.

 

8.19 Counterparts. This Agreement and each other Security Instrument may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement.

 

8.20 Statute of Frauds; No Oral Agreements. THIS AGREEMENT AND ALL DOCUMENTS AND INSTRUMENTS REFERENCED HEREIN OR EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN OR AMONG OBLIGOR(S) AND BANK, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN OR AMONG OBLIGOR(S) AND BANK. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG OBLIGOR(S) AND BANK.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, this Loan Agreement is executed effective as of the date first set forth above.

 

	BORROWER:
	SANARA MEDTECH APPLIED TECHNOLOGIES, LLC
	By:	Sanara MedTech Inc.,
		Its Manager
	By:	/s/ Michael D. McNeil
		Michael D. McNeil
		Chief Financial Officer
	BANK:
	CADENCE BANK
	By:	/s/Emily Loomis
		Emily Loomis,
		Senior Vice President
	GUARANTOR:
	SANARA MEDTECH INC.
	By:	/s/ Michael D. McNeil
		Michael D. McNeil,
		Chief Financial Officer

 

Schedule 6.7 – Litigation

Schedule 6.9 – Subsidiaries and Investments

Schedule 6.13 – Real Property / Collateral Locations

Schedule 6.14 - Trademarks, Tradenames, Copyrights, Patents and other Intellectual Property

Schedule 6.20 – Assumed and Other Names

 

Exhibit A: Compliance Certificate

 

Signature Page of Loan Agreement

 

 

Exhibit 99.1

 

 

Sanara MedTech Inc. Announces the Acquisition of Certain Assets Related to its Collagen Products Business

 

FORT WORTH, TX / GlobeNewswire / August 2, 2023 / Sanara MedTech Inc. Based in Fort Worth, Texas, Sanara MedTech Inc. (“Sanara,” the “Company,” “we,” “our” or “us”) (NASDAQ: SMTI), a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical, chronic wound and skincare markets, announced today the acquisition of certain assets related to its collagen products business.

 

The acquisition of proprietary assets (the “Asset Acquisition”) from Applied Nutritionals, LLC, The Hymed Group Corporation, and Dr. George Petito (collectively, the “Sellers”) is a major milestone for Sanara’s strategy to own the intellectual property, including trade secrets, for its hydrolyzed collagen products. In addition, the Company believes controlling its manufacturing will reduce costs as well as help it to expand research and development efforts related to hydrolyzed collagen products.

 

Zach Fleming, Sanara’s Chief Executive Officer, stated, “We believe that this transaction furthers our goals by eliminating the royalties we pay to the Sellers on CellerateRX^® Surgical Powder and Gel (“CellerateRX”) and HYCOL^® Hydrolyzed Collagen (“Hycol”), giving Sanara control of the manufacturing process for CellerateRX and Hycol, and giving us full rights to develop new collagen products for human wound care uses based on the acquired technology. I would also add that Sanara has an outstanding relationship with the Applied Nutritionals team and we look forward to continuing to work with them on new innovative products under the terms of the agreement.”

 

The assets that Sanara acquired include the following:

 

	●	All rights and ownership (for human wound care uses) for four 510(k) cleared collagen-based wound care products including CellerateRX and Hycol.
	●	All rights and ownership (for human wound care uses) for three new collagen-based products currently under development.
	●	All patents, patents pending, trademarks and regulatory approvals related to collagen human wound care products owned by the Sellers. This includes nine patents and all of the Sellers’ patents pending for collagen products for human wound care uses, five trademarks, and four 510(k)s.

 

The initial purchase price for the assets that were acquired by the Company is $15.25 million, consisting of $9.75 million in cash paid at closing, shares of the Company’s common stock with an agreed upon value of $3.0 million, and four equal annual installments of $625,000 in cash. The Sellers are also entitled to earnout payments of up to $10.0 million based on future sales of a collagen-based product currently under development, as well as certain royalties and incentive payments on future products that are developed. Cash at closing is being funded through a loan provided by Cadence Bank.

 

 

About Sanara MedTech Inc.

 

With a focus on improving patient outcomes through evidence-based healing solutions, Sanara MedTech Inc. markets, distributes and develops surgical, wound and skincare products for use by physicians and clinicians in hospitals, clinics and all post-acute care settings and offers wound care and dermatology virtual consultation services via telemedicine. Sanara’s products are primarily sold in the North American advanced wound care and surgical tissue repair markets. Sanara markets and distributes CellerateRX^® Surgical Activated Collagen^®, FORTIFY TRG^® Tissue Repair Graft and FORTIFY FLOWABLE^® Extracellular Matrix as well as a portfolio of advanced biologic products focusing on AMPLIFY^™ Verified Inductive Bone Matrix, ALLOCYTE^® Advanced Cellular Bone Matrix, BiFORM^® Bioactive Moldable Matrix and TEXAGEN^® Amniotic Membrane Allograft to the surgical market. In addition, the following products are sold in the wound care market: BIAKŌS^® Antimicrobial Skin and Wound Cleanser, BIAKŌS^™ Antimicrobial Wound Gel, BIAKŌS^® Antimicrobial Skin and Wound Irrigation Solution and HYCOL^® Hydrolyzed Collagen. Sanara’s pipeline also contains potentially transformative product candidates for mitigation of opportunistic pathogens and biofilm, wound re-epithelialization and closure, necrotic tissue debridement and cell compatible substrates. The Company believes it has the ability to drive its pipeline from concept to preclinical and clinical development while meeting quality and regulatory requirements. Sanara is constantly seeking long-term strategic partnerships with a focus on products that improve outcomes at a lower overall cost. In addition, Sanara is actively seeking to expand within its six focus areas of wound and skin care for the acute, post-acute, and surgical markets. The focus areas are debridement, biofilm removal, hydrolyzed collagen, advanced biologics, negative pressure wound therapy products and the oxygen delivery system segment of the wound and skincare markets.

 

Information about Forward-Looking Statements

 

The statements in this press release that do not constitute historical facts are “forward-looking statements,” within the meaning of and subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements may be identified by terms such as “aims,” “anticipates,” “believes,” “contemplates,” “continue,” “could,” “estimates,” “expect,” “forecast,” “guidance,” “intend,” “may,” “plan,” “possible,” “potential,” “predicts,” “preliminary,” “projects,” “seeks,” “should,” “targets,” “will” or “would,” or the negatives of these terms, variations of these terms or other similar expressions. These forward-looking statements include, among others, statements regarding the potential benefits created by the Asset Acquisition, the anticipated impact of the Asset Acquisition on Sanara’s business and future financial and operating results, Sanara’s ability to develop and commercialize the new collagen-based products currently under development, including the manufacturing, distribution, marketing and sale of such products; Sanara’s ability to maintain or replace the Sellers’ manufacturing and distribution process, including relationships with vendors, the development of new products, the timing of commercialization of our products, the regulatory approval process and expansion of the Company’s business in telehealth and wound care. These items involve risks, contingencies and uncertainties such as the extent of product demand, market and customer acceptance, the effect of economic conditions, competition, pricing, uncertainties associated with the development and process for obtaining regulatory approval for new products, the ability to consummate and integrate acquisitions, and other risks, contingencies and uncertainties detailed in the Company’s SEC filings, which could cause the Company’s actual operating results, performance or business plans or prospects to differ materially from those expressed in, or implied by these statements.

 

All forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to revise any of these statements to reflect the future circumstances or the occurrence of unanticipated events, except as required by applicable securities laws.

 

Investor Contact:

 

Callon Nichols, Director of Investor Relations

713-826-0524

CNichols@sanaramedtech.com

 

SOURCE: Sanara MedTech Inc.

 

v3.23.2

Cover	Aug. 01, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 01, 2023
Entity File Number	001-39678
Entity Registrant Name	SANARA MEDTECH INC.
Entity Central Index Key	0000714256
Entity Tax Identification Number	59-2219994
Entity Incorporation, State or Country Code	TX
Entity Address, Address Line One	1200 Summit Avenue
Entity Address, Address Line Two	Suite 414
Entity Address, City or Town	Fort Worth
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	76102
City Area Code	(817)
Local Phone Number	529-2300
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	SMTI
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

---